Have you heard of the Rule of 752?
For those struggling to save money, this one’s for you.
We always hear that by cutting out small expenses, we can save big (I even have an eBook touching on 10 expenses that can kill your savings). We know those $3 daily lattes add up. But it can be hard to visualize the impact on your savings when you’re sipping from that piping hot cup in the morning.
Here’s where the Rule of 752 comes in. Invented by Mr. Money Mustache, a finance blogger who effectively retired at just 30 years old, the rule is meant to give you some perspective on how small expenses really add up.
It works quite simply. Take any weekly expense and multiply it by 752. The result is the real cost of that expense over 10 years, if you had invested the money instead of spending it.
If you buy that $3 latte every day on your way to work, that’s $15 a week. Now multiply that by 752 and you get $11,280.
That’s not pocket change. And that’s just for your latte.
Think about the $9 lunch out you have every week instead of eating leftovers? That’s $6,768. The extra $20 a month for all those premium cable channels? That’s $3,760. That $50 night out at a fancy restaurant or a cocktail bar every week? That’s $37,600. That meager little $15 or so you’re paying in credit card interest each month? That’s $2,820.
Before you know it, that’s well over $60,000 you could have in your retirement account, just for sacrificing a few minor expenses. Just cut out one latte or beer a week and you’re looking at an extra $2,000 in 10 years.
That should give you some perspective on why you’re struggling to save money.
Of course, this rule only applies if you invest that money. So skip the lunches out or cancel the cable and instead of just socking that cash away in a savings account, invest that money in your 401K instead. That way the money you’re saving is actually earning money.
Read more about Mr. Money Mustache’s philosophy on his blog, and see how he arrived at the Rule of 752 here.
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