Habits Habits Everywhere
Everybody has habits that are impacting their future net worth. It is not possible to eliminate all of these habits but if we seek to minimize them we can end up with maximum cents! There are an infinite number of habits that people have. I am going to explore some typical habits to see the yearly impact.
For this example I’m going to assume someone smokes 1 pack of cigarettes a day at a cost of $10 per pack. This comes to $3,600 up in smoke per year. Everyone knows that smoking will also lead to health issues down the road, but for today I’m going to ignore those costs.
Nothing like enjoying some cold beer with friends after a hard week at work! I’m going to assume that someone goes to a bar once a week and orders 4 drinks at $7 per beer. That’s $1,456 down the hatch each year.
Here is one of my guilty pleasures. I believe in the motto: “Life is short, Drink good coffee.” Let’s assume that someone goes to their coffee store of choice twice per day to get a medium designer latte at $3.65 per cup. Each year their java habit comes to $2,665.
According to NY Magazine, as of 2016, Americans were spending more at restaurants than on groceries for the first time in recorded history. We will assume their average of $9 per meal is correct and this hypothetical person will eat half of their meals per week from a restaurant. Surprisingly this is the most expensive habit and comes out to $4,914 per year. Again, I am ignoring the secondary effects of eating unhealthy meals from restaurants.
Yearly Impact of These Habits
Time to add up all the habits from this person and see what it totals per year:
|Habit||Cost Per Year|
|Total Per Year|
The result of $12,635 is surprisingly high! I feel that the numbers I used in the examples were being conservative by using the averages for the various habits. I could easily see a large number of people spending more than this number per year if they have more expensive tastes.
This is a lot of money to be spending unless you are making high six figures or above. Somebody making the mean income of about $50,000 will pay taxes of $8,238 (assuming no deductions or state taxes). After spending the average $18,000 per year on housing, this leaves $23,762 per year. After the habits are factored in it leaves you with $11,127 per year.
This is not a lot of money left over. I have not covered several expenses that people typically incur including insurance, cars, child care, clothing, travel, gifts, entertainment, etc. Reducing the cost of these habits is crucial in order to have any savings left over and to ultimately invest.
In future posts I will write about steps to minimize the financial effects of these habits. I will also look into the impact they have on future net worth.