Financial Calculators That Show How You Blow a Fortune Without Knowing
Before settling down to read this post, please keep any hot beverage away from you that may spill, get some smelling salts, and ask a friend to check in on you. I was in my office at work with the door closed, yet someone next door was still able to hear me yelp, “What the [expletive]?” after I plugged some numbers into some very revealing financial calculators. It was a little embarrassing…
I pointed Zac to these calculators a while ago, before I took the finance class that changed my life. He played around with them for quite some time, but I didn’t want to use them because I really didn’t want to confront how much money I was burning by going out for lunch all the time.
But since I was feeling a bit bummed because it’s the beginning of the month and I’ve just paid off a ton of bills, I figured I should look for ways to cut my spending to boost my checking account. So, I turned to this previously avoided lunch calculator as a starting point.
The lunch calculator allows you to figure out how much money you would save if you were to brown bag your lunch instead of eating out, and then how much you would earn from investing those lunch savings. I’m still in the process of paying off debts, so I’m in no place to invest just yet, but I am working (ever so hard) on raising start-up capital for the coffee shop and building an emergency fund of three months living expenses.
Here are the numbers I plugged into the site’s calculator:
Cheap Home Lunch price: $2.00
Eating Out Lunch Price: $7.00
Days eaten per year: 250
Years to Calculate: 3
Investment Yield: 5.05%
With some good bargain-hunting, I figured I could make lunch with wholesome ingredients averaging at $2.00 a day. I easily spend between $5 – $8 a day when I go out to lunch. (We have delicious food in San Francisco, but it doesn’t come cheap if you want to eat healthy.) The site suggests using 250 eating days a year for the comparison, but you can change that if you want. I picked three years of savings for the calculation because that’s about when I’d like to open up the coffee shop. Currently E*Trade offers 5.05% interest on savings accounts, so I used that as my investment yield.
The whopping figure in invested lunch savings I came up with is $3,942.56. Even if you assume a 2.5% inflation rate (latest CPI-U numbers) for the next three years, that $3,942.56 is $3,661.06 in today’s money. Not too shabby!
This Hugh Chou guy has some other mighty interesting calculators that astonished me.
For the same three year savings period, I used his Booze/Beverage Calculator to determine that if I cut buying drinks from 5 drinks a week to just 3 drinks a week, I’d have $1,640.11 in invested savings.
I used the Stop Buying Expensive Coffee and Save Calculator to figure out that if Zac and I switched to making our own brew at home, we’d each have $1,143.34 in invested savings in three years. That would be $2,228.68 dollars that we could put towards a down payment for a house.
By making a few adjustments in my spending per these calculators, the total of my individual invested savings would add up to $6,726.01. Factoring in inflation, that’s $6,245.77 in today’s money. Yikes! That’s a lot of money to be throwing away.
There are plenty more calculators on this website to play around with, but don’t say I didn’t warn you about how shocking it can be.
Good article. The challenge I always find with the “if you gave up eating, drinking, buying books, etc… then you would have $X in investments” argument is that — who actually takes that $ and invests it? For instance, I rarely eat out lunch, never really have. Yet, I don’t have a piggy bank that I drop that $ in until I invest it. So, if I choose to skip my coffee today, what probability is it that that $3 will actually make it separately to savings.
I believe that is the big catch. Good news is I just put $ in savings monthly & “live” on the rest so in a covert way I may already be doing this — but I just never get to see it and get the “wow” factor that the calculations you lay out give me on paper.
What about you or others? What has been your experience?
My strategy is X% goes into investments, Y% goes into a money market fund and Z% goes into bank savings. I periodically review the amounts – if I kept my expenses down, Y and Z will have increased beyond my operating and emergency thresholds. When I see chunks above my limits, I move the difference up the chain.
So yes, for me cutting back on morning cappuccinos, expensive lunches, drinks after work, random crap – goes into my savings and then investments.
John,
I tried to post something like this to Paula’s article but it didn’t work for some reason.
Just to point out the over-determined and complex nature of the stakes with respect to something as mundane as “how much money
I spend a month on coffee”.
One thing your blog mentions is your interest in saving money so that you and your partner can save up for a home. Paula is interested in investing her savings, as are at least Nina and Rich.
What keeps me reading Queercents as a student of philosophy, though, is not necessarily the nitty gritty advice about how to save but, rather, because Queercents and other sites (as well as my own blogging) allows me to canvas some public opinion about how people do and should relate to money and markets. I’m a firm believer that philosophy is not the exclusive provenance of “great thinkers” and academics but is in some way already woven into the fabric of everyday life. Philosophy for me is about practice and not necessarily a library of classic books with stuffy titles.
