Want to Be a Millionaire? Drink Cheaper Beer (and Other Ways to Save)
May 29, 2018
By Jeremiah Back
Personal Banker, Security National Bank
A 2017 survey by Go Banking Rates found that most “young millennials” — defined as those between 18 and 24 years old — had less than $1,000 in their savings account. This would leave most millennials one unexpected expense away from their parents’ basement.
Couple this with expert opinions that say you should be putting away about 25% of your paycheck in your 20s, it’s obvious not a lot of young people are on the right track.
There are several reasons for this: student debt, rising living expenses and plain old procrastination, to name a few. But today’s excuses will only get in the way of tomorrow’s financial well-being. If you’re a young adult who hasn’t started saving, the good news is you can start today!
Easy Lifestyle Changes to Save Money
Most people never intend to live outside of their means. It happens slowly, with minor activities and costs piling up to an eventual standard of living that can be hard to reverse.
Something as simple as cooking dinner for yourself, or picking up a Redbox instead of watching a movie in the theater, can make a big difference when it comes to budgeting and saving money. Making consistent decisions to cut back on what are thought of as "normal spending habits" can end up saving you hundreds of dollars each month — and even a million dollars if you’re in it for the long haul.
Sound a little outrageous? It’s actually simple math.
It’s an idea author David Bach has coined the "Latte Factor" — the simple idea that to finish rich, all you need to do is redirect the money you spend on small things that you don’t really need.
Drinking Cheap Beer (or other beverages)
This article wouldn’t be correctly titled if we didn’t mention beer, right? No offense to David Bach, but if you think Americans drink a lot of lattes, you haven’t considered the amount of beer we guzzle — more than 67 billion cans per year, to be exact.
Take a look at two different types of beer: craft and domestic. A quick run to your local store shows that a 4-Pack of craft microbrew can run as much as $12 (or $3 per bottle). Meanwhile, a 12-Pack of domestic beer runs around $11 — or 92 cents per can. Considering the average American consumes 556 drinks per year, that opens up potential savings of $1,156 per year — just by switching to cheap beer! That's a significant difference, especially if you do the math over 10 or 20 years. Going cheaper now can save you thousands in the long run.
Are you a non-drinker? The same rules apply to just about any other type of beverage — or product, for that matter.
Saving With Hair Care
Just look at the difference between salon and commercial hair care products. Traditional Dove Hairspray costs around $8/bottle, while a "top-of-the-line" brands like Chi or Kenra Hairspray cost closer to $20. If you go through six bottles of hairspray in a year, that's $70 in savings.
Saving at The Gym
If you’ve ever had a gym membership, you know how easily the costs can add up (especially if you’re not going as often as you should be).
Depending on where you live and what gym you frequent, your membership pricing will vary. But let's say a gym membership costs around $30 per month, or $360 per year. Compare this to the price of a fitness app, like Aaptiv ($8.00 per month) or the great outdoors (completely free), you only spend around $96 within the year — that's $264 in savings.
Saving With Your Coffee Choices
One of the more infamous saving examples involves how much money you’re spending at Starbucks, compared to making coffee at home. If you get around 20 drinks at a Starbucks per month, the cost comes close to $780 per year (assuming the average drink price of $3.25). Making your coffee at home, even with a comparable brand like Dunkin’ Donuts, can put about $300 back in your pocket over the course of a year.
These are various ways to save money, but this doesn’t mean you have to cut back on everything. If you don’t want to lose out on Starbucks coffee or designer hair products, look to other things in life you can cut back.
"But wait, didn't you say I can be a millionaire by drinking cheap beer?"
Yes, but it requires two more things: 1) Staying disciplined, and 2) applying the "cheap beer" mentality to other areas of life. If you stay committed enough, you can save an enormous amount of money! Do the math for yourself, using the calculator below. For instance, if you decide to buy four cans of cheap beer instead of four bottles of craft beer once per week, you'll save at least $7. Let's say you decide to make this a habit for years to come, and add inflation-adjusted return on investment between 5-8 percent (which has been the standard for decades).
According to the calculator, how much will you save?
SECURITY NATIONAL BANK
Savings will be
this is just an estimate of what your savings could be
*Information and interactive calculators are made available to you as self-help
tools for your independent use and are not intended to provide investment advice. We cannot and do not guarantee their applicability or accuracy in regards to your individual circumstances. All examples are hypothetical and are for illustrative purposes. We encourage you to seek personalized advice from qualified professionals regarding all personal finance issues.
Now, apply this same saving mentality to other little areas in your life — and make it a goal to get up to $50 or even $100 in savings per week. We're convinced, after you move the sliders around, you'll be amazed at how spending less now can lead to saving more for later. A lot more.
Why Should You Save Money?
One reason to save money is to build an "emergency fund," to prepare for unexpected costs that come your way.
Nothing hits you harder than a serious car issue or health emergency. These can amount to thousands of dollars of damages, and without a savings account, you may resort to charging the whole fix on a credit card. Having money in case these issues pop up can give you peace of mind.
Once you have an emergency fund stashed away, you can grow your wealth through other investment options. Or, add more money to your retirement plan (if you don't already have one, here's why you should). The earlier you get started investing, the more buying power and returns you’ll see. At Security National Bank of South Dakota, we have financial advisors who'd be happy to help you get started.
CAN’T SEEM TO SAVE MONEY, NO MATTER HOW HARD YOU TRY?
Even when you’re cutting costs or actively focused on saving, you can sometimes feel like you’re never gaining any ground. Sound like something you’ve experienced? It’s easy to fall into a cycle where you find yourself at the end of the month with no money to save. Ultimately, savings will come in one of two ways: cutting back on big purchases or making minor changes to slowly build up your bank account.
If you’re looking to cut back on the bigger expenses, it may mean skipping out on the newest iPhone, or holding on to your perfectly functional TV. Wait another year before getting the “next best thing.”
For those who aren’t making “big” purchases, it’s important to find the smaller, seemingly insignificant "impulse" costs that are slowly draining your accounts, dollar by dollar. Learning how to save in the little areas of life takes dedication. It’s like weight loss — all of the small things add up over time. It doesn’t happen overnight. While challenging, once you’ve built a lifestyle around saving — you will be well on your way to a more financially responsible life.
Take Control of Your Savings
When you save money, you’re not just stashing away money. Saving is a way to prepare for the unexpected and invest in your future. It gives you a safety net and breathing room to live comfortably.
If this article has hit home, set up a savings-focused appointment with one of our bankers today. We’ll be happy to go through your financial goals and help you formulate a strategy to get there!