One of the things I work on with clients is maximizing their happiness per dollar spent. This isn’t a one day fix but a process that entails becoming mindful, getting clear on what’s important and doing some fun experimenting. We often don’t realize the impact that little habits can have over time with the magic of compound interest. While I am not a fan of personal finance dogma or telling people how to spend their money (because personal finance is extremely personal and should be dictated by personal values and goals), I offer these seven habits below as examples of how much power we have in our day-to-day lives to build wealth. If you can’t imagine giving up your daily cappuccino, replace #1 with something more relevant to you.
This is about taking an honest look at what’s providing you joy in your life, not to make you feel guilty. And before swearing by any of these new habits, test them out for yourself. Does it work for you? If so, you might decide to adopt it into your lifestyle for good! Without further ado, here are seven habits that will make you a millionaire in the next 21 years.
1. Make your own coffee. I know… you’ve heard it before. Buying your coffee at Starbucks can really add up. The thing is, it’s 100% up to us if we want to buy or make our coffee but it’s fun to see what would happen if we let the expense go. Let’s assume you would normally spend $5 per day on coffee and you could make it for $0.50 at home (add in even more savings if you drink it at work for free). $4.50 in savings, 365 days per year is $1,643 in coffee per year. If we continue to save that amount each year over the course of 21 years, and it’s growing at the historical rate of the S&P 500 over the past 35 years (let’s round to 9.5%), we’d have $98,983 saved after 21 years.
2. Max out Your IRA. IRA stands for individual retirement account and these are accounts we can open free with a brokerage company to put away money tax-advantaged for retirement. You can put up to $5,500 per year in an IRA ($6,500 if you are 50 or older). If your company offers a 401-K, you can put even more money aside in there but let’s assume you invest $5,500 per year over 21 years. At the same historical S&P rate, you will have $331,451 saved at the end of 21 years.
3. Bring your lunch to work. It takes some planning to bring our lunch to work each day but when you think about the added benefit of eating takeout, it’s often not worth even it. How many of us scarf down bland food in front of our computer screen that costs us $15 per day? If you love going out for lunch because you need the break or walk, take the walk! Get to the bottom of what you love about going out to lunch and see if you can honor the important part while letting go of the rest. You can do this with any expense. Let’s say by bringing your lunch, you save $12 a day (New York City prices) and you do this 5 days a week for 48 weeks per year (this assumes you get 4 weeks of vacation). This would save you $2,880 per year and if you invested that at the same historical S&P rate you’d have $173,560 after 21 years.
4. Take the 30 Day Money Cleanse. During my 30 Day Money Cleanse, we do a lot of fun exercises that help us align our spending with our values and then it’s easy to go of the expenses that are not important to us. The average participant saves $950 during the 30 Days Money Cleanse and let’s be really conservative and say that they save $950 per month that first year and then don’t save any additional money in years going forward (which you of course they will!). If you invest that $11,400 in savings from the first year at the historical S&P rate, and never add to it again, you will have $70,014 in 21 years. Not a bad return for a $297 investment!
5. Set up an automatic transfer as little as $35 per week. As you know, I’m a big fan of automating our savings to make sure that we prioritize paying ourselves first. If you set up an automatic transfer for $35 per week to your savings or investment account, that’s $1,820 per year in savings. At the same 9.5%, you’d have $109,680 after 21 years. Think about some ways you could find an extra $35 in your weekly spending. That could be one more night of cooking dinner, negotiating down your cable bill or letting go of something that isn’t bringing you much joy.
6. Skip the taxi 1x per week. Let’s say the average taxi ride you take is $15. If you walk or take public transport once per week instead of taking the taxi, you’d save $780 per year. It’s also often faster and you don’t get car sick. Win-win all around. Over the course of 21 years, invested at the S&P 500 historical rate, you’d have $47,006 saved.
7. Pay down your credit cards. The average American household has $15,762 in credit card debt with an average APR (annual percentage rate of interest) of 18%. That totals to $2,837 in interest charges each year. Over the course of 21 years at the S&P 500 historical average, that’s $170,978 in savings.
There you go! Total up these seven habits and you get $1,001,673. Millionaire status in 21 years! If some of these don’t apply to you, that doesn’t mean it’s hopeless or that you’re off the hook. Reflect on your life and switch some items out. If you’re not taking taxis but buy a water bottle at the gym every day, that will total to something very similar! Plug your habits into these equations to see what they are actually costing you. Then you can decide if they’re worth it. I’d love to hear about your millionaire habits. Comment below or shoot me an email to let me know!