Increase Savings (and/or Decrease Spending)

Short of coming into unexpected money we all live on a fixed income. Without identifying extra money, how does one increase savings? The answer is found in the question's opening phrase - "identifying extra money." Let's use "Joe" as an example. Joe works in YourTown, 5-days a week. Each day he stops at the 7-11 for a coffee and a pack of cigarettes. Fridays he will stop on the way home and have a pint with his co-workers...just 1 pint. He spends, on average, $4 a day for lunch. One might say Joe is rather average in his work-a-day pattern of behavior and not overly indulgent. But let's take a look at these daily expenses Joe has: $2 coffee, $5 cigarettes, $4 lunch, and once a week $3 for a pint. This is $11/day, $14 on Fridays. In a week Joe spends $58 - 5 coffees, 5 packs of cigarettes, 5 lunches, 1 pint. In a month, Joe spends $232; in a year that's $2,552 ($232 X 11 as Joe has 2-wks vacation a year and 2-wks off with holidays and personal days...although he still likely spends another $100 on cigarettes on those weeks and this does not count what he spends on cigarettes on weekends all year round). So, we could argue that Joe has $2,552 with which to Invest if he wanted, but this is not terribly realistic as he does have to eat lunch each day, etc. However, if Joe packed his lunch 3-days a week and spend $1 on the ingredients for those lunches, that is a $9 savings and if he made his coffee at work contributing $.50 a day to the kitchen fund, that is a $7.50/wk savings. If he cut his smoking in half, that would be a $12.50/wk savings...if he quit altogether, $25/wk - Joe really enjoys his pint with friends on Fridays so that remains unchanged. That comes to $29/wk savings or $41.50/wk if he quit smoking altogether. $29/wk = $116/mo or roughly $1,276/yr. By making weekly investments in his 401-K of $29 for 48 weeks of the year at 4% compounded daily, Joe would have $18,383.83 in 10 years of which $3,477.83 would be the interest earned...all from packing his lunch 3X/wk, making his coffee at work, and cutting his smoking in half - if he quit smoking altogether, he'd have $26,244.51 of which $4964.91 would be the interest...and this does not count savings from not smoking weekends and during vacations and holidays! True, Joe may or may not consistently earn 4% or be able to have it compounded daily but the point remains, little changes that are practiced religiously can result in significant benefits over time. Think what these numbers would be if Joe did this for 20-years or 30? To calculate what you might realize in savings over an extended period if you made some changes in your spending habits and invested the savings, visit https://financialmentor.com/calculator/compound-interest-calculator What do you think? Dr. Robert