Adding Up the Lunch Money

In my last 3 posts, I looked at how to pack a frugal, green and healthy lunch, including examining some alternatives to sandwiches and looking at a healthy chipotle hummus recipe that’s great for incorporating more vegetables into lunch plans. I had mentioned that going to the neighborhood deli cost over $10 to pick up lunch and that the savings of planning ahead and packing a nice, healthy lunch were substantial.  I was wondering the magnitude of savings, so I checked with one of my favorite financial calculator sites.

The lunch savings calculator on this site allows you to input your own information of how much it costs to eat out and how much it costs to prepare food yourself.  It calculates the savings over the time period and investment rate which you can change.  To start with I carefully measured how much it cost to make lunch for myself; and went to a nearby takeout place to get live prices of how much lunch would cost eating out.  I found that I could make lunch (including fresh organic fruit) for an average of $2.87 (let’s call it $3).  Purchasing lunch averaged $12(!) making a daily savings of $9.  Without interest or investment earnings, the savings would accumulate to $2,250 per year.  This actually surprised me somewhat. I’m not sure why, but saving a few dollars a day on lunch seems not very consequential whereas over $2000 a year seems like a lot.

But, the story doesn’t end there. What if you saved the difference, invested in something that paid interest or earned investment dollars and continued to do this for several years.  At a 5% investment rate for 10 years, not eating out would save $28,300.  Let’s say you did this for a whole adult lifetime (from age 25 to retirement at 65) of 40 years of frugal lunches.  Again at a 5% investment rate, this comes to $271,799. (The calculator compounds savings annually).

What if your investment was not at 5%, but rather in a higher investment return asset (long-term stock returns are higher, even after the 2008 debacle).  At a 10% investment return, the 9$/day savings would cumulate to a lifetime savings of $995,833.  That’s right, nearly a million dollars saved and invested from eating in and investing the proceeds.

You might ask, do I realistically think that this overly simplified calculation reflects anyone’s experiences.  Well, not exactly.  After all, I know that most people are not diligently banking their daily savings and not touching the pool for several decades.  In addition, many people are cutting back frugally in order to pay bills or reduce their debt. I also know that when savings balances are higher, people tend to loosen their stranglehold on their pocketbooks and live less frugally. However, the exercise shows several important lessons.  One, is that a relatively small action, when taken every day, can save a lot of money over time.  And two is that planning and discipline, can have huge returns for later years, especially for retirement planning. So even if you end up bringing a lunch 3X a week instead of 5X, this will still be substantial over time.  I’m still surprised at how much can be saved in a year (or another way to look at this is how expensive lunches are) by packing a lunch.

posted at Frugal Friday