This is why Americans are overweight and broke – In my latest book, Building Wealth (For the Rest of Us), I discuss the relationship between diet and finance. However, I am looking at it from the difficulties involved in starting a diet and sticking with it, and how that correlates with starting to save and investing for your future. We have no money and why we are overweight as well, but it’s primarily about our lifestyle decisions and the way (or should it be “weigh” 😉 ) we spend our money. Dining out is the No. 1 thing that Americans blow their budgets on, according to thePrincipal Financial Group’s annual Financial Well Being Index, which was released in December 2016.
Those restaurant meals are also adding to our growing waistlines: On days when people dine out, they tend to consume 200 more calories than when they eat at home, according to a study of more than 12,500 people published by Public Health Nutrition.
Look at the chart below and observe how we spend our money. In just a recent two year comparison we can see that the amount that we are spending on almost all these items has increased. The one that jumps off the page to me is coffee. In just two years, we have tripled the amount we spend of coffee.
People have a tough time seeing how small changes today could have a far reaching impact in the future. I have been told by numerous people that they can’t save and invest $10 a day; they just don’t have the cash. Well, in aggregate, $10 a day is $3,650 a year, so when you look at it that way, it is a lot of money, but look at that chart again. People have TRIPLED the amount they are spending on coffee. That likely means that people are spending about $10 on coffee.
I’m not going to suggest that you don’t socialize with friends, but what if you took half of the money that you are spending at the coffee shop and invested it… every single day, take a five dollar bill and invest it.
If you were able to get a 4% return on your investment, here’s what you’d have:
After 10 years: $22,000
After 20 years: $57,000
After 30 years: $106,000
After 40 years: $180,000
All that simply by halving the amount you spend on coffee each day. And that’s assuming just a 4% return on your money. That’s fairly modest. Over the long term, the S&P 500 index has returned a lot more than that, If you reinvest the dividends, it’s closer to 10%. Here’s a chart comparing various rates of return on your money.
|Annualized Rates of Return|
Saving and investing just five dollars a day could be worth between $200,000 and $900,000. This is just one example. The food choices we make — both quantity and number of calories — has a direct affect on our waistline. The number of dollars we put in our mouth via the food choices we make versus saving and investing for our futures has a direct affect on our net worth.