Thanks to Stephen Gilbert, who found this outstanding resource in the New York Times.
It lets you calculate the effect of, say, switching from Starbucks to office-brewed coffee (or bringing your own peanut butter and honey sandwiches to work with you instead of buying them off the cart). Say you buy one $3.50 cup of coffee a day and could get it for 50 cents from the office vending machine or brewing it yourself.
I’m not saying you should do this – or save another $3 a day by not buying cigarettes or whatever.
But if you did do this, starting now, at age 49, say . . . and if you could invest your savings at 6% over inflation, which is no slam dunk but not nuts, either . . . by the time you were 84 (with another 10 or 15 good years ahead of you, let us pray), you’d have an extra $83,000.
Or $122,000, if we’re talking $3 a day on cigarettes, because with the coffee I was figuring 5 days a week, 50 weeks a year. With the cigs, we’re talking 365.25 days a year.
If you’re 18 today and saved the same $3 a day, by the time you’re 65, with the same 6% assumption, we’re up to $264,000.
Of course, if you’re 18, you’re thinking you’ll never be 65. But actually the chances are that you will be – with an an extra $264,000 after tax in today’s dollars in your Roth IRA, for being a bit frugal.
It’s cheating – but fun – to assume more than 6% above inflation, but it’s not impossible, either. So if we go wild and assume 7% instead, the $264,000 jumps to $360,000.
And remember, this is still just on $3. You could double that if you found a second way to save $3 a day – say by buying one fewer gallon of gas a day by (in the short run) driving more carefully and (in the long run) switching to a car that got better mileage.
There’s tons of good and amusing stuff on his site to ponder.