Eating lunch out during work is fun, convenient, and an opportunity to try new eateries, but it can also be expensive. Even if you only spend $10 - $12 per day, that adds up over time. According to a CNBC study, if you eat out every workday (there are about 260 workdays per year) and spend an average of $10 on your meal, you will have spent a whopping $2,500 over the course of a year. That is a lot of money. Imagine half of that going toward your retirement, all from making a few changes that are as simple as taking a peanut butter and jelly sandwich and an apple to work instead of ordering fast food.
Revise your daily habits
There is no denying that going out to eat is a pleasure life affords us. Justifying ordering that avocado cheeseburger is easy. Talking yourself out of it in the moment is the hard part. However, if you find yourself dealing with financial struggles or worried that maybe you haven’t put enough away for when you no longer want to work anymore, consider making a few changes to your daily habits. One great way to save money is to bring your lunch to work instead of eating out. You don’t have to do it every day, start with just half the time. You not only save money, but it is also healthier.
Save money and invest throughout the year
When you think over the span of a lifetime and how much money gets spent, $1,250 might seem somewhat inconsequential. For some, that might not seem like much, but what happens when we bring small monthly contributions, time, and interest into the equation? Let’s give it some context. Consider the following hypothetical:
Say you have an initial investment of $1,250, half of what you would spend annually on eating lunch out during the workweek. Instead of just sticking it in a savings account where it will sit there, you invest it, for example, in an index fund that tracks the S&P 500 with an average annual return of 10%.
You then contribute $104 monthly, approximately how much you’d save each month, bringing your own lunch half the time. Next, you wait. Over 30, 40, and 50 years, the money compounds. Take note of the returns each decade. What you are seeing is the power of compounding.
Initial Investment: $1,250
Monthly contribution: $104
Length of time in years: 30
Estimated Interest rate: 10%
Compound frequency: Annually
Total results after 30 years: $227,100.29
Total results after 40 years: $608,929.58
Total results after 50 years: $1,599,296.41
* This is a hypothetical example and is not representative of any specific situation. Your results may vary. The example above is just a hypothetical to show how compounding looks after years. The market is a rollercoaster of ups and downs. Within periods of bear and bull markets, investors tend to participate in panic selling and enthusiasm buying. The hypothetical is based on cost-dollar averaging, where you increase your balance with steady payments over time. The numbers shown are not blind guesses; however, in real life they will vary due to market volatility, however, and it should be considered that the index has produced a historic annualized average return of approximately 10.13% since 1957.
Consult a financial professional
When you are looking to cut back on spending and revise a budget, if you have one or are creating one from scratch for the first time, getting help from a financial professional could be greatly beneficial. Personal finance can be complex, and your decisions, if not carefully assessed, could significantly impact your financial goals.
A financial professional can help you create a budget and investment strategy and work with you on short- and long-term financial goals. Having goals gives you a foundation to work from and a direction to go, which may help mitigate some of the risk that comes from impulsive or uninformed decision-making.
Important Disclosures:
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investment(s) may be appropriate for you, consult your financial professional prior to investing.
Investing involves risks including possible loss of principal. No investment strategy or risk management technique can guarantee return or eliminate risk in all market environments. All indexes are unmanaged and cannot be invested into directly.
Past performance is no guarantee of future results.
All information is believed to be from reliable sources; however, LPL Financial makes no representation as to its completeness or accuracy.
S&P 500 Index: The Standard & Poor's (S&P) 500 Index tracks the performance of 500 widely held, large-capitalization US stocks.
Sources:
S&P 500 Average Return (investopedia.com)
Compound Interest Calculator | Investor.gov
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