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3 Things 10-14-24

Thing One



The $300,000 Lunch




It's too late for many of us to take full advantage of the magnificent power of compound interest, but we still can share our knowledge of it with younger people who are just getting into position to benefit from it maximally. In that vein, we share excerpts from a post on wisebread.com that used the simple example of eating out for lunch everyday at work to make a profound financial point. See below for the details:



"...It seems obvious that a serious handbag habit, or a penchant for champagne might damage your finances. But lunch? Seriously? Afraid so.



I know, I know. Lunch is hardly an extravagance. We all need to eat and picking up something to take out is a far easier option than preparing something at home.



But did you ever really consider the long-term costs? Although the small daily outlay on a restaurant or cafeteria lunch (not to mention coffees, sodas, and snacks) may seem insignificant, it adds up over time. If you're like the average American office worker, you could be spending about $3,000 on lunch and coffee this year. Just imagine how that mounts up over a whole working lifetime...



According to survey findings, 82% of working Americans spend at least $20 a week on coffee, and no fewer than 89% spend at least $35 every week on lunch. That works out to at least $57.49 per week. So, let's take an average Joe example:



Spending $57.49 a week on lunch and coffees, for 50 weeks in a year, means you're handing over $2,874.50 to eat an unsatisfactory (and probably unhealthy) meal at your desk daily. And if you spend more than $11 or so per day on lunch and coffee (as many of us are guilty of doing), that figure increases rapidly...



If, instead of buying lunch — for this year only — you invest the $2,874.48 saved in a skimpy 1% interest savings account, it could become a "happy retirement" holiday once you get to the point of ditching work, turning into $3,874.85 over the course of 30 years. Just by sitting there! Putting the same amount of cash aside into a vehicle that mirrors the S&P 500 over 30 years, based on a historic average return of 7%, your savings would turn into $23,409. Of course, additional contributions will lead to even greater gains...



By continuing with your "average" annual savings from ditching takeout lunches over the course of 30 years, your pot, even at a low 1% yield, would become just over $100,000 thanks to the magic of time and compound interest. If you learn enough about investing to achieve that historic average of 7% from the S&P 500 over that period, you could accumulate an astonishing $312,362. Enough to change your retirement plans?"



The math is irrefutable and powerful. Young people in the workforce have an opportunity, hiding in plain sight, to methodically stash away hundreds of thousands (and maybe even millions) of dollars. Let's all help them see it.



Thing Two



Saving On Car Insurance



A recent Wall Street Journal article noted that, “…car-insurance premiums have risen 8.3% on average compared with a year ago, according to S&P Global Market Intelligence…Driving those premium increases are higher costs for replacement parts, labor and the evolving technological sophistication, which makes repairs of new vehicles more expensive…”



The author offered four ways to save as rates rise. We’ve summarized them below:



1. Reduce your coverage. The author uses a rule of thumb that suggests multiplying your annual premium by 10 and comparing that result to the trade-in value of your car. If the 10-year premium exceeds the value of your car, you might consider dropping your collision and comprehensive coverage according to their analysis. We’ll add that most insurers will itemize the cost of adding collision and comprehensive coverage for you so you could even do the math using just those portions of the annual premium if you’d like. Either way, the point is you should have a good reason for over-insuring an old vehicle.



1. Raise your deductible. If you have a solid emergency fund, you might consider raising your deductible to reduce your overall insurance bill. The author gave an example where a consumer raised his $250 deductible to $2500 and saved almost $500 in annual premium payments. It may not make sense in your case, but you should at least make the call to your carrier or agent and check it out.



1. Shop around and demand discounts. A financial advisor mentioned in the article suggested spending 2 hours annually shopping around for your insurance and understanding all the discounts available to you. We’ll add that if you get you insurance from an independent agency (like us), they can do the shopping for you.



1. Share driving data. Many drivers are reluctant to do so but adding apps to your smartphone that allow insurers to track your driving habits (speeding, hard braking, fast accelerations, idle time, etc.) can result in significant savings over time if the data confirms you are a better underwriting risk as a result of being a safe driver. This is a case where invading your privacy through data collection can actually save you money.



All four suggestions make sense. In the very least you should consider number 3 and enlist an independent helper with your best interests in mind if you’d rather not tackle it yourself.




Thing Three



Just A Thought



“A mathematical formula for happiness: Reality divided by Expectations. There were two ways to be happy: Improve your reality or lower your expectations.” ― Jodi Picoult

Kommentare


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