If you are able to cut unnecessary expenses, it is a great way to put money back into your budget. However, eliminating wasteful spending won’t benefit your bottom line if you don’t put the money that you are saving to work for you.
You might be surprised by the amount that could be saved over time by eliminating seemingly small expenses and investing that money instead. We have used an online financial planning tool to put together some calculations to show how much richer you could be if you cut 10 unnecessary costs and put the money into a moderate risk investments that earned 5 percent annually. (A 2% inflation rate)
1. Checking Account Fees
It doesn’t seem right to pay a bank just to keep your money in a checking account, does it? Some checking account maintenance fees are as high as $35 or more if account holders don’t maintain a certain balance or jump through other hoops. After researching and examining multiple banks checking accounts and fees an average monthly maintenance fee of $12 is most common. But even that seemingly small amount adds up to $144 a year.
Fortunately, there are banks that offer free checking. So if you were to switch your account to one of these financial institutions and invest the $144 you’d be avoiding in fees annually, here’s a look at how much you would have.
- After 10 Years: $1,762
- After 20 Years: $4,003
- After 35 Years: $8,849 (by retirement age of 65 if you started at age 30)
2. Landline Phone Service
If you are still an American households that still has a hardwired telephone line you are spending an average of $353 a year on the phone service, according to the Labor Department’s Consumer Expenditure Survey. Having this service is a common way to lose money if you’re not really using it and are using a cell phones instead.
At that average cost if you ditched your landline and invested that $353 a year, here’s how much richer you could be.
- After 10 years: $4,258
- After 20 years: $9,667
- After 35 years: $21,376
3. Cable TV
If you’ve debated cutting the cord to save money, you might be more motivated once you find out how investing those savings could really add up. According to Leichtman Research Group, 79 percent of households have pay-for-TV service and pay an average of $106 per month. So if you cut the cord and invested the average annual cost of cable — $1,272 — this is how much your money would grow over time.
- After 10 years: $15,560
- After 20 years: $35,334
- After 35 years: $78,137
4. Restaurant Meals
On average today, Americans spend $3,154 a year, on food away from home. This fact was from a study conducted by the Bureau of Labor Statistics. If you slashed that spending in half, you’d save $1,577 annually. If you then invested those savings and earned 5 percent annually, you’d have even more.
- After 10 years: $19,085
- After 20 years: $43,337
- After 35 years: $95,832
The average household spends $850 a year on soda, study conducted by the Water First project of the Tweens Nutrition and Fitness Coalition. If water was substituted for soda, one would not only save money but also improve their health by reducing calories and sugar intake dramatically. The impact of investing the savings alone, though, might be enough to make you want to quit your soda habit.
After 10 years: $10,267
- After 20 years: $23,335
- After 35 years: $51,602
6. Bottled Water
Yes, water is a cheaper and healthier alternative to soda. But don’t waste your money buying bottled water. According to the International Bottled Water Association, Americans drink 39.3 gallons of bottled water a year at a cost of $1.27 per gallon. That’s an average of $50 a year spent on bottled water. If you bought a reusable bottle and filled it with filtered tap water instead and invested that $50 annually, here’s how it would add up:
- After 10 years: $612
- After 20 years: $1,388
- After 35 years: $3,070
7. Subscription Boxes
Today, there seems to be a subscription box for every interest or need — from fishing products, to makeup products to French snacks. It’ is always fun to get a surprise in the mail. However is it really worth shelling out $20 a month — or more — for a subscription box? That’s $240 that could be invested annually and could provide a much better return for your money over time.
- After 10 years: $2,939
- After 20 years: $6,670
- After 35 years: $14,749
The Bureau of Labor Statistics.has found that On average, Americans spend $484 a year on alcohol. Eliminating this costly vice could add up to big savings. Even if you spent half as much annually on alcohol — $242 — and invested the savings, you would see a big benefit.
- After 10 years: $2,963
- After 20 years: $6,727
- After 35 years: $14,872
If you are a smoker or chew tobacco, you already know that both habits are bad and hurting your health along with your wallet. Of course, quitting isn’t easy. But knowing how much richer you could be might help motivate you. According to the Bureau of Labor Statistics, the average amount spent on tobacco and related products is $337 a year. If you invested that money, here’s how much you would have.
- After 10 years: $4,114
- After 20 years: $9,337
- After 35 years: $20,647
10. Daily Latte
No list about costs that can be cut would be complete without including the daily latte. However, you don’t have to give up coffee altogether to cut your Starbucks bill. Just skip the pricey latte and make coffee at home.
The average cost of a Starbucks latte is $2.75 versus 20 cents per a cup of coffee brewed at home, according to ValuePenguin. That means you could save $930.75 making your own cups of Joe, and then invest your savings instead.
- 10 years: $11,391
- 20 years: $25,866
- 35 years: $57,194
If you eliminated all of these costs, you would save $5,978.75 in just one year. That’s a lot of money to add back into your budget. But if you invested that money every year and earned 5 percent annually, you’d see even bigger long-term benefits.
- After 10 years: $72,958
- After 20 years: $165,667
- After 35 years: $366,331
Even more impressive is how far that money can go in retirement. The On Trajectory calculator shows that if you stopped investing money into your retirement fund at the $366,331 mark, and then withdrew 4 percent of your balance annually to help cover living costs, you’d still have a little more than $300,000 left by the age of 90. It might seem hard to believe, but that’s the power of compound interest.
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