If You Want to Retire, STOP Spending Money on Fancy Lunches and Invest
This is a follow-up to My Dad Spends $8,000 Per Year At Work. The majority of my coworkers go out and purchase “fancy lunches” every day. Sometimes they’ll spend a few bucks, maybe $6 for a sandwich. Most of the time, they’ll spend closer to $10 or $15 for an entree and soda. Rarely, they get super fancy and will go to a sit down restaurant and spend $30. They do this 5 days a week, 52 weeks a year. These same coworkers will complain that they never have enough money. Their student loan payments are too high, the rent is expensive, and car payments are the worst. “It’s expensive to live. You work for years, and what do you have to show for it at the end?” Don’t make their mistakes
Fancy Lunches Add Up
For my regular readers, you know that the little things add up. All of those small expenses: a soda here, a candy bar there, become a very large amount of money. Worse, its easy to forget that you even spent money on this. Food is no different. I asked one of my coworkers how much he spends on food a month. He said not much, maybe $300 a month. $300 a month, are you serious? He easily spends $10 a day, 20 days a week. His lunches, or 1/3 of all his food, costs more than $200, there’s no way he only spends $300 a month total. My guess for him is closer to $600.
The other problem with these expenses, is they don’t always give us much happiness. Sure, food tastes good. Its really nice when somebody else cooks it for you too. Bonus points for if somebody hand delivers it to your table. But it seriously impacts your budget to the tune of hundreds of dollars a month. However, these costs are really amplified when you track them over the course of your career.
The True Cost of Fancy Lunches
Lets say that I buy a fancy lunch for $15 a day, every day that I work. This is what many of my coworkers do. I also work 260 days a year. Every year, I will spend $3,900 per year. Over the course of a 40-year career, I will spend $156,000. But what if I invested this amount? If I invest this in a Roth IRA for 40 years, receiving a 5% real return, I will have amassed $470,000. If I instead got a 7% real return (the average return of the stock market over the past century), I will have amassed about $780,000. And, if I get an 8% return (do-able if you invest heavily in the Russell 2000 index, and have nerves of steel), then you will have amassed more than $1 million.
That is seriously a lot of money. For some people, that’s enough money to retire. Its more than the majority of the people in the US have saved in general. If you receive any type of social security, those distributions plus withdrawing from your new, shiny retirement account will lead to an extremely comfortable retirement. Your retirement budget would be $5,000+ a month which is very cushy.
This isn’t just a problem with fancy lunches. Lets say that you go out to the bars every Thursday, Friday and Saturday night. When closing time comes around, you open up your Uber app and get a ride home. Each ride costs you $20 for a grand total of $60 per week. Its not that much, right? Its better to have a sober driver get you home safely. However, can you take the metro, or can you carpool? Any segment of your budget that does not provide you with happiness should be evaluated. If you can trim your budget by about $400 a month, you can now comfortably retire as long as you invest.
Decide Whats Most Important
So why doesn’t everyone stop buying fancy lunches and invest in their Roth IRA? Many people don’t know the math behind it. How many people have actually done the calculation to determine the end value of an investment based on increased savings from tightening their budgets? In addition, I bet a lot of people don’t actually realize how much money they are spending on their lunches. They just swipe their card and forget about the cost. Instead, they enjoy their fried chicken sandwich with french fries and a coke.
The thing is, if you really care about eating out for lunch, that’s perfectly fine. If you truly get enjoyment out of eating fancy lunches, or it helps your mental state, or you just need a break from your job, then go for it. I’m not advocating that you need to stop eating out immediately. Rather, if you want to save more for retirement, and you are looking for ways to trim your budget, eliminating your workday lunches is a spectacular way to do it.
You only live once. You deserve to enjoy the moment and your youth. But what if you could enjoy the moment and save for your future? Is limiting yourself to eating out once a week really that terrible? If it is, then keep eating out. If it isn’t, then consider bringing your own lunch and investing everything that you’ll save. You’ll be sitting on a beach enjoying a Margarita while everyone who wanted their fried chicken sandwiches are still working at 70. Sometimes, delaying gratification is the right way to go.
How much $$ do you spend on lunch, or other expenses that you don’t care about? Would you consider trying to trim them and redirect them to investments? Let me know in the comments!