I’ve long advocated that people who can should reduce their unnecessary expenditures in order to save-down, invest more and realise Financial Independence as early as possible.
However, expenditure habits are hard to break. I know this from personal experience: despite being painfully aware of just how overpriced take-out coffee is, I have spent $thousands on my daily cappuccino I have spent $ thousands on them even since I started my early-retirement mission in 2014.
I can make up all sorts of excuses why: everything from work-stress to the need for (low quality) human contact during lockdown, but whatever the reason I’ve found myself in Costa or Nero’s on far too many occasions over the last few years!
So I’ve developed a little motivational tool to help me (and you) think twice about paying out £2.95 for a daily coffee, or paying out for whatever little unnecessary treat happens to be your weakness: Weekly Dominos’ or nail-bar trip? Monthly shoe-shop? Yearly holiday abroad?
Whatever your ‘unnecessary expenditure Achilles’ Heel’ happens to be, I humbly introduce to you the ‘[Daily Cappuccino](or whatever unnecessary item of your choice) relative to mobile phone life time expenditure calculator'.
My rational is that I’m never going to convince anyone to give up their mobile phone – I think it’s fair to say that’s an essential piece of kit for our postmodern society.
However, it is fairly pricey to run a mobile…. An unlimited data contract is pretty cheap these days – in the UK, you can get a SIM only unlimited 4G deal for £25 a month, but you have to add on about £20 a month to cover the cost of buying a reasonably nice phone every couple of years to get an all-in package of £45 a month – entirely reasonable for what you get and given how essential communication is, but also not super cheap for most people.
And of course, there’s always the desire to buy a nicer phone, or a 5G connection, so you could easily push that to £60 a month or more, but that desire gives my model here a bit more leverage.
Anyway, my motivational idea for getting people to cut down their expenditure is to get them to work out what they spend on ‘unnecessary’ items every day/ week/ month/ year (the period will vary) and then compare that to their mobile phone expenditure.
And then (and this is important) work out how many years it would take them, at their current salary, to work in order to pay for said items, and then you compare them.
The idea is that if you spend more on something which is unnecessary, compared to your mobile, and thus more years working to fund it, you feel like a bit of a twat, and so are more likely to stop spending that money on the shit you don’t need, thus saving more and retiring earlier!
Here’s an example:
- £45 a month on my necessary phone will cost me around £21.5K over 40 years, or it will take me 0.7 years working at the median net annual UK salary to pay for 40 years’ worth of phone use.
- £90 a month on a daily cappuccino will cost me around £43K over 40 years, or it will take me 1.4 years to pay for 40 years’ worth of take-out coffees.
Now, I don’t know about you, but I look at the figures for the mobile phone and think ‘that’s OK – 0.7 years out of my total working time of 40 years to pay for something that essential, FINE! And £21.5K over a lifetime sounds perfectly reasonable.
HOWEVER, looking now at the cost of my daily cappuccino habit, it seems TOTALLY unreasonable that I should spend twice as much on this total non-necessity compared to the cost of the mobile, especially when it’s relatively easy to get that coffee for about 1/8th of the price if I just make it myself!
Link to the calculator
Here’s a link to the calculator. Why not add in your own unnecessary expenditures and tweak the variables to match up to yer own life circumstances?!?
It might just help shame you into spending less, saving more and retiring earlier!