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Save or Spend? Cool Tool Calculates the Cost

Tower of $4 lattes
I have a Starbucks habit. (Yes, those cups are all mine.)

Now Bills.com wants me to know just how much that habit costs me over time. In fact, they want to add up as many as four of my costly little habits and calculate the kind of long-run savings I've given up by giving into these tasty temptations.

The tool, called My Savings Machine, operates with a drop-down menu, suggesting the many ways we fritter away cash -- from car washes to cigarettes to beauty treatments and unused gym memberships. (If you use the gym membership, you probably save as much on foregone health care as you spend on the membership.) The buttons on top and in each window let you adjust the amount you spend on that item each week; the interest rate you think you might earn on your savings if you banked the money instead; and the number of years you want to consider. The machine does the math, accounting for compound interest -- a force that Einstein reportedly called the most powerful in the world.

In my case, pulling the button to adjust from the paltry $5 weekly that they assumed I might spend on coffee to the (gulp) $20 that's more likely, I found my latte habit probably costs me $1,060 per year (assuming a 4% rate of return); $12,790 over 10 years; $60,327 in 30 years.

Spend $100 a week on dinners out? That will set your savings account back a whopping $300,000 by retirement some 30 years away. Pack-a-day cigarette habit? You don't even want to know.

My Savings Machine is essentially the electronic version of my recent post 6 Little Things That Cost A Lot. The point, by the way, is not to tell you that buying a Starbucks coffee is evil or that you shouldn't do it. It's simply to clarify what these habits cost so you can decide whether they're important enough to spend that kind of dough.

The greatest thing about having a tool like this provide the math is you can see what would happen if you cut back, rather than cut out, your costly habits. After all, few of us could give up our habits cold-turkey. But I just might be able to do okay with one less latte a week.

Kathy Kristof is the author of Investing 101
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