March 2016
Barbara O’Neill, Ph.D., CFP®
Extension Specialist in Financial Resource Management
Rutgers Cooperative Extension
In the Cooperative Extension Small Steps to Health and Wealth™ program, there are 25 behavior change strategies. One is called “Live the Power of Ten.” What this means is to take actions to improve your personal finances that include the number 10 or a multiple of ten such as $100.
The number “10” 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 or saving 10% of one’s gross income, “10” and derivatives of 10 (e.g., 1 and 100) are strong motivators to improve your health and finances if the magnitude of their impact is fully appreciated.
Below are some financial and investing tips to consider that are based on the number 10:
- “Pay yourself first” by saving and/or investing at least 10% of your gross income. If you earn $50,000, you’d save $5,000 or 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.
- Put $10 a day of savings (about $300 monthly) in a tax-deferred retirement savings account such as an Individual Retirement Account (IRA). If your IRA’s long-term performance matches the return of the Standard and Poor’s (S&P) 500 stock market index since the 1920s, you’d have over $250,000 in 25 years from $10 in daily savings.
- 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.
- Add $1 a day ($30 monthly) to the required minimum 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 rate (APR) credit card will save $7,624, $12,615, and $16,168, respectively, in interest.
- 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. Stocks have more risk than bonds and cash investments but have historically provided a higher return over time.
- Save $10 a month, or multiples thereof. If you save $10 a month at 5% interest for 30 years, you’d have about $8,357. Ramp that up to $100 and $1,000 set aside each month and the accumulated amounts rise to about $83,570 and $835,700, respectively.
More information about potential savings accumulations with $10 a month of savings can be found in a table (shown below) in the Rutgers Cooperative Extension fact sheet How to Save $1,000 or More a Year Use the table to see how much you can save over time with multiples of $10. Find the intersection of the interest rate you expect to earn and the time frame needed to reach your financial goal. For example, if you save $10 a month at 5 percent interest over 10 years, you’ll have $1,559. If you can save $30 a month, multiply $1,559 times three and you will have $4,677 in 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.