Hello!  Welcome to Money Mondays, a series of posts dedicated to women and personal finance.  Today, we focus on your financial future (promise…it will be illuminating!). So, let’s start with a surprising thought.  What if I told you that by curbing your latte and salon nails habit you could have $34,000 in ten years?  And $100,000 in twenty years?  Or $208,000 in 30 years!!!!

But I love my latte…. and salon nails are my “me” time!

Before digging in, I would like to say that personal finance is, well, personal.  What you choose to spend your money on is up to YOU.  The point of this post is to present an example of how one hypothetical woman’s choice can lead to an extra $34K to $200K in her bank account!  This savings effort amounts to thousands of dollars that she can use to spend, continue to save or give away.

I am using the nails/coffee example as those are two luxury services that many women I know (including me) spend money on.  This is not a judgment but rather an easy example to point out how YOU have choices on how to spend your money.  And, those choices have a real impact on your wallet and your life.

If you spend and save intentionally, then you are making good choices with your money and can maximize what you do with that money whether it be to save for a house or a car or that vacation you have been dreaming about…again, every woman is different, and I am not here to judge! Only you can decide what you want your financial future to look like!

Lattes and nails a fun math example!

Math fun?  It sure is fun when we are talking about growing your bank account.  Spoiler alert: you will have access to a financial calculator that does the heavy lifting for you.  

Let’s take a look at how much that designer coffee and professional manicure costs in my corner of Connecticut.

What you spend:

Regular (not spa) manicure $10 plus $2 tip

Fancy coffee at Starbucks $6

Assuming a 30-day month:

Having your nails done once a week is $48 a month and $576 spent in a year.

Daily coffee at Starbucks is $180 a month or $2,160 in a year.

If you add them both up, daily coffee plus weekly manicures cost $2,736 in a year.

So, then do you take $2,736 and just multiply by 10 to get what you would have in ten years?  Not quite. (Unless you stuck that money in your mattress and it earned nothing).   In that case, you are not taking into account the interest earned and compounded or something finance geeks like me call The Time Value of Money.

Let’s geek out and see how savings over time impacts YOUR financial future.

On day 1 of every finance class (trust me on this topic –  I have taken many finance classes in college and grad school) the professor starts out with a concept called the Time Value of Money.  Fortunately,  you can skip the pain of sitting through a finance class as I am going to explain the idea right here.

The Time Value of Money means that $1 today is worth more than a $1 tomorrow.  Why?  Because today you can take that dollar and invest it and earn interest on it, thus tomorrow that dollar will be worth more!  

Now that Finance 101 is done, let’s move on for the fun part.

How much could you save with DIY nails and coffee?

While on a daily or weekly basis nails and designer coffee do not seem like much of an expense, let’s think about if we changed these two habits over the span of 10, 20 or 30 years (or in other words your financial future!). 

First, we need to calculate the true cost of doing it yourself (DIY).  You will need to buy yourself some nail supplies and coffee plus creamer/milk/sweetener if you like.   Let’s deduct those costs from the savings we calculated above for DIY nails and coffee.  

Coffee:  Cost of brewing at home versus Starbucks

Now, according to the Specialty Coffee Association of America, one pound of coffee is enough to make 48 6-ounce cups of coffee.  I just bought a pound of coffee at Trader Joe’s for $4.99 on Friday.   So at that price ($4.99 divided by 48), the cost per drink is $.10 cents a cup.  Because I like milk and sweetener I am adding another 9 cents to my totalling .19 cents per cup.  (As a side note, I always heat or froth my milk – and put it in a pretty mug so it is exactly as I like it, and as if I am at Starbucks).

Fancy coffee at Starbucks $6 a day, minus .19 cents so your savings from not going to Starbucks on a daily basis and making your own coffee at home equals approximately $5.81 per day.

Nails:  Paint your own or professional manicure

Salon manicures in my area cost $12.  If you deduct the cost of buying nail polish and a few supplies which I estimate to be $8 a month (possibly less depending on what you buy) then the cost is roughly $10 a week if you had nails done every week.

With 52 weeks in a year:

Coffee ($5.81 a day $174 a month, and then multiplied by 12 months) = $2,091

Nails = ($10 a week, $40 a month and then multiplied by 12) = $480

So, the savings is $2,091 plus $480 = $2,571 for a year of savings for being an DIY er and not going to a professional barista or manicurist.

Use a financial calculator to see where you end up in 10, 20 or 30 years

Ladies, I hate math.  Yes, I majored in finance but the dirty little secret is that you do not have to know much math in business or even finance unless you are trading options.  The rest of business math is pretty straightforward, and I had mastered it in middle school (you heard it here…my job to break is it down for you)!  Fortunately, there are handy dandy calculators to help you figure all of this out.  Here is one I like.

How much money do I have in 10, 20, 30 years?

Plug in $1 to start into “Starting principle” (just fancy for how much money do you have now)

Then plug in your interest rate.   Let’s use 6% which is a conservative rate for a long-term investment (more on investing at a later date).

10 is your “n” (or number of years)

$2,571 is your payment (Remember the savings calculated above.  This is the amount you would have from DIY coffee and nails)

Voila! The magic number is – $34K   (and if you make your payment at the start of the year you have another $2K for $36K)

And in 20 or 30 years?  Compound Interest is more fun than you think!

How did that happen?  Well, your money earned money through the interest.  The larger sum then continued to earn money.  You kept putting in more money from doing your nails, brewing your own coffee. Like a snowball that is rolling down the hill, the money gets bigger and bigger and bigger.  

Let it snow…

In fact, if you did this for twenty years, you would have approximately $100K.  How about 30 years?  You would have $200K!  All for brewing a cup of Joe at home and doing your own nails, and putting the savings into an account that earns 6%!!!

Ugh…I don’t want to think about my financial future! Why are you picking on my two favorite things to do for myself?

Ladies, I started out by saying that personal finance is personal.  I use these examples as illustration only!  In my case I really like my double, skinny latte with a dash of mint.  I also really like the way the nail salon does my nails!  But when I run these numbers I realize that for me, an occasional visit to the nail salon or visit to Starbucks to meet a friend more than satisfies my need.  The rest of the time I make it myself or do my own nails.  You may be different.  

Your Starbucks may be the place you get work done and compared to renting office space, it is downright cheap!

Or the weekly nail salon trip is your time alone and a mental health saver.  Certainly much cheaper than therapy.

I am totally fine with that!  My non-negotiables are getting my house professionally cleaned every other week.  I am sure I could save money doing it myself but honestly those five hours are gold to me…so again, it is not my place to tell you how to spend your money. I would like you to think about how you spend affects your financial future.

My hope is that you will start to think about choices.  Maybe you clean your house but heading to the nail salon is your must have.  Or maybe like me you like to travel so doing some stuff yourself is a small price to pay for seeing the world.  

Plug in your own examples. Maybe you could cut $25 off your grocery bill? Or do you really need to dry clean? What if you bought clothes that were easy to maintain? Take your savings and plug them into the financial calculator. Play around with the interest rate, years you can save and see how you feel. When you see your the “facts” or what you could have making a certain decision it all becomes very interesting.

What do you spend money on?  And where do you save?  Do you put that savings into an account that earns interest?  Please leave a comment below and join me on social media to chat about it too!

DISCLOSURE:   Sunday’s Bread and any content in it exists to thought provoke and learn from the community. Your financial decisions are yours alone, and we are in no way responsible for your actions.