Friday, September 19, 2014

Financial Thought of the Day September 19, 2014: My Bad Habits--Sodas Add Up

I really love sodas. But sodas can get expensive over time. At a local sit down restaurant sodas cost $2.25. It's kind of habitual for me. Let's say that I eat out 200 times per year: 200 x $2.25 = $450 per year. Let's say next year I refrain from that habit and the following year I save $450. I invest that $450 lump sum in an index fund and it gets 10% per annum for the next 30 years. Compound interest is a multiplicative mathematical function (1.10^30=17.45). Take $450 x 17.45 = $7,852.33. That's assuming I do this for one year only and assuming sodas don't go up in price. Imagine if I did this for now on?

No comments: