Happy New Year! In this season of resolutions, I’m going to resolve to spend $1.80 less than usual each day. Would you like to join me?
Little Things Mean a Lot
Why would such a small amount make any difference? Think about this: one dollar and eighty cents each day comes out to roughly $12.50 a week.
Saving a measly $12.50 a week just on groceries is totally doable, right? Shop the sales, use a few coupons and skip a few convenience items. Or you can bring lunch from home or skip the coffee and doughnuts.
So, every 4 weeks you’ll save $50 dollars.
In a year that’s $650 dollars.
How to be smart with this money
What you do with this money can change your financial life.
Are you broke?
If you have absolutely no savings in the bank, I’d suggest first you stash it away for a few months and don’t touch it. Build a little cushion of cash. Don’t touch it!
The difference between “I can’t possibly afford to buy that” and “I choose not to buy that in the best interest of my family” is a monumental difference for the soul.
Once you have a bit of choice back in your life, you’ll feel more in control again. But don’t touch it! That’s for a dire emergency ONLY!
Do you have Credit Card Debt?
Okay, so $50 a month doesn’t seem like a lot, does it?
Let’s pretend you have a $6000 credit card balance. Based on how your credit card payment is calculated, at a 21% interest rate, your minimum payment would be about $163.95.
As you pay the card down, the minimum payment would go down. If you paid only the minimum payment, it would take you 25 years and 2 months to pay this off. The interest paid to the credit card company would be $10,044.78.
However, pay the same $163.95 minimum payment as a fixed monthly payment to reduce that to 4 years 11 months and interest of only $3,667.
BUT! If you kept that minimum payment as a fixed payment and added the$1.80 daily/$50.00 monthly savings from on your grocery budget, you’d be paying $213.95 a month. The credit card balance would be paid off in 3 years and 3 months and you’d only pay $2,323 in interest.
After you’ve paid off the credit cards, you can apply those same savings to your mortgage.
Do you have a mortgage?
Let’s say you have a $200,000 / 30 year home mortgage at 7.5% interest and you apply that $50 groceries savings to your mortgage every month.
The result of that small effort over the life of your mortgage is an additional $18,000 off the principle earlier and you’d save $41,326 in interest!
That’s a year’s income for a lot of folks. On top of that, the time it takes to pay off your mortgage would be shortened by 3 years and 4 months.