Every Dollar You Spend


Financial planning expert Jonathan Pond has often observed that “your best dollar is the one you don’t spend”. From the point of view of securing your and your family’s futures, there could not be a more accurate statement. Every time you spend a dollar, you give up the future value of that dollar. You lose the power that comes from possessing a sum of money. You also pay a very high price: you pay the “opportunity cost” of using that dollar in a better way. An example, though quite painful, will help you to see this concept in action in a way I assure you that you will not forget.

Had you invested about $10,000 in stock of chewing gum maker William Wrigley in April, 1986, your investment would have grown to $265,000 by early 2008. You would have been receiving cash dividends of over $7,000 per year. Yes, your annual cash receipts would have been 70% of your original investment. It does not end there. Earlier this year, Warren Buffett and Nestle purchased William Wrigley, Jr. Company for $80 cash per share. Warren and Nestle would have sent you a check for $360,000. This is quite a result from a $10,000 investment in a company that was well known in 1986.

How did you spend the $10,000 you had during the mid 1980’s? On cars, clothes, lunches, dinners, trips you can’t remember, staying at overpriced hotels and renting cars? Look around your house, in the basement and in the closets. That’s what you spent it on, that is, what’s not already gone to some poor landfill. Neither Buffett nor Nestle would send you a check for any of that.

To have made the Wrigley score, you needn’t have had the $10,000 all at once. You could have bought $500 worth and made additions through Wrigley’s dividend reinvestment plan. Many great companies had them then and have them now. Wrigley stock returned 16% or more per year for all the years from 1986 through the Buffett/Nestle buyout.

You don’t lose $1 million by carelessly misplacing it. You lose it $50 and $100 at a time, buying things you don’t really want and certainly don’t really need. You lose that future $1 million (or perhaps much more) with every dollar you spend.

never said washington had the highest gas tax. never bragged about the size of my bank account, in fact never mentioned it. never said I made $120k, that was for 2 people in our best years, not every year. Most years alot less.
But I am proud of what me and my wife have saved and invested over the past 35 years. And I started right where you probably are right now...with virtually nothing. So my point was that anyone can do it. Obviously the earlier you start the better off you are and the earlier you get there and can begin to enjoy your life instead of being a slave to work. The self imposed illusion that people have that only the high income crowd can save substantial amounts of money is just that, an illusion...and an excuse to continue on the way to the financial abyss.
Instead of lambasting middle class people who have set financial goals to save money, all you can do is whine. But then if that is all the effort you put into getting a savings plan in place, obviously you have a low likelyhood of succeeding.
And I don't brag to anyone about anything. In fact, if my neighbors knew our financial position, they would probably fall over in disbelief. To them we are just a couple of middle class neighbors.
Everyone should read the book, "The Millionaire Next Door". This is a fascinating book about wealth in America.
One of my favorite paragraphs in the book was the author asked a middle class millionaire what his favorite beer was. The answer was that he only drank two kinds of beer..."free" and "budweiser". Stop and think for a minute when reading the book...and ask yourself one simple question. If I want to accumulate wealth, who better to get the advice of than someone who has actually done it or your buddy who spends the majority of his time sitting on a bar stool or in front of the tv watching football?
Almost everyone except the fortunate few who are either born with a silver spoon in their mouth or inherit money have to make a choice in their working life. Do I want to have to work until the day I drop dead in order to keep the wolf away from the door or not? All everyone has to do is answer that question and then proceed thru your life accordingly.

The generation of "gimme"! Just wait another 10 years until they are too old to find employent, and don't have a dime to their name. SS will be bled dry, but maybe the politicians can just steal from the "universal health care fund". My generation(X), isn't any better, but it'll be too late for us to screw anything up.

With the Obama budget hitting Americans with a two trillion dollar deficit, any saving that individuals do is more than made up by the spending that the government does. And in the end it is us, the American people, who will have to pay the bill. Sadly, most of the bill will be passed on to our children and grandchildren. If the previous generation was the "Greatest generation" then we baby boomers are the worst.

I read a compelling article that suggested that the so called savings is really about American's paying down debt, thus translating into savings. It's not that we are piling up money in our savings accounts.