Today's Cost Doesn't Matter, It's Tomorrow's That Does

Money, saving, investing, compound interestRecently our daughter had the opportunity to participate in a pinewood derby race.  When my son and I made one together several years ago we learned most of the fathers spend a great deal of time trying to turn their $10 kit into sound barrier breaking demon on wheels.

Our daughter had no interest though. Later, my wife inquired if I was disappointed. My response… “Heck no, that’s $10 bucks saved!”

The wife was not happy with my response. This was a bonding opportunity and  unlike most other sponsored kids activities it was frugal as well.

My daughter is my princess, had she expressed a desire, she would have had a pinewood Veyron!

But our daughter wasn’t interested, the princess had spoken.

Am I disappointed?  I was not. There is never enough time spent with family you love. But relatively speaking, we have much more time together than in the past. My daughter and I read, cuddle and play ball like other families.  Was it all about the money? No! But given an opportunity, to save $10 is not something I take lightly. In my mind we didn’t save $10, we saved $80!

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When it comes to spending money, most people I’ve asked, only think about the expense as it is today. Herein lies the reason, I believe, so many people fail to focus on building their nest egg for retirement. Too often people do not take the time to consider how a few dollars today cost them in the future.

With 30 years left until retirement, saving $10 is not going to make a difference, by itself. How many opportunities can you find to save ten dollars or five or one?  Thanks to the power of compounding $10 saved today will become $80 in retirement. Find enough of those $10 opportunities (and all others), compound them over time and you can grow a comfortable nest egg.

Some personal finance pundits criticize sweating over the pennies in our budgets. They say it is pointless to worry about your LatteFactor®. In a vacuum, they are correct. Just like the one time charge of $10 for a pinewood derby car isn’t worth worrying about.

Put all the gourmet coffees, pinewood derbies, stops at the convenience store, prepackaged foods, extra phone services and other, nice to have but unnecessary expenses, together and you will easily spend a couple thousand dollars each year. Two thousand today will be $16,000 in thirty years!

Unless it is a need, don’t think about today’s cost, think about tomorrow’s.

Readers: This perspective of calculating the future value of today’s expense drives my wife nuts! Tell me though, am I the only one? Do you take the time to think about the long-term impact of today’s purchase decisions? If not, why not?


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photo by johntrainor


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10 comments to Today’s Cost Doesn’t Matter, It’s Tomorrow’s That Does

  • It is amazing how lucrative it is to think past the end of next week. When we live today but also think about where we will be in 5 years, we actually have an accomplishment after 5 years, it doesn’t feel like it is still this week.

    Thanks for sharing. I am sure the time spent with your daughter is extremely valuable whether you bought the basic car of the expensive car.
    .-= BibleDebt´s last blog ..Outsource Your Job – Then Catch up on Sleep =-.

  • It is the little things that keep people stuck in a rut financially. I’ve seen this happen to some many friends and peers. They often wonder why they can’t get ahead as they go out to lunch every day blowing $15.00 on something that could cost about 1 or 2 dollars by packing… not to mention what they spend for eating out for dinner!!!

    Still, don’t deprive yourself either, you are only young for a short period of time!!! It truly is an imperfect balance that must constantly be fine tuned…

    Use spreadsheets and budgets as your planning tools, they are amazing!
    .-= Money Reasons´s last blog ..Saving By Paying Attention – Conclusion Part 4 of 4 =-.

  • Hmm…good question. I think from now on I’m gonna start thinking a little longer about those small purchases that could be worth more later! :)

    Maybe a good question to ask yourself before making a purchase is if it in line with your future goals. Does it bring you one step closer to achieving your target or does it take you farther away?

  • ctreit

    I don’t think it matters whether you save a little amount on a box car or a lot on a family car. Being conscientious of all your spending is key. And you show very nicely how each spending decision has a much larger long-term effect. I don’t look at each one of my savings in this way, but it makes a lot of sense.
    .-= ctreit´s last blog ..Become a Better Consumer in 3 Steps =-.

  • I’m all about value. If the small thing we are buying will make someone happy, then I don’t worry about it, but if the purchase is some impulse that will be forgotten in a day, or devoured in a few minutes with nothing but an extra belly roll to show for it, it drives me nuts.

    A $1 hamburger a day is $365 a year without, compounding interest.
    .-= Jesse´s last blog ..Your Guide to Income Based Repayment =-.

  • Hey. I am already retired (63 years old) but I still think in terms of what that $10 could mean in the future. After all, I am planning to be living in good health for at least another 30 years :) …time is still an issue!
    .-= Joe Plemon´s last blog ..A Prisoner Raises the “Serving Others” Bar =-.

  • Right premise, wrong approach (imho).

    Because tomorrow’s dollars will always be more than today’s dollar (theoretically), you’d never spend any money.

    Working from a slightly more negative outlook – what’s tomorrow’s depreciation? In the case of your daughter, that $10 spent today could generate $10 or more in value when she’s all grown up.

    Actually, this goes along with Evan’s post on value vs. worth. It’s a really insightful post, which you’ve already read. For others, here’s the link:
    http://www.myjourneytomillions.com/articles/valuable-worth/
    .-= FinEngr´s last blog ..Rooting Out The Devil: Kathy Kristof Interview =-.

  • The LeanLifeCoach

    @Bible Debt – Thanks for stopping in! My daughter and I have decided to spend the day with the soccer ball instead.

    @Money Reasons – No worries on the splurging, we still have plenty and then some!

    @Kristine – While I don’t actually track a running total, this is what I do with every purchase, am I money ahead or behind?

    @ctreit – You have it in one sentence! “Being conscientious of all your spending is key.”

    @Jesse – Is happiness alone, enough?

    @Joe – thank you for your perspective and sharing. You still have a very long life ahead. I really don’t think many of us factor in the long-term view. I also consider how long my wife out live me. I would die all over again if I found out I didn’t leave enough resources to support my wife beyond my grave!

    @FinEngr – Thinking about tomorrows depreciation motivates me even more. Because of this we will be in need of many more dollars that we might think! I like your first line. It may not be entirely realistic but the closer I can come to never spending any money the sooner I can get to that day of true financial freedom!

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