The Power of 25

What can you get for $25?

Off the top of my head, a daily Venti Starbucks Latte on the way to work, or a $5 footlong from Subway every day for lunch, a new shirt, 2 movie tickets, a 30 pack of cheap beer, 8 or 9 gallons of gas…or a dollar a year for the rest of your life.

It’s pretty easy to spend $25.  It’s also incredibly easy to save it.  Think about how much pain you would feel if you had to make a transfer of $25 right now to your savings.

Most of you probably wouldn’t feel anything.  Apps like digit sneak that much into your savings without you noticing over a couple weeks!

Now, one $25 transfer isn’t going to make you set for life.  But several thousand will.

I usually spend my morning commute playing with numbers in my head and the other day thought about how, based on a 4% safe withdrawal rate, you need 25 times your annual spending to be financially independent.  Thus, every dollar you spend in a year needs to come from $25 saved.

If you spend $40,000 a year, you need to make 40,000 $25 transfers to savings to never have to work again.  Considering the average human might live for 30,000 days, we’re a bit short.  Subtract out childhood and post-retirement and we’re looking at maybe 2-3 of these transactions a day, every day, for years.  Try to retire in your 30’s and you might be in trouble.

But wait!  Consider the biggest expenses in your life.  They’re probably housing, transportation, and food.  What can you do to subtract $25 from each category?  How many $25 chunks can you take out?

After the big stuff is taken care of, then consider those daily or weekly transactions.  What do you spend $25 on a day or a week that you don’t even remember?

These transactions are starting to seem more manageable.  Now comes the fun part.  For every $25 you cut from your budget, not only did you give yourself a dollar a year for life, you doubled up on your reduction.

You saved enough to cover the cost, but eliminated the cost altogether.   The effect is the same as saving $50, with the effort of saving $25.

There’s more!  Investing that money will earn you compound interest, dividends, maybe even tax reductions.  What does your company’s 401k plan match?  Probably at least a few $25’s.

You can find $25 in tons of places.  And one final number:

$500 saved gives you $25 a year for life.  One less transfer you have to make 😉

Readers:  How many $25s have you cut in your spending, or added to savings?  Did you just go transfer $25 to your savings account!?

Image by Sira Anamwong at

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