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The Gift of Time
by Sherri Mahoney-Battles
Almost all of us wish for more money, yet we often over look the long-term effects that time has on our money. Money spent wastefully or unnecessarily over a long period of time can amount to some serious cash.
I once had a friend who would buy anything as long as it was less than twenty-five dollars. Purchases over twenty five dollars required extensive thought and planning while no thought at all was required for endless purchases as long as they didn't cross the twenty five dollar mark.
Oftentimes, we negate the effects of small purchases since the outlay seems so small at the time. After all, a dollar per day for a bottle of water or two dollars a day for coffee doesn't put a dent in our pocket when we shell it out on a daily basis, but let's look at some of those costs over a long period of time.
A dollar per day for bottled water will cost us approximately $25,000 over thirty years while two dollars a day for coffee will cost us about $50,000. Do you bag your lunch or do you eat lunch out every day? Lunch out every day will come with a price tag of about $178,000 over thirty years.
Smokers with a pack-a-day habit will be out about $217,000 and that's if the cost per pack doesn't go up in the next thirty years. Are scratch tickets your thing? Ten dollars per day will run you about $248,000 over a thirty year period. A weekly manicure will cost you over $76,000 over thirty years.
I am not suggesting that we deny ourselves every small pleasure that life has to offer, but when we pay for these things on a regular basis they become habits that we don't appreciate. When we get a Starbuck coffee once a week or a manicure every few months we tend to savor these things as more of a treat.
As consumers we are led to believe that many of the things we pay for are necessary and that our lives are drastically improved by the layers of gadgets and bills we accumulate.
Do we really need two hundred and fifty channels and what does it cost us over a long period of time?
There is no doubt that some things are absolutely necessary, and some, while not necessary, do enhance our lives. How do those things stack up, however, when we look at their long term impact versus the seemingly low initial outlay?
Why do marketing companies break the cost of a large purchase into the smallest daily or monthly payment; Pennies a day, a few dollars a month, a small monthly payment? They know that most of us don't examine the long term implications when we're teased with only having to shell out a small monthly amount.
Netflix started subscription based digital distribution in 1999 and by 2009 they had 10 million subscribers. They based their platform on a low monthly all inclusive fee, and millions of us, myself included, signed up for the service.
Some of these products are indeed great, but let's examine the costs over the long-term versus the short-term before we sign on that dotted line.
So, we've talked about how money spent over time diminishes our resources, but what happens when we give our money the gift of time? Small amounts of money accumulated over long periods of time will become large amounts of money.
When both of my daughters were very young I set up an automatic withdrawal from my checking account that funded college tuition plans for each of them. Both of them chose to attend either state schools or community colleges, and I was fortunate to have saved enough in their tuition plans to cover their college costs.
The key is to start early and time becomes your "friend". A child's tuition plan funded with $150 per month monetary birthday and Christmas gifts from grandparents, aunts and uncles makes for an even greater yield. As an added bonus interest and principal amounts withdrawn from qualifying tuition plans are tax free when used for college.
Let's not forget about our own financial future. Set a goal. Have an amount of money transferred each month into a savings account and consider it gone. Do you have credit card debt or home-equity debt? Increase each minimum monthly payment by $50 or $100 per month. Increase the amount going into your retirement account. Add an amount to your mortgage payment each month to go towards principal.
Spread these payments out so that they come from different sources and get applied in different ways: Twenty-five dollars more per week toward retirement, $100 per month toward credit card debt, and $150 more on your mortgage payment.
Pay the most towards debt with the highest interest rates. These payments won't feel like a lot, but over a long period of time they will make a significant difference.
"Bringing Balance to Numbers"
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It never ceases to amaze me when employees don't take full advantage of employer funded retirement plans. When you have an employer generous enough to help fund your retirement be sure to invest enough to get the maximum employer contribution.
Four hundred dollars per month will increase your wealth by almost a half million dollars over a period of thirty years.
Remember, small amounts of money spent over long periods of time will become large amounts and small amounts of money saved over long periods of time will also become large amounts.
Do you feel like you're short on time? Make some drastic changes. Take some time in your checkbook and reviewing your credit card statements. What things do you really need to spend money on? Every dollar that you don't spend increases the amount you can save.
Start with a few additional monthly savings contributions or debt reductions and check it four times per year. When you feel a little more comfortable you can increase the amounts. Take advantage of the satisfaction you'll feel as your savings increase and your debt decreases.
Remember to make conscious decisions about where your money goes. After all, you are the author of your own financial story, and only you can give yourself the gift of a secure financial future.
Sherri Mahoney-Battles, of Taxing Matters, specializes in income tax preparation for small businesses and individuals.
As an Enrolled Agent, licensed by the IRS, Sherri has been representing clients for over twenty-five years in cases of audit, collections, and appeals and does extensive work with non-filers.