Multiply Expenses by 10 Years and Discover Where Much of Your Money Goes.

Multiply Expenses by 10 Years and Discover Where Much of Your Money Goes.

It can be difficult to appreciate the amount of money we spend in our daily lives.  For this reason, one of the methods I use to evaluate an expense is to determine the total cost estimate over a 10-year period. 

In this method, I identify the expense and multiply its monthly cost by 12 (for the 12 months in a year) to determine the effect on my annual budget. I then multiply the resulting annual figure by 10 (Ten years) and this is what paints the picture of its impact.  After seeing the impact, I then try to determine if it is an expense I should accept, reduce or eliminate.

The process comes in handy for expenses that I may not give a second thought to.  This includes daily or weekly expenses that I may consider small in each installment but amount to something surprisingly high over the period of a month.   We are in the cord-cutting era where many are trying to move away from paying for traditional cable services, so I will use said cable services as an example.  While many of us may consider a cable bill of say 200 a month to be worth it, I think the realization of just how big an impact it can have on our finances is what is creating so many cord-cutters.

In that example, if I am spending $200 a month for cable services, that adds up to $2,400 a year which then translates to $24,000 in 10 years, assuming all things remain equal.  Seeing that number should prompt one to examine what his emergency fund looks like compared to what he is paying for that aspect of entertainment. 

I can also go beyond cable services and look at other daily or weekly expenses that may add up to even more than the $200 cable services bill.  If I only count the roughly twenty weekdays a month, I should be able to identify a single item for which I spend an average of $10 a day… or I can also just count the roughly four in each month, and it should be relatively easy to identify where I spend at least $50 each weekend.  So, both instances would separately add up to $200 a month each and combining both would then reveal around $400 a month, which is $4800 a year and $48,000 in 10 years.

Please do not interpret this method as a way of not enjoying life, but rather, being aware of where your money is going so you can plan properly to establish financial stability.

Carlisle

Welcome to My Savings and Me. I have been blessed just enough to have a financially stable life for my family and myself. I have used simple saving and investing methods to make my money work for me and it is now my hope that information shared throughout this blog may ignite a fire in others.

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