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Cutting These 10 Costs Can Make You Rich

Cameron Huddleston
Cutting These 10 Costs Can Make You Rich

Cutting unnecessary expenses is a great way to put money back into your budget. But eliminating wasteful spending won’t benefit your bottom line if you don’t put that money you’re saving to work for you.

In fact, you might be surprised by how much you could save over time by eliminating seemingly small expenses and investing that money instead. GOBankingRates worked with the team at OnTrajectory, an online financial planning tool, to calculate how much richer you could be if you cut 10 costs and put the money into moderate risk investments that earned 5 percent annually. We also factored in a 2 percent inflation rate.

Click to read more how to increase your savings and retire rich.

Checking Account Fees

It doesn’t make sense to pay a bank just to keep your money in a checking account, does it? Checking account maintenance fees can be as high as $35 if account holders don’t maintain a certain balance or jump through other hoops. Among accounts examined by ValuePenguin, a monthly maintenance fee of $12 is most common. But even that seemingly small amount adds up to $144 a year.

Fortunately, there are banks that offer free checking. So if you were to switch your account to one of these financial institutions and invest the $144 you’d be avoiding in fees annually, here’s a look at how much you would have.

After 10 Years: $1,762
After 20 Years: $4,003
After 35 Years: $8,849 (by retirement age of 65 if you started at age 30)

Landline Phone Service

American households spend an average of $353 a year on landline phone service, according to the Labor Department’s Consumer Expenditure Survey. But this service is a common way to lose money if you’re not really using it and relying on cell phones instead.

If you ditched your landline and invested that $353 a year, here’s how much richer you’d be.

After 10 years: $4,258
After 20 years: $9,667
After 35 years: $21,376

Cable TV

If you’ve debated cutting the cord to save money, you might be more motivated once you find out how investing those savings could really add up. According to Leichtman Research Group, 79 percent of households have pay-for-TV service and pay an average of $106 per month. So if you cut the cord and invested the average annual cost of cable — $1,272 — this is how much your money would grow over time.

After 10 years: $15,560
After 20 years: $35,334
After 35 years: $78,137

Restaurant Meals

Americans spend $3,154 a year, on average, on food away from home, according to the Bureau of Labor Statistics. If you slashed that spending in half, you’d save $1,577 annually. If you then invested those savings and earned 5 percent annually, you’d have even more.

After 10 years: $19,085
After 20 years: $43,337
After 35 years: $95,832

Soda

The average household spends $850 a year on soda, according to the Water First project of the Tweens Nutrition and Fitness Coalition. If you were to substitute water for soda, you would not only save money but also improve your health by reducing your calorie and sugar intake dramatically. The impact of investing the savings alone, though, might be enough to make you want to quit your soda habit.

After 10 years: $10,267
After 20 years: $23,335
After 35 years: $51,602

Bottled Water

Yes, water is a cheaper and healthier alternative to soda. But don’t waste your money buying bottled water. According to the International Bottled Water Association, Americans drink 39.3 gallons of bottled water a year at a cost of $1.27 per gallon. That’s an average of $50 a year spent on bottled water. If you bought a reusable bottle and filled it with filtered tap water instead and invested that $50 annually, here’s how it would add up:

After 10 years: $612
After 20 years: $1,388
After 35 years: $3,070

Subscription Boxes

These days, there seems to be a subscription box for every interest or need — from makeup to artisan products to French snacks. Sure, it’s fun to get surprises in the mail. But is it really worth it to shell out $20 a month — or more — for a subscription box? That’s $240 that could be invested annually and could provide a much better return for your money over time.

After 10 years: $2,939
After 20 years: $6,670
After 35 years: $14,749

Alcohol

On average, Americans spend $484 a year on alcohol, according to the Bureau of Labor Statistics. Ditching this costly vice could add up to big savings. Even if you spent half as much annually on alcohol — $242 — and invested the savings, you would see a big benefit.

After 10 years: $2,963
After 20 years: $6,727
After 35 years: $14,872

Tobacco

If you’re a smoker, you likely know that your bad habit is hurting your health and your wallet. Of course, quitting isn’t easy. But knowing how much richer you’d be might help motivate you. According to the Bureau of Labor Statistics, the average amount spent on tobacco and related products is $337 a year. If you invested that money, here’s how much you would have.

After 10 years: $4,114
After 20 years: $9,337
After 35 years: $20,647

Daily Latte

No list about costs that can be cut would be complete without including the daily latte. However, you don’t have to give up coffee altogether to cut your Starbucks bill. Just skip the pricey latte and make coffee at home.

The average cost of a Starbucks latte is $2.75 versus 20 cents per a cup of coffee brewed at home, according to ValuePenguin. That means you could save $930.75 making your own cups of Joe, and then invest your savings instead.

10 years: $11,391
20 years: $25,866
35 years: $57,194

If you eliminated all of these costs, you would save $5,978.75 in just one year. That’s a lot of money to add back into your budget. But if you invested that money every year and earned 5 percent annually, you’d see even bigger long-term benefits.

After 10 years: $72,958
After 20 years: $165,667
After 35 years: $366,331

Even more impressive is how far that money can go in retirement. The OnTrajectory calculator shows that if you stopped investing money into your retirement fund at the $366,331 mark, and then withdrew 4 percent of your balance annually to help cover living costs, you’d still have a little more than $300,000 left by the age of 90. It might seem hard to believe, but that’s the power of compound interest.

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This article originally appeared on GOBankingRates.com: Cutting These 10 Costs Can Make You Rich