I will forewarn you. This blog post is going to use math, and math does not care how we feel, which is why I did not major in math. Well, not really, but math can be cold, especially when it reminds you how people could have bought waterfront property with the money that they spent on fast food over the years. And that is my segue.
Here is a piece of waterfront property that is available through realtor.com (https://www.realtor.com/realestateandhomes-detail/Red-Wing-Cv_Ocean-Springs_MS_39564_M91417-75274)
On the front end, that looks like a lot, but let's look at what a little extra spending here and there really adds up to.
If I go out to eat four times a month (which is on the low end for most Americans), and let's just assume you are spending $15 per meal (once again on the low end). A quick run of the math will show $15 a week will equal $780 for the year. Now if you just ate out for one year or stuffed the money in a shoebox under your bed, that money would not make a large ripple in your finances, however doing so is like you just saved up for your own yearly bonus at work and you can use it at your discretion. You now have the ability to go on a vacation, buy something really nice, or help someone in a big way - or you could have just eaten it slowly but surely. On the math side, $780 isn't going to help you buy a piece of property (unless you wait 43 years...), so what can we do?
A tale of two accounts
Let's say you do more than just stuff it in a box under your bed. Let's say you did something crazy and decided to make it work for you. Below we will have a few different scenarios - the goal isn't to tell you what to do, but to let you see what it could be and then you decide for yourself what is worth it.
Savings Account
This is the safest option and the lowest yield option (well, other than the shoebox under your bed). According to bankrate.com, the best percentage rate you will get on your money is 0.60% (as of 2/22/2021). Wow, that is dismal. And what will you earn if you do this for ten years? $21.46. To put that in perspective, that is 2,146 pennies over 3,650 days. You could double your return just developing a daily habit of looking down to see if you find a penny discarded on the ground.
Account with an Investment Firm
According to nerdwallet.com, the average return in the stock market is roughly 10%. In case you are doing the math, that is over 16 times your return percent in the aforementioned savings account. Once again, a savings account is safer, but it isn't keeping up with inflation at such a low rate. That little bit of difference (10 little piggies instead of part of one), makes a very big difference in your return. In fact, the return on your investment is $4,288, or almost 200 times what you would have gotten from your savings account (199.81 times for the sticklers).
Of course that comes with risk - especially on the short term. If you stick with it for ten years, your average yield should be 10%. But if you were going to pull it out at year ten and that year coincided with a fallout, well, you could lose a lot. But don't let that stop you from investing. If you get cold feet after a few years, according to the averages you will still have way more than you would have if you had invested in safer method for the same amount of time.
There are other ways to use your money that might have more risk or might not have the goal of waterfront property attached to it. I listed a few of the myriad of ways you can use that tiny bit of income to do something that makes a more lasting impact.
Invest in a single stock
Now we are increasing risk. The previous one is a fund - a mixture of stocks bundled together. One stock can bring a much faster and higher return, but it is also putting all of your eggs in one basket - which could also lead to a much faster and lower return. Last year was a crazy year and if you caught some stocks at the right time, you might be looking at waterfront property with a house on it for that amount of money, or you could be on the flip side of that and have lost the majority of it.
Invest in a job
What if you could use that little bit of money to learn a new skill for a side gig or a new job? For that much money, you could learn webpage design or a programming language - couple that with a portfolio and you might find fast food money become that which opens a new door for you.
Invest in a life
What if you took that money and decided to help or even save a life? Organizations like World Vision allow people to sponsor children in impoverished areas to help provide clothes, food, clean water, and school opportunities. Imagine if you traded a number 3 combo for helping a child in indelible ways?
What are some things that you would do with an extra $21.46, $780, or $4,288? Feel free to post your ideas in the comment section. If you can't think of anything, you can always eat it...
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