By eliminating a recurring monthly expense of CHF 10, you will find yourself with CHF 1'546 more in 10 years thanks to the magic of compound interest.
If you think bigger and succeed in eliminating CHF 100 of monthly expenses, then we are talking about CHF 15'400 more in 10 years.
It’s crazy when you think about it, because you don’t even notice these kinds of minor changes in your daily life. It’s just the recurrence of costs that makes it multiply month after month, year after year.
Let me give you a concrete example:
- In 2014, we changed car insurance and saved CHF 940/year since then
- In the same year, we drastically reduced our internet and mobile subscription expenses and saved CHF 2'700 more per year
Since we invest the savings we make (assuming a rate of return of 7%), we will be richer by CHF 53'826 in 10 years. The proof is in the table below:
| Year | Savings in CHF | With compound interests |
|---|---|---|
| 1 | 3'640 | 3'895 (= 3'640 + 7% de 3'640) |
| 2 | 7'535 (= 3'895 + 3'640) | 8'063 (= 7'535 + 7%) |
| 3 | 11'703 | 12'523 |
| 4 | 16'163 | 17'295 |
| 5 | 20'935 | 22'401 |
| 6 | 26'041 | 27'864 |
| 7 | 31'504 | 33'710 |
| 8 | 37'350 | 39'965 |
| 9 | 43'605 | 46'658 |
| 10 | 50'298 | 53'819 |
And that’s without mentioning bringing our lunches to work but I agree with you that it takes more effort. But insurance and mobile, nada. We still drive the same safe way, and we still make the same phone calls.
Your challenge until 31.03.2020
Just to give you the initial impetus to start your new frugal life, I challenge you. It’s gonna go something like this:
1. Before 22.03.2020
Announce in this forum topic the expense you’re thinking of cutting — but have never taken the time to deal with — and the amount you think you’ll save per month.
2. Before 31.03.2020 midnight
- Come back on the forum and explain to us if you’ve made a successful change, and what you’ll really save monthly
- Confirm that you have set up a monthly standing order corresponding to the amount of these savings, and tell us to which account (savings, investment, 3a, or other) you will transfer the amount
In case your change can only be made at the end of the year (I’m thinking of insurance in particular), that doesn’t prevent you from announcing your cancellation before 31.03.2020, and subscribing to your new service in advance. Too bad if you thought you could use that as an excuse :D
If you want it to be more fun, and especially if you want to be sure you’ll succeed, I also recommend that you talk about it to your spouse, a relative or a close friend. Just doing this will make the challenge more tangible, and you will feel more “obligated” to do it.
Are you ready? Then we’ll see each other on the forum during the next two weeks!
Note: I have already completed my part of the challenge by changing (again) my car insurance. I’ll explain all this in the forum in order to participate in the challenge as well.
