The Cost of Small Pleasures Add Up To Big Money

Many people enjoy sipping a fresh cup of coffee from Starbucks while listening to the in-car satellite radio and CDs as they drive to work or the mall in their comfortable SUV or minivan. And having lunch at an upscale restaurant with friends or colleagues breaks up the daily routine.

These activities are affordable and don't dent the wallet much but collectively their costs add up, particularly if you examine what the money would grow to in the future if you invest it instead of spend it. For example, suppose you substituted home brewed coffee for the fancy brand and invested the money you would have spent. Through the magic of compound interest a $20 weekly outlay for the fancy coffee would grow to $160,952 at a 6 percent return per year over 40 years. Or assume that you downsize the hulking SUV to a more fuel-efficient vehicle. Then you could invest the money that you save on gas. A $20 a week savings in gas would give you another $160,952 in 40 years.

As more and more of the burden of providing a comfortable retirement falls on each individual, understanding the implications of spending lots of money on creature comforts that you probably could do without or at least consume in lesser amounts is a worthwhile exercise.

The following table shows the amount of money you could accumulate if you forgo some common niceties and invest that money. The examples assume you receive a 6 percent annual return on your investment.

Future Value of Current Expenditures
Expense	Cost Each Week	Invested Each Year	40 Years	50 Years	60 Years
Coffee	$20	$1,040	$160,952	$303,480	$554,827
Lunch	$20	$1,040	$160,952	$303,480	$554,827
Gas	$20	$1,040	$160,952	$303,480	$554,827
Satellite Radio *	$3.08	$160	$26,408	$52,167	$93,165
Cell Phone	$10	$520	$80,476	$153,243	$278,922
Total	$73.08	$3,800	$589,740	$1,115,850	$2,036,568
Note: * Satellite radio cost is based on fees for XM Satellite Radio as of August 2005.

The amount of money you could accumulate just by cutting back on certain daily expenditures is amazing. And the younger you start the more money you will have in the future.

Allocating money for long-term investing takes some effort and a bit of sacrifice but the long-term financial benefits are often worth the effort.