Rhonda and Michael both work for the same company in corporate America, doing the same job and earning the same salary. After accounting for weekends, holidays, and paid time off, they both work in the office about 240 days per year. Every day, Rhonda packs a lunch at home and brings it with her. It generally costs her about $3 for the ingredients for her lunch. Michael, on the other hand, spends a quick $9-$12 bucks at the local grab-and-go restaurants next to the office. Let’s say he averages spending $10 on his lunch.
Rhonda has the ability to spend more money on lunch, but chooses to take the cost-efficient method because she has a long-term mindset. She pledges to herself to take the extra money she saves and start investing it in a long-term growth index fund. This means that each year she invests $1,680 dollars of “lunch money” into her retirement account. On top of this, she also drinks coffee at home and foregoes the $5 brand name coffee that Michael gets on the way to work. This is an extra $4.50 per workday that she can invest. So now each year, Rhonda is contributing $2,760 towards retirement that Michael is not. Rhonda realizes she wants to retire early and is laser-focused on that goal.
Now Michael works hard, does a great job, and retires at age 65. No shame in his effort whatsoever. Maybe to him, the convenience of not packing a lunch and a slightly tastier lunch was worth it to work an extra 10 years at the end of his life. But not for Rhonda!
Rhonda always knew she wanted to start enjoying her life full-time outside of the work world at an earlier age. From age 22 she was contributing the extra $2,760 per year towards her retirement, along with her regular contributions. Investing at a typical 8%, by the time she is 55, she has $447,000 extra in her retirement account that is solely from her “lunch money.” This portion of her investment alone is also earning her $40,000 per year in interest, and that number is only going up annually. Along with her other retirement contributions, Rhonda is able to retire with confidence at age 55…10 years ahead of schedule!!
Now Rhonda definitely had to sacrifice to make this happen, but in the end, she would attest it was definitely worth it! I’m sure the extra 10 years of enjoying her family, traveling, and hitting the golf course quickly allowed her to forget about the 5 minutes she spent each workday putting her lunch together.
What ways in your life can you cut spending and focus on your long-term financial goals? Do you need guidance or motivation to find the right path to get you where you want to be? I’d love to help you chase your dreams, and give the guidance and motivation needed to help you get there. Contact me today to see how we can get you to where you want to be!
