The most important part of getting debt under control is learning how to avoid unnecessary expenses. This is a lot more difficult than it sounds. I find that it is easier when I look at the future value of money. In other words instead of looking at a music CD as costing $15, it can help to look at how much that money would be worth at retirement. For these examples I’m going to assume that you’re 20 years old and want to retire a few years early at age 60.
The $15 CD costs you $975 in retirement dollars. $35 spent on a meal for two costs $2275 in retirement dollars. One years worth of cable television at $50 per month costs you $39,000 in retirement savings. And that is just one year. So if you are 20 years old and getting an apartment, you can add $39,000 to your retirement by not ordering cable television for 1 year and putting that money into a retirement account.
Here are some more figures:
Purchasing a good used car for $5000 instead of a new vechicle for $20,000: $350,000 to $650,000 depending on how long you keep the vehicle. If the used car saves you just $150 per year in insurance, you’ll be able to save an additional $97,000 by the time you’re 60.
Franklin said that a penny saved is a penny earned. However, when it comes to retirement, a penny saved is $.65 earned.
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