"If you watch your pennies, the nickels and dimes will take care of themselves"
We've all heard this expression on the merits of being frugal by watching the small, repeating expenses. I'd like to illustrate an example from everyday life that really brings this point home. It involves the common practice of people purchasing a lunch on a work day, instead of preparing one. We all know those people who readily purchase their lunch every work day; maybe you are one of these people. Perhaps it is a choice that you feel comfortable with because you want to enjoy your lunch more, or perhaps you work in an environment where there is little choice but to buy a lunch. Nevertheless there are some people who do buy their lunch at work everyday.
Let's assume a typical lunch sets you back $8, and you buy your lunch every work day of the year. Also let's pretend that you don't get any holidays or days off whatsoever (sounds like a great job!). At age 22 you begin your career...
By the time you are 50 years old you would have spent $77,074, adjusted for inflation, on lunches. That is a hefty sum for a footlong meatball sub and a coke every day, but it keeps you happy and productive at work.
But let's consider for a moment that you chose to make and bring your lunch to work, and instead invest your $8 every day and you obtained an average annual rate of return of 8%. At age 50 you would wind up with an inflation adjusted sum of money of $261,424, before tax in a registered account.
So basically you are paying the equivalent price for your lunch every week day that you would pay for a nice home (at age 50) in many parts of Canada.