Go Dutch, Save Money

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LEARNING DUTCH

It’s not really that hard. Dutch words like ‘ghettoblaster’ and ‘confetti’ are easy. Dutch words like ‘broodrooster’ (breadroaster, which is to say ‘toaster’) are fun. A ‘flueitketel’ whistles when the water boils. ‘Handzeep’ is handsoap. Charles’ and my favorite Dutch word – not found on this site, but worth mentioning – is the word for what the waiter brings at the end of your dinner – ‘de rekening.’

But actually (thanks, Peter, for forwarding this), this is a page for a Dutch department store chain. Don’t scroll down – just wait a couple of seconds and see what happens.

BUDGET TRICK

Here’s a little trick that may help you – voluntarily – be more frugal, thereby to build more wealth as you get older. (If you’re already older, pass this on to your wards.)

To wit: Whenever you spend money on something optional – not the mortgage, but a mocha grande, say – do the math. Annualize it.

It’s not a $4.50 coffee, it’s a $2,000 coffee because you go for these about five times a week = $25 with the tip times 52 weeks = $1,300 which is all you net, after deductions, from a $2,000 paycheck.

It’s not a $125 massage, it’s a $9,000 massage, because you get one almost every week = $6,000 which is what you have left after earning $9,000.

This is not to say you shouldn’t have the mocha grande or the massage; it’s just to give you the big picture, which might make you want to not have it, and to bring a thermos of coffee from home, or take a really nice hot bubble bath, instead.

Or want to go for the Bud instead of the Black Label.

Want to go for the $20,000 2006 Prius that gets 45 miles to the gallon instead of the $30,000 2008 Ford Explorer that gets 15 – and thus save, beyond the initial $10,000 and the cheaper insurance premiums, $40 a week on gas, if your driving is typical, which is $2,000 a year, which is what you have left after earning $3,000. (My last car cost only $10,000. I’d have bought a $4,300 car if I were just starting out.)

Saving $5,000 a year that might otherwise have gone to bottled water (buy one bottle, refill with tap), books (go to the library), and long distance phone charges (with Skype, it’s all but free) – and investing it to earn 6% after inflation, which ain’t easy but should be possible – will give you, if you’re 25 now, $774,000, in today’s buying power by age 65. Which paid out gradually over 30 years would be enough to supplement all your other retirement income by $56,000 a year through age 95.

Not to mention that frugal people with retirement savings tend not to need to borrow at high rates against their credit cards, often saving 8% or 18% or even as much as 29% on everything they charge.

That could be another $2,000 a year in savings on credit card interest alone, which, with the same assumptions as above, now bumps the retirement nest egg past $1 million in today’s dollars and your annual pay-out, age 65 to 95, past $78,000.

The great joy about being rich, or even just rich-ish, is that you don’t have to think about relatively small things like this.

Think twice about buying a boat – but a latte? A massage?

Yet unless you’ve inherited your wealth (which brings with it its own set of demons) or married it (potential ditto as well), you first have to get rich. And doing that means living beneath your means and investing the difference.

Tomorrow (speaking of rich): Richistan