2 min read
Here are some numbers.
I currently have about $10,000 sitting in a savings account at Ally Bank earning 1.45% annual interest. This means I’m on pace to earn $145 over the course of one year.
When I switched from an unnecessarily high-cost phone plan to a cheaper one, I saved $30 per month. That’s equivalent to saving $360 over the course of one year.
Last month I got back into the side hustle of stats tutoring and made $120. That’s equivalent to earning $1,440 over the course of one year.
In this analysis, I found out the difference between dining out for every meal compared to my actual eating habits is about $180 per month. That’s equivalent to saving $2,160 over the course of one year.
When I moved to Cincinnati, I had the option to move into a slightly larger apartment for $300 more per month, but chose a smaller one with a roommate. That decision will save me about $3,600 over the course of one year.
I also earned a bit over $600 from blogging last month. If I consistently earn that much each month, that’s equivalent to $7,200 over the course of one year.
Combined, all of these savings and earnings add up to $14,905 over the course of a year.
Currently I have around $70,000 invested in various assets across brokerage accounts, IRA’s, and 401(k)’s. In total, these investments would need to earn over a 21% yearly return to match the amount I’m currently saving and earning through my six lifestyle choices listed above.
In a good year, I might expect this $70k to earn a 6% total return, which is equivalent to $4,200. That’s a decent amount, but it’s still less than one-third of the guaranteed return I can get from my combined lifestyle choices.
For anyone in a position like myself, with a net worth less than $100k, the fastest way to make progress financially is through making the right lifestyle choices. Starting a side hustle, finding a cheaper phone plan, living in a reasonable place, dining out just a bit less, etc. These choices often have a bigger impact on your wallet than your investment returns.
My favorite free financial tool I use is Personal Capital. I use it to track my net worth, manage my spending, and keep an eye on my monthly cash flow. It only takes a few minutes to set up and it makes tracking your finances simple and easy. I recommend trying it out.
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