The Five Dollar Challenge
Have you heard about the five dollar challenge before? I am sure many of you have, since this is nothing new. Also, those of you who have been following me on Instagram for a while have seen the five dollar challenge posts. For those who have not heard it in a while let’s revisit the idea of the five dollar challenge.
I have heard about the five dollar challenge back in my high school days, but I haven’t really put the idea to work. Probably some of you can relate to that as well. However I have revisited the idea a while back when I was talking to a couple of friends of mine. Two of them are heavy smokers and smoke about a pack of cigarettes per day and have been smoking for a long time now. I quickly calculated that they could have been easily saving about $25,000 for those past couple of years. They could either enjoy buying a really nice car for that, or if they are smart enough it would be a down payment on a house. Their only argument was that even if they would quit smoking they would spend that money elsewhere.
I have also brought up the idea to my sister before. She always cries about not being able to save, but on most days she enjoys her daily latte from Starbucks. For those of you who also have daily lattes, I really recommend The Automatic Millionaire by David Bach. He talks about the latte factor in his book. He also brings up a really good point that those who get their daily lattes end up getting a lot more than the daily latte. You quickly add a little snack to the latte and sooner then you know you have easily spent more than ten dollars. These little spending’s every day add up really quick throughout the months.
By now some of you might think screw this, I am going to enjoy life while I can and get my daily lattes. I am not saying we should not enjoy life, and not get the things that we desire. However, if we have the money for a pack of cigarettes a day or for the daily lattes, shouldn’t we be able to save five dollars per day for savings, or rather investing? At the end it is going to be for your own good. According to USA Today, 8 out of 10 Americans live paycheck to paycheck. We can change this easily with small steps. A successful life is made up of small steps at a time. The Automatic Millionaire gives a lot of good advice on how to become millionaires automatically. The only thing I do not like about the book is that it teaches you how to become a millionaire by the time you retire. I am sure most of you want to become millionaires earlier than that.
Learning how to save money is the first step you can take towards your millionaire life. Saving five dollars a day will get you to the habit of saving money really quickly. I have decided to do the five dollar challenge for a year, but instead of just saving the five dollars I try to invest the saved money for each month. I will not invest the money right away at the end of the month, rather when I feel like it is a good idea to pull the trigger on something. I do post my investments on Instagram, but by no means is that financial advice for anyone. You have got to do your own research on investments. You have also got to remember that not all of your investments will be successful. You will lose some but if you do your research correctly you should be able to win more than you lose. Nobody is perfect at investing. Even Warren Buffett made mistakes and lost big amounts of money. Look at that loss as a fee for your learning process. Also speaking of Warren Buffett, he recently got super wealthy because of compounding on his investments. I also try to invest for the long term. Even if the stock, crypto, or any other investment falls in value, I do not panic and sell right away. I am in it for the long term. You have got to remember you only lose when you sell. Do your research well before taking a loss, and selling a stock, crypto or any type of investment.
After doing your research and it makes sense to sell for a loss you just have to pull the trigger. Maybe the money that you have left will make back your loss and even more in a different investment. A good example for me right now is the JD stock. The CEO of the company got caught up in some sexual scandal. The price of the stock dropped a good amount, but I chose to stay in and not sell for a loss yet. The fundamentals of the company are still there, it is soon set to make profit. However, if the stock drops even more and there won’t be any profit making it will be better for me to sell the stock and take the loss. You might say why gamble with investments when you can lose your money. Why not just save it. If you think about it, saving five dollars a day gives you a total of $1825 of saving per year. If you would like to become a millionaire before retirement, you have to make your savings work for you and make you more money. A good quote by Grant Cardone: “Save to invest, don’t save to save. The only reason to save money is to invest it.”
Now that your mind has been refreshed on the five dollar challenge, you can start putting it into good use. If you are not comfortable with investing it just yet, saving five dollars a day is a really good start. If you have any other bad habit of spending money other than the latte and the cigarettes feel free to share it in the comment section. Also feel free to share this blog post with your friends who might find it helpful. I hope I have given you enough encouragement for you to start saving, investing and becoming financially free in the future. Until the next post….