Blog

Jon Evans

In our daily lives, we are faced with hundreds of choices.  It’s easy to fixate on the “big” decisions, like making a career change, buying a different house, or adding to your family.  Those are all decisions that demand extra consideration.  But the “little” decisions we so casually make every day, can have a dramatic effect over the course of a lifetime.

Specifically, when it comes to managing our personal finances – the ‘little” decisions might include things like:

  • Making coffee at home or grabbing a latte at Starbucks
  • Bringing lunch from home or going out
  • Fixing up your older car or buying something newer
  • Renting a movie rather than going to the theatre

There may be nothing wrong with saying ‘yes’ to any of those examples – but the point is, we have to understand the long-term implications our spending decisions have and the impact forgone savings could have on our financial goals.

Consider the chart below.   Based on an annual salary of $35,000, a 1% increase in savings to your 401(k) account (or IRA account) would cost you about $5 per week (the cost of a sandwich or latte).   Assuming a 7% annualized growth rate, that $5 per week would turn in to an additional $50,000 in retirement savings over your working career.  An increase of 5% would obviously be even more meaningful

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Example 1 Assumptions: This example is for illustrative purposes only. The assumed rate of return in this chart is hypothetical and does not represent the return of any particular investment option. This chart assumes: 1) 25% tax bracket, which includes local, state, and federal taxes, 2) $35,000 in annual income with a 3.5% annual pay increase, 3) 30 years of savings to retirement, 4) only includes the worker’s pre-tax salary deferral contributions, and 5) 7% annual rate of return. Reduced take-home pay is accurate for the initial year and would change based on the worker’s annual pay. The illustration does not take into consideration any fees that may be associated with administering this account.

At Foster Group, we believe the little decisions DO matter, in both life and money.  The spending / saving choices we make leave an indelible mark on our financial future, for good or bad.  Financial planning can help you navigate spending decisions and provides clarity and confidence for all of the decisions – both major and minor – you’ll make on the road ahead.


PLEASE NOTE LIMITATIONS: Please see Important Disclosure Information and the limitations of any ranking/recognitions, at www.fostergrp.com/info-disclosure/. A copy of our current written disclosure statement as set forth on Part 2A of Form ADV is available at www.adviserinfo.sec.gov.