These shoes are cool, and an important status symbol to some people. But how important are they to you?
Right now, I am going to tell you how to retire rich. I am not getting anything out of telling you this, and it is simple math, but hold on tight, ’cause this is going to be one wild ride. I promise.
There are literally a million ways we can save money in different areas of our lives. When we factor together all of the little choices we make on a day-to-day basis; that is how we spend our money, and ultimately, live our lives. From saying yes or no to upsizing your drink at the local cinema, to deciding which lender to go with when buying a house; these decisions dictate how much money we spend and how much we ultimately have. This particular post is one of serious nature, should be taken as so, and for everyone living paycheck-to-paycheck, this is especially for you.
I will give an example, as I often do, that accurately portrays this broad concept on a local level. Here’s the hypothetical situation that will affect your life drastically: you’ve worn down your last pair of shoes, and your on the hunt for some new ones. You are thinking about several options, all of which have their pros and cons. Let’s say your just going to go with some standard sneakers. You have the option of getting Air Jordans or even these Nike sneakers, that they only made 40 of, with an estimated resale value of $1000 or more. Realistically, however, you have narrowed your choice down to some Air Jordans from Foot Locker for $159.99 or some Dunkman Game Time by Shaq treads sold at Payless for $29.99. Real shoes, real prices.
Let’s pretend you get those Shaq shoes instead of the Air Jordans, which although you really want you just don’t need, and save yourself $130. That is a lot of money, right? You could use that to pay a little of your rent, or have a few nights out with friends. Already, your on a roll as far as your decision-making is concerned. However, let’s say you invest that…I know, in todays market, that is pretty much a dirty word, but time and time again investing has been proven the best method to get a return on your money without any real work involved.
So, you take that $130 and you put it in, let’s say, a hedge fund that earns 8% over the long term. Not bad, so you’ve just made about $10 your first year. That is a meal for two at McDonalds! For fun, however, let’s just say you keep it in there since you were 20 and you’re approaching retirement at 65. How much did your $130 earn you in that time?
It is more than you probably think it is, and I’m going to tell you, I promise, but let’s add a little fun to it. Ok, so you bought your shoes, but let’s say that every year you buy new Shaq shoes instead of Air Jordans and save yourself $130 every year. That’s really good, but let’s say you invest that money in the same place as well. At your retirement party at 65, somebody comes up to you and says “Hey, what happened to your Air Jordan money, did you save it, invest it, or did you buy 45 years worth of worn-out old-fashioned shoes? I did some math, and if you saved it without interest, you’d have $5,850 by now!” You say that you invested it, but you haven’t checked it since then. You knew it was making about 8% every year, but now you go over to a computer and you look while your chowing down on your retirement cake. How much did you make?
That is a difference of $52,565.05 between just saving the money under a mattress and investing it. If you had even just socked away $130 that first year and never put any more money in, you would have $4,149.66. Still a great return on your original investment.
And that is just shoes.
$58,415.05
Just shoes.
Think about it.
