If it has been a little while since you have read part one, go back and review first. The reason is that I am not going to give any background or explanations. I am just going to pick up where I left off, as if you had just turned the page.
What’s a Dollar?
My previous focus and examples were about monthly expenses. If you decide to take on a monthly commitment to spend money you have to weigh the true cost in order to make a truly informed decision. But what about those one-time decisions? An extra buck or two here or there can’t really make a difference, can it?
Let me give you an example of what I am talking about. When I was a newlywed and in college my wife and I would go grocery shopping together. We didn’t like to spend any time apart that we didn’t have to (and we still don’t). What we didn’t realize was that it was also an opportunity to learn about each other, our spending habits, and to grow in our ability to come to a consensus on what is worth spending money on, and what is not.
I grew up in a home where we always bought brand name foods. She grew up in a home of buying things that were a great deal or were on sale. I remember wanting to buy Kraft American Cheese. She couldn’t see why I would pay an extra dollar to buy Kraft instead of saving a dollar and buying the store brand. I insisted that it was “worth” it. She was wise enough at the time to let it go. I have since come to my senses on my own.
Often now, when I hear my mind whispering “it’s only a dollar,” I have a different train of thoughts come through my head. The first thing that comes to mind is: Is it really only a dollar? Going back to the illustrations in Part 1 let’s see what one dollar is worth if it is invested instead of spent.
|8%||10%||12%||18%||Actual $ spent|
The Years Have Now Passed
It is interesting for me to be writing this now. My wife and I will be celebrating our 11th anniversary this week. So, ten years have now passed since we were having these grocery store conversations. Looking at the chart, if I had taken the extra dollar home and invested it instead of buying Kraft, I would likely have about $3 now. Doesn’t sound like much, but it is THREE TIMES as much as ten years ago. Two questions begin to scream inside my head.
First, would I have bought Kraft if it cost $6 and the store brand was $3? Would I have been willing to pay twice as much? No. My wife would have had a much easier time convincing me. But the reality is that I did pay twice as much. And twenty years from now I will have paid 17 times as much. Fifty years from now I will have paid 300 times as much. I will be paying for that decision, more and more, for as long as I live!
The Most Important Part
The most important part of this is that we don’t make just one isolated decision to spend an extra dollar. The reality is that we make these decisions often. I would guess that if you will take time to honestly assess your spending habits, you will find many times when such a decision is made. My guess is that most people make such a decision more than once a day. Even if there are only two times in a week that you spend/waste an extra dollar, that would be $100 dollars in a year. Now look at the numbers in the chart above and multiply them by 100. Then multiply them by years of such decisions. Scary. Mind-boggling.
I will end by saying that there are many $1 decisions that I still think were worth it. Most have to do with experiences with my children and memories that were made. However, I know that there are innumerable $1 decisions that I have made that were not worth their true cost, and I will have tens or hundreds of thousands of dollars less in retirement because of them. Now that is expensive cheese!