Great Money Saving and Money Making ideas

MayCaesar

If you are into extreme money saving ideas, like me, then I would like to suggest a shift in perspective that allows one to easily resist impulsive buys and save incredible amounts of money as a result. I learned it from Graham Stephan, a millionaire with a channel on Youtube who gives a lot of great investment and saving tips.

The idea is the following. Take your current age, and then take the typical retirement age, 65. Take 1 dollar and apply a very optimistic (but realistic) index fund interest rate to it (say, 8%), and then calculate what one invested dollar will grow into by the time you are 65. This is the "true worth" of each dollar you are spending today - meaning that if, instead of spending it, you invested it, then by the time you are 65 this is how much you would have on your bank account.

In my case, for example, investing $1 today would result in having roughly $15 by the time I am 65. Now, I can use it to evaluate the true value of things I buy. For example, suppose I want to buy a bottle of Coca-Cola for $2; I know it is bad for me, but I really like Coca-Cola. Now, I multiple $2 by 15 and get $30 - this means that this bottle of Coca-Cola will set me back by $30. Is a bottle of Coca-Cola worth $30? Probably not. Knowing how expensive it really is, I now really do not want to buy it. I will instead drink water and have a couple of great meals at a restaurant for the same money in 36 years instead.

Be careful with this though: once you have internalised this principle, you may become a really-really frugal person, which is not for everyone! A less extreme version of this principle is described in the book "The Latte Factor", where the author explains how even small saving decisions daily can avalanche into a fortune decades later.