June 2007
Barbara O’Neill, Ph.D., CFP®
Extension Specialist in Financial Resource Management
Rutgers NJAES Cooperative Extension
The number “10” is a powerful tool. It is easy to multiply, divide, and remember; small enough not to discourage people from taking action; and large enough to make an impact over time. “10” also shows up repeatedly in expert recommendations to improve health and wealth. Whether it’s shedding 10 pounds, exercising in 10-minute increments, saving 10% of one’s gross income, reducing debt by $10 a day, or earning a 10% long-term investment return, “10” and derivatives of 10 (e.g., 1 and 100) are strong motivators if the magnitude of their impact is fully appreciated.
Below are some financial tips to consider that are based on the number 10:
- “Pay yourself first” by saving at least 10% of your gross income. If you earn $50,000, you’d save just under $100 per week, preferably through payroll deduction. If you start saving $100 a week in your 20s, with an 8% return, you’ll have over $1.5 million in 40 years to provide financial security in later life.
- Add just $1 a day ($30 monthly) to the minimum monthly payment due on credit cards. According to Slash Your Debt by Detweiler, Eisenson, & Castleman, paying $1 a day more than the minimum due on a $5,000, $10,000, and $15,000 balance on a 17% interest credit card will save $7,624, $12,615, and $16,168, respectively, in interest payments.
- Save $10 a month, or multiples thereof, using the table below as a guide. Find the intersection of the interest rate that you expect to earn and the number of years you’ll be saving. Adjust the number according to your savings; e.g., multiply the figure by 5 for $50 ($10 x 5) of savings.
Accumulations Possible By Saving $10 Per Month at Various Interest Rates and Time Periods
| Year | 4% | 5% | 6% | 7% | 8% | 9% | 10% |
| 1 | $122 | $ 123 | $124 | $125 | $125 | $126 | $127 |
| 2 | 249 | 253 | 256 | 258 | 261 | 264 | 267 |
| 3 | 382 | 389 | 395 | 402 | 408 | 415 | 421 |
| 4 | 520 | 532 | 544 | 555 | 567 | 580 | 592 |
| 5 | 663 | 683 | 701 | 720 | 740 | 760 | 781 |
| 10 | 1,472 | 1,559 | 1,647 | 1,741 | 1,842 | 1,950 | 2,066 |
| 15 | 2,461 | 2,684 | 2,923 | 3,188 | 3,483 | 3,812 | 4,179 |
| 20 | 3,668 | 4,128 | 4,644 | 5,240 | 5,929 | 6,729 | 7,657 |
| 25 | 5,152 | 5,980 | 6,965 | 8,148 | 9,574 | 11, 295 | 13,379 |
| 30 | 6,940 | 8,357 | 10,095 | 12,271 | 15,003 | 18,445 | 22,793 |
Source: How to Save $1,000 or More a Year, Rutgers Cooperative Extension Fact Sheet 539. Available at njaes.rutgers.edu/pubs.
- Save $1 a day, plus pocket change, in a can or a jar by reducing daily expenses by $1. You should be able to save about $50 a month or $600 a year. Increase the daily savings amount to $2 or $5, plus loose change, and you’ll have around $1,000 and $3,000, respectively, saved.
- Invest a portion of long-term (i.e., financial goals that are 5 or more years in the future) investments in stocks and stock mutual funds to potentially earn returns that have averaged about 10% a year since the mid 1920s. Beware of the risk-reward relationship, however. When you are investing, there is a positive relationship between the amount of expected return and the risk of losing your money. Stocks have more risk than bonds and cash investments but have historically provided a higher return over time.