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This is the time of year when many people are resolving to quit bad habits with the hopes of transforming their lives for the better. According to a survey by Nielsen, most New Year’s resolutions revolve around one of two themes: fitness and money.

Striving for better health and money management are pretty virtuous goals, but what most people don’t know is that there’s an opportunity cost to keeping bad habits around. This makes it even more important to make sure these resolutions stick. Seemingly harmless, unconscious behaviors can impact your ability to save and build wealth over the long run.

Once you put a dollar amount to how much bad habits set you back, it makes it all the more worth it to make changes and stick to them. Additionally, we often neglect the “time value of money,” and the true opportunity cost of a bad habit can be much higher than we think.

For example, a $4 daily latte isn’t just $28 a week or $112 a month. If that $112 is invested each month at a 5% return for 10 years, it grows to $17,749.92. Now that’s an expensive fancy drink!

Take a look at a few more potentially bad habits and the opportunity cost of forgoing 10 years of monthly investing at a 5% rate of return:

The Lunch/Latte Factor: $32,647.18

Teresa Mears of Living on the Cheap once spent upward of $55 per week, or $220 per month, on coffee, tea, snacks and restaurant lunches. Soon, she began to make her own hot drinks and pack her own lunch. Saving $220 or more per month might not sound major, but it could result in a nest egg of $32,647.18 over 10 years!

Nicotine Fix: $47,544.42

Angela, founder of the Work at Home Wife, admits that both she and her husband smoked a pack of cigarettes each day. This added up to $75 per week, or $300 per month. The couple just celebrated their five-year anniversary of being cigarette-free. Angela estimates that she’s already saved $18,000 by kicking this bad habit. Plug that in an investment calculator, and you’ll find that investing $300 per month for 10 years could yield $47,544.42.

Getting Pumped Up: $9,508.88

Gym memberships can cost anywhere from $10 to $200 per month, with the average being around $60 per month. Public radio station NPR profiled a popular gym in New York, which reported that almost half of its members never even show up to work out! If you decide to skip the gym (which you might not even use anyway), you could invest that $60 each month. At a 5% rate of return for 10 years, that amount could yield $9,508.88.

Impulse Buys: $39,620.38

Perhaps one of the most detrimental habits of all is buying things without a plan. This is known as buying something on impulse. Jeff Rose, certified financial planner and founder of Good Financial Cents, says that he had a habit of buying things on impulse, sometimes even banking on money he hadn’t yet earned. In order to curb impulse spending, he and his wife decided to set a limit on the amount of money they could spend without discussing it with one another first: $250. After 10 years, skipping that $250 a month entirely could grow to $39,620.38

Doing this type of math will definitely help you weigh the impact of frivolous spending connected with potentially bad habits. If you are looking to improve your financial outlook, adjusting expensive habits like the ones mentioned could be a great start.

What do you plan on doing to improve your financial outlook for the year ahead?

This Post Has 16 Comments

  1. All this talk of where can I find 5% returns is scary. I hope these are just honest questions from people who do not know. 5% is so conservative, I would say it is an error to use that low of a number. A simple S&P 500 ETF will get you more than 5%. Stocks are the way to invest. Do not use banks as investments. It is difficult to get less than 10% returns with the major index ETFs. This is long term of course. If you want something with less than a 10 year time frame your options are more limited. With the start of a new bull market, right now is an excellent time to begin investing in the stock market. Please do a little research. You will be very happy you did.

  2. Saving in general is a healthy practice. Investing those savings in moderate risk mutual investment funds can see anywhere from 5-8% annual returns. Take some time to look into investment sites such as Fidelity, TrowePrice, Charles Schwab, etc., and you will find out that investing $200 a month over the life of 20 years can grow to a substantial amount. $10/day for lunch, etc. can be saved or cut back. It’s all a matter of priority and discipline. Not easy, but can be very beneficial in the long run.

  3. Your calculations use 5% annual interest rate. Tell me. Where do I find an long term investment option at 5% these day? I am lucky to get 0.05% on a 10 year CD!

    1. Hi Dennis:

      It’s true that you won’t get that kind of return from a bank. However, historically, data has shown that if you invest in the stock market over the long term, it’s not unreasonable to expect to see a return of about 7%. This is also a hypothetical, but I don’t think it’s unrealistic. Obviously, everyone’s situation and risk tolerance is different.

      Kevin Graham

    2. Stocks that pay Dividends like AT&T Southern Company or Coca-Cola AT&T ,Coca-Cola andSouthern Company had been paying a dividend for over a hundred years on time every quarter without fail no matter how the economy is going so if the stock goes lower Believe it or not that’s a good thing because the Lower a stock is when you reinvest your dividends the more stock you would buy

    1. Hi Nancy:

      I think it’s fair to stipulate that you’re not going to get a 5% return from any particular bank. If you look at stock market returns on a historical basis, the average return if you keep your money there and invest in the long term is around 7% . This is a figure that’s been quoted by various reputable sources. The author was also trying to give a hypothetical example of the return you could see. If you invest your savings by cutting out some of these habits, you’ll certainly earn more money than if you didn’t invest.

      Kevin Graham

  4. good ideas/ but everytime I try to enter the 4,000 contest it WILL NOT take my phone number!!!! Actually any phone # mine or my husband.

    1. Hi Susan:

      Sorry for the confusion. It should work if you just enter the numbers as in 0123456789. Please let me know if you have any other problems and good luck in the contest!

      Kevin Graham

    1. Hi Mary:

      The actual investment returns mentioned in the article are hypotheticals. Regardless of actual return, you can still get more out of your money by investing it. Thanks!

      Kevin Graham

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