“If I don’t make a big movie every three or four months, I can’t pay my bills.”
— Nicolas Cage
It is always a good idea to be mindful of expenses, regardless of how much money you make or have.
A year ago, a rich friend said he had the realization that spending fifty extra dollars a day is about $20,000 a year ($18,250).
He is good at math, so he was capable of doing this before. It was more of an emotional recognition of how easy it is to spend $50 these days, which feels somewhere between inconsequential and unavoidable every time you leave the house, but clearly adds up to a meaningful amount when you see what it means if repeated over a year.
After that conversation, I made the table above. Although it’s simple, it has been a powerful visual and has actually changed my behavior.
I realized that every $3 a day decision is a $1,000 a year decision.
Millennials have been bullied for their daily Starbucks and avocado toast for 15 years. This is not about eliminating one or two habits you enjoy, nor is it about a scarcity mindset. It’s more about paying attention and continuously evaluating what value you get from things. Extrapolating an expense over a year highlights the impact more than thinking about it in the moment.
You can take it further.
Let’s assume that you pay 30% in taxes on the money you make. To spend $20 more a day ($7,300 per year), you need to make $10,429 more per year before taxes.
So, by reducing your daily expenses by $20, that’s the equivalent of giving yourself a $10,429 raise.
Before & After Taxes
Here is a similar table, showing weekly amounts annualized.
“Beware of little expenses. A small leak will sink a great ship.”
— Benjamin Franklin
See also:
- The Cheap $12 Bottle of Water (extra guac)
- Designing Your Life (extra guac)
- The Financial Wisdom of Rap Music (extra guac)
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