Let’s Make A Deal

I went to a (early!) retirement party for a friend and former colleague of mine this week.  Yay Phil!  It was so fun to catch up with my old work buddies who were there.

Knowing that Mr. Ms. Liz and I are fairly knowledgeable about things financial, one former colleague confessed that he spends about $4,000 a year going out to lunch.

If you read last week’s post, you know that if you LOVE going out to lunch and it completely enhances your world,  you should go out to lunch and enjoy every minute and every morsel.  (So long as you don’t have consumer debt like credit cards and you are saving at least 15% of your income for your retirement).

But he was making this confession because going out to lunch doesn’t completely enhance his world, it just makes life a bit more convenient.

He thinks $4,000 a year is too much money.  Yep, it would be too much money for me too.

What if you could save $2,500 of that $4,000 by bringing your lunch to work?  That leaves you about $6.00 a day for lunch – you can brown bag for much less but you’ll probably want to eat out occasionally.

So my friend can save $2,500 a week by brown bagging most days but eating out occasionally.  How much is that really?

Over your 30 year work span, $2,500 a year, increased 2% annually for inflation, invested in the S&P 500 turns into $280,000. 

That’s $280,000 in today’s dollars. 

The average 30 year return of the S&P 500 is 6.6% after inflation*.

Wholly crap!  Over a quarter of a million dollars just slipping through your hands.  Not to give you joy but just to give you a bit of convenience.

That $280,000 can support $11,200 of spending each year in retirement.  That goes a long way towards creating a retirement budget that would work for most of us.

This $11,200 is based on the Trinity Study.  The Trinity Study back tested various  withdrawal amounts and found that you can “safely” withdraw 4% of your investments in year one of retirement and increase that withdrawal by the rate of inflation each year.  Some people beat up this rule and, though it may require some flexibility, it generally holds true.

And what about the convenience factor?  Isn’t going out to lunch more convenient than bringing it?

I would argue it is more convenient to bring lunch.  Mr. Ms. Liz packed the same lunch for most of his 38 working years.  And trust me, he’s not one to spend much time making food.  His go to lunch was a peanut butter and jelly sandwich, a banana and a yogurt.  Subtract the yogurt and you don’t even need refrigeration–if, say for instance, your job involves a lot of meetings and driving around.

Step 1 – buy some bread, peanut butter, jelly and some bananas
Step 2 – make a sandwich, throw it and a banana in a bag
Step 3 – find a beautiful place to eat lunch–maybe next to a creek or in a park
Step 4 – think about what that extra $11,200 will give you

I’d bet you’ll even save some time doing this–not having to think about, drive to or wait for lunch to be prepared by someone else.

If going out to lunch isn’t your thing, does money slip through your hands in another way?

Think about how you spend your money.  It’s like “Let’s Make A Deal”, you can spend it now or trade it for a better future–door #3 anyone?  Your choice.


Photo by Johanna enhanced by Gary Buck

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Author: Ms. Liz

A CPA, I retired at 51 and I am helping people create their fantastic futures!

4 thoughts on “Let’s Make A Deal”

  1. I’m retired somewhat early and knew that one thing I’d miss about work was free travel and free meals covered by an expense account. So before I walked away from my career I set up a part time side gig that only required a couple of days work per week but also gave me a very liberal expense report pays for everything that my previous career expense report did. My fine food cravings are generally satisfied when I business travel three or four times a month and it is free! I know most people would not really care about those kind of perks but strangely that was one of the things I really liked about my career and it is nice to have kept that good part of my old work life alive and to have ditched the bad stuff like stress and 60 hour work weeks!

    1. I miss the free travel and fancy meals too! Great job identifying that this was important to you and figuring out a way to keep it going in retirement. It sounds like you’ve created the perfect semi-retirement job.

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