Buying your lunch every day at work might seem like a small and inexpensive pleasure.  The question for today is “What is the realcost of buying your lunch instead of taking it from home?”

The REAL cost of buying your lunch every day

You may have heard or read about the ‘Latte Effect’.  In the personal finance world it is the phrase coined by David Bach about 15 years ago that suggests that if small indulgences can be avoided – like an expensive coffee – a lot of money can be generated by investing it instead.

I’m providing a table here to help you estimate what savings might be possible from taking your lunch to work.  It assumes the amount saved will be invested at 5% in a Tax-Free Savings Account rather than be digested.

20 days per month for 40 years 15 days per month for 40 years 20 days per month for 30 years 15 days per month for 30 years 20 days per month for 20 years 15 days per month for 20 years
$3/day $91,943 $68,957 $50,144 $37,608 $24,765 $18,574
$5/day $153,238 $114,928 $83,572 $62,679 $41,275 $30,956
$7/day $214,533 $160,900 $117,002 $87,751 $57,784 $43,338
$9/day $275,828 $206,871 $150,431 $112,823 $74,294 $55,721

 

Keep in mind that making your lunch at home isn’t free.  You need to subtract that cost from the average cost of buying your lunch each day.  If, for example, your average purchased lunch is $7 and making a balanced lunch at home is $2 (not difficult), you would save $5 a day and use the table above to calculate the potential investment value of saving that small daily amount over your working life.

The most difficult part of all of this however, is not the discipline to make your lunch each day (or perhaps being the first to start brown-bagging it) – it’s not spending the money you saved before it has grown to the amounts in the chart.

The REAL cost of buying your lunch every day

 

Letting money sit in a ‘virtual jar’ growing over many years without touching is not something we’re trained to do.  There are cars to buy, vacations to enjoy and all the costs of life.  When there is pressure on the chequing account we often turn to whatever accounts are available and the ‘virtual jar’ is broken open.

Not touching an account like this requires discipline, but more importantly, a cash flow system that is proven to work.  One of most critical things I do as a professional money coach is to build customized personal finance systems for individuals and couples who want to take control of their money.  It can be overwhelming to do this on your own because there is so much conflicting advice available.  If you want to sit down and discuss your money challenges with someone who will not judge your past and has helped hundreds of others, send me a note to arrange a free in-person consultation.   I’d be pleased to review some money management principles that just might solve your cash flow issues and let you focus on the more important things in life.

Of course saving money doesn’t need to start or end at lunches.  This might not be the category you want to compromise.  Going to the library for free rentals and books, doing your own nails, saving money on groceries and cutting out some corner store purchases can have the same effect.  Becoming aware of what spending categories in your daily life that could be reduced for the purpose of saving is a very useful exercise.

Don’t forget that once you make a decision on how much can be cut, set up an automatic withdrawal from your bank account each month to make sure you save it!  If you don’t do this part, you’ll likely just spend it on other things, and wonder where the calculated savings went.

 

Drop me a note at YRMC@rogers.com if you want to continue the conversation.