As you move forward in your financial journey, you should continuously ask yourself, “What opportunities do I have available to me that will free up extra cash that could help me progress faster toward financial freedom?” Additionally you should ask, “What erodes my opportunity to achieve financial success?” To answer these questions, you must examine your financial commitments and purchasing habits. All of us make small purchases everyday that are given very little thought, but when added up over time could generate significant wealth potential.
Take a look at those Starbuck junkies who go beyond the $4 a day Latte purchase and habitually return that same day to feed their passion. Many of these people will spend $10 a day fueling a habit that will give them very little in return. This $10 daily opportunity could cost them $141,250 over a 20 year period.
Take a look at all the bottled water that we purchase and consume. I personally know someone who spends $150 a month for Smartwater. Annually this indulgence costs $1,800. If this $1,800 was invested every year in a savings account yielding 8%, in 40 years its value would exceed $500,000.
The biggest erosion of our hard earned income is all the interest we pay for the privilege of borrowing money. The biggest example I can give is what we are actually paying for the home we so excitedly financed. Did you know that the average American spends 34.5% of every dollar earned on interest expense? If you finance a $250,000 home for 30 years, you will have actually paid over $500,000 for that home once it is paid off. Stop the insanity now and send a second check every month for next month’s principal payment. This will cut your mortgage from 30 years to about 15 years.