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Recently I had a female friend who's car became out of commission for a while. She was almost in tears saying how she was broke and didn't know how she was going to afford to get it fixed. So I gave her a ride back to her town about 10 miles away. Once we got into town. She said "Can we stop at the gas station. I want to buy some pop and stuff".

 

So her and her daughter went into the gas station. She bought 1 beer (because she was having a bad day) a energy drink, some pop and candy for her daughter. Total money spent $15. All on things they didn't need.

 

So that got me thinking, assuming she / you or someone you know makes this a very frequent occurrence, If you save $15 per day how much would you have in 20 years?

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It depends, are you putting this in a yielding account? IE compound interest?

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It depends, are you putting this in a yielding account? IE compound interest?

 

This is just saving not spending and no interest.

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$15x365x20? - $109,500.00.

 

:ermm:

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$15x365x20? - $109,500.00.

 

:ermm:

 

Ta Da! Crazy huh!?

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$109,560

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$15x365x20? - $109,500.00.

:ermm:

You forgot interest ...even at 1%

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Ta Da! Crazy huh!?

 

Except those people aren't spending $15/day on stuff they don't need. 

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You forgot interest ...even at 1%

He didn't forget. The OP had clarified before that this was just saving from not spending, no interest.

 

But since I love this stuff, at 1% per annum compounding monthly, $15 each day will have grown to $180,218.97 after 20 years of investing.

 

 

Except those people aren't spending $15/day on stuff they don't need. 

Right. You need to have $450 of untied funds per month to be able to throw away $15 each day on junk. It's a waste of $5400 a year.

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problem is $15 a day = $450 a month, not many people can afford to save that per month, let alone for 20 years.

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$15x365x20? - $109,500.00.

 

:ermm:

Not quite, you're forgetting 'leap years'...

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Not quite, you're forgetting 'leap years'...

and thats about $75 more

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and thats about $75 more

My point was that his calculation was incorrect, not that it made a huge difference.

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Thanks for pointing out leap years! (y)

 

Don't think the exact $$ amount was needed, just that it's tons of cash

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And this is exactly why most people in this country live paycheck to paycheck.  Very very few people have financial responsibility.

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I have been trying to tell my parents for years, they always complain about not being able to buy stuff they want and yet They have not kicked my brother out (he is older than me and nearly 30) his wife and child also live there, and both my parents, and my brother and his wife smoke. As well as drink beer constantly If they were to cut out beer and cigarettes they would save thousands a year. When I was a kid i did that math once and it came to around $6,000 per year per person that they were wasting on smoking. I wish i had that sort of money that i could just throw away.

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I'm not sure I understand the point. No, saving isn't difficult to do, but it's a matter of doing it. In this case she hasn't, but how does reaching the conclusion that if she had started saving $15 a day 20 years ago she would have money help her right now?

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He didn't forget. The OP had clarified before that this was just saving from not spending, no interest.

 

But since I love this stuff, at 1% per annum compounding monthly, $15 each day will have grown to $180,218.97 after 20 years of investing.

 

 

Right. You need to have $450 of untied funds per month to be able to throw away $15 each day on junk. It's a waste of $5400 a year.

 

Unfortunately 1% is well below inflation.

 

What you would need to do to "save" is to have an interest rate that exceeds inflation or you would have to adjust your daily savings rate every year until 20 years from now when you would need to save what, 27-33 bucks a day to have what 15 bucks a day can get today.

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Unfortunately 1% is well below inflation.

 

Good point, but 1% per annum compounding monthly easily beats 2% annual inflation.

 

1% per annum compounding monthly = effective rate of 12.6825%

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The situation is all too common, but boils down to a combination of a lack of financial education (though I'm still mixed on how I feel about this) and a lack of proper management.

 

That is the surface view from at least a couple hundred miles away without any real knowledge of this person's finances. Most people spend based on what they have today and aren't doing any form of long-term planning. She should be saving as much as she can for a rainy day while also carefully balancing credit options to give her the room to weather extreme emergencies in the short term. This is obviously easier the higher the persons income, but the problem exists on all income levels.

 

I think it is unfair for us to be able to say anything more than that. It looks nice to take a glimpse into someones financial spending and say "hey that is frivolous spending! you should stop that!", but it isn't that straight forward. If the person is living on the razors edge and really can't afford anything beyond the bare basics to survive being able to splurge every once in a while is very healthy and needed too. People need some level of pleasure in their lives. The hard part is finding the right balance between needs and wants.

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I doubt they were spending $15 per day on that stuff, but still it can add up.  Ill never understand the people that smoke and have no $.  Whenever I run into a QuikCheck/7-11/Wawa type store to buy something there is at least 1 person in there buying cigarettes for $6+, one time the person was paying in coins.  Nothing against people who smoke but people who dont have the money to do so should figure out how to quit.. theyd be RICH!

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Good point, but 1% per annum compounding monthly easily beats 2% annual inflation.

 

1% per annum compounding monthly = effective rate of 12.6825%

 

let me know where you find that savings rate :)

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problem is $15 a day = $450 a month, not many people can afford to save that per month, let alone for 20 years.

True. And this was a one time purchase for her. It's not like she spends $15 every day. Very few of us could afford that.

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To me; saving money is similar to having a baby.

 

You're never really ready for it; but once you start it becomes easier as you continue doing it.

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Good point, but 1% per annum compounding monthly easily beats 2% annual inflation.

 

1% per annum compounding monthly = effective rate of 12.6825%

 

Where did you get that number from? According to my quick dash in Excel it should be an effective interest rate of 1.005% which also is agreed to by Wikipedia.

 

Far below the 2% inflation target of the Federal Reserve.

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