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Thursday, 26 January 2017

Where's my million?

I think we'd all be pretty thrilled to have a million dollars. The current minimum wage is $672.70p/week before tax, according to http://www.mywage.org/australia/main/salary/minimum-wage. On a minimum wage it would take you 30 years to earn that million. If you could somehow invest 100% of your income, compounded at 7% it would take 16 years to turn $672 a week into a million. So just on paper, we're all 16 years away from being millionaire. Woohoo.

Of course, every dollar spent on food, housing, good beer and good times cuts into that future million. So I got to wondering, how much do my purchases take out of my million?

A daily coffee is worth $4. after 10 years, that compounds out to $21,059, that's 2% of my million right there. My mortgage is $200 a week, so it's costing me $225,010 in ten years, or 22.5% of my future million. Groceries at $200 a week are month are $34,617 and 3.5%. Water bills are $800p/a, $11,539, 1.15%.

Obviously I can't stop spending on these things. I signed a contract with the bank for my mortgage. My body needs fuel. People I work with appreciate it when I shower. And coffee is a necessity for interacting with other people. But it was really interesting to plug in my budget and realising that over 10 years it was going to cost me $576,950.

I'm definitely not going to jump up and down and insist that I cut every expense down to the bone so that I can get closer to my future million. But I enjoy the changed perspective. I used to have a spending issue on $5 Steam games. The cheap gimmicky ones that are probably available for free on my phone. I used to justify it to myself by pointing out that it only $5. But after realising I'd spent close to $100 in a couple of months on games that I wasn't playing I got a bit frustrated with myself. An average $50 a month quickly became $600 a year that wasn't improving my life. Most of these games I would zone out because they were gimmicky casual games. Or I wouldn't finish them. I was essentially spending $600 a year for a few minutes of entertainment.

So I started matching all my Steam spending with payments to myself. Every $10 on a game is matched with a $10 contribution to my investments. I started spending less on games, and when I did spend on them I thought my purchases through a lot more.

I might not be putting aside a million just from stopping purchasing games, but I'm happy to have stopped mindlessly spending. If you'd like to take a crack yourself and see how much of a million your're spending, or could start saving, try out the calculator below.

Item Description Cost Frequency Annual Spend Ten Year Percentage

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