Today’s Spending Decisions


How a person spends money is far more important than how he or she invests it.  It is much easier to reach retirement goals by deciding how to live, rather than how to invest.  Deciding what to do with the money we earn – how to spend it – is what brings about peace of mind, not how much we make or how much we have.

The late Loren Dunton, founder of the non-profit National Center for Financial Education in San Diego, wrote about his lifestyle decisions to buy new cars and spend weekends in Reno, instead of investing a hundred dollars each month in a mutual fund when he was in his late twenties.  That fund would have been worth over a million dollars today.


Perhaps you think the difference between a full sized car, fully equipped, and a compact is only about $10,000.  Actually, it is more like a million dollars.  Consider this; borrowing $25,000 for a new car over four years will cost about $634 a month, while borrowing just $15,000 will cost only $381 a month.

If one saved the difference of $253 each month for 35 years, earning an 8% average rate of return, it would swell to $580,352.  However, that is just the accumulation of the funds.  What about the earnings as the funds are withdrawn during retirement?

If one were to get monthly payments of $4,479 from that sum from ages 65 to 90 (and some predictions say there may be over 250,000 people over the age of 100 in America in the 21st century), the total amount collected would be $1.3 million.

This is the magic of compound interest.  However, it is not retroactive!  One must save now to enjoy the benefits of compound interest in the future.


For instance, if the difference in the example above were saved for only 25 years it would grow to just $240,000.  Paid out at $1,857 a month, the total would be $557,000.  It is amazing that the difference in saving an additional ten years is about a half million dollars.  However, the monthly difference in payments of $2,622 monthly shows how today’s lifestyle decisions can be worth a million dollars in retirement years.

When should people begin saving money?  Never soon enough.  If ten years could mean a difference of $2,622 in retirement income each month, can you imagine what 15 or 20 additional years of savings would mean when you reach age 65?


For some, no doubt saving now would be easier if there was more current income.  People 17 to 23 years old may think: “Me save?  Are you kidding?  I am just getting my education and besides I want to have a good time.  When I get out of college and start my career, I’ll start saving.”

People 24 to 30 may be tempted to think: “You don’t expect me to save now?  I have only been working a few years.  Right now, it is important to dress well.  I’ll save later.”

From 31 to 42, the reasoning may go something like this:  “How can I save now?  I am married with small children.  Perhaps when they are older I can think about saving.”

Those 43 to 55 wish they could save now.  However, many just do not, saying they cannot because of children in college and education loans to pay.

From 56 to 65 most recognize the urgency to begin saving now.  However, money is tight.  It is not easy for people that age to better themselves.  It is tough to break years of over-spending habits.  “Maybe something will turn up,” many say.

At age 65 and older, it is too late to begin saving money.  You cannot save when there is no income.  Many older people live with their children and are dependent on Social Security, which is inadequate, since Social Security was only designed to be supplemental.

If the choice between cars can impact retirement income, imagine the possibilities when applied to lifestyle choices such as a home, vacations, dining out, entertainment, wardrobes, furnishings, etc.

Try to develop the art of money accumulation now.  Begin by saving every day.  Start today!