From my perspective, what you are up to in these blogs shares much with some of the fundamental ethical questions that come up time and again in the work of “great teachers/thinkers” from the Western tradition (I think one can draw some comparisons to material in Buddhist ethics and other non-Western thought and practice but this is not what I know so I’ll stick with the West). Some fundamental questions–of which there are certainly different versions–are: How much influence do cultural habits have over the shaping of our desires and how much is our agency circumscribed by the culture in which we grow up? How much control do we have to retrain or school our desires?
Let’s say one has gotten into the habit of going to Starbucks everyday on the way to work. It might become almost second-nature and automatic to do so. One can speak of being ritualized, I think. Starbucks is very good at getting its brand story to seep into the psyche through the senses and the “values” it claims to be committed to. But, if we actually do what you suggest and stand back and calculate how much that daily latte is costing us over the span of a year, we might jolt and that naturalized relationship with Starbucks compromised.
Thinking about costs to us over time is *one-way* we can get some critical distance from our ingrained consumptive rituals and habits. Marketers would love it if we walked around the mall or surfed the net, making purchases as if this activity were akin to pulling an apple from a tree or breathing the free air. In fact, read marketing books and you’ll see that Starbucks is singled out for being so good at making its brand “connect” with consumers on a narrative level (think: the way we might relate to a TV character we grow attached to over time and see some of ourselves in that character’s life).
Consumption rituals get so naturalized that people do literally max out credit they shouldn’t have without giving much self-reflexive thought to the implications for personal finances (and I know this is a big issue for young women and young LGBT folk who move to the big cities to live the “Sex in the City” or “Queer as Folk” lifestyle…there was a great article about this a few years back…about the costs of the stories we tell ourselves and perform for others). If we get into the practice of asking tough questions that inevitably break the hold of the fairae tale spells of things like Starbucks, we reclaim some ethical freedom. That’s my ultimate point.
Another way we can strive for some critical distance from our consumption habits is to think about the costs to others and to the environment. For example, if one reads this article– http://www.sbs.ox.ac.uk/starbucks — I think one is more apt to think twice about walking into the nearest Starbucks out of sheer habit. Not that everything then boils down to self-conscious reason but instrumental information about the costs of things to ourselves and to others and the interrelation of our personal habits and global justice can make a big difference in schooling or retraining our desires.
Something like calculating costs or, to shake things up, looking at the darker side of some kinds of cost cutting on a global level (the deleterious effects a general interest in having more stuff, more cheaply can have on global wages and the environment) is actually, in the end, about self formation.
Good point, Paula. Who actually invests the money they saved by not buying something? Hugh, the guy with the calculators, developed the lunch calculator to figure out what kind of fortune he has amassed by not eating out for lunch.
I’m shocked by how much money I’m throwing away. So for me, I think as a going forward stategy, I’m going to do the following:
The money I would save by not buying lunch is $1250.00 per year. If I divide that by 12, one thing I could do is committ to putting away $104.17 at the end of each month, as a way of depositing my lunch savings.
It may sound a little corny to do this, but it would be incredibly easy, especially with online banking. My bank allows me to transfer funds from checking to savings (and vice versa) with very little effort online.
That’s going to be my plan, after I get some groceries for next week and buy a coffee maker.
John,
In keeping with the argument I made that calculating costs to us can be brought into conversation with the question of costs to others and that each of these prongs as well as both, in tandem, can help us reclaim ethical agency in a society striken with a veritable disease of consumption, here is an old article about something truly extraordinary some kids from the Bronx did in the late 90s: http://www.saigon.com/~nike/news/ny092797.htm
As has already been said the trick is investing the money you saved by not eating out. I rarely eat out but since I never had a habit of eating out in the first place I’m not saving anything.
Part of this week’s Festival of Frugality:
http://www.hustlermoneyblog.com/2007/02/13/hustlerblog-presents-festival-of-frugality-61/
Another financial blog I just read covered the same thing and the author had a good idea. For example, he would budget $3 a day for coffee (so $15 for the work week). And if he didn’t go get Starbucks that day, he would get to deposit it into his savings account (like an ING account). So he had a sort or reward for himself for not getting the coffee. Just thought I would pass it along.
Some people might think that’s a lot of work, but w/ how easy electronic transfers are these days, you can do it in less than 2 minutes 1 day over the weekend.