The average 50-year-old American has only $60,000 saved for retirement. Yet that same average American has eaten almost a half million dollars – almost literally! How does this happen and how can you avoid this same retirement-killing situation?
Cooking At Home
I actually enjoy cooking… sometimes. In fact we just purchased a new Instant Pot and I’m very much looking forward to trying out some recipes in it. Eating meals we’ve prepared ourselves makes sure we know every ingredient in the dish – allowing for healthier choices. Of course I also appreciate the fact that it is a lot more cost-effective than eating in restaurants or take-out. Yes, I like to be frugal. What I definitely don’t like is meal-planning. That’s part of the reason we’ve used HelloFresh (review) in the past and why we also subscribe to eMeals. Both of those services allow us to still cook at home but remove some of what we feel are the biggest pain points for us.
Dining At Restaurants
Even though there are a lot of benefits to preparing meals at home, my wife and I enjoy a meal out on occasion. Okay, maybe more than “on occasion”. Our dining out budget is a decent chunk of our total spending. Why? Everyone will have their own reasons for their like or dislike of eating at restaurants but there are a couple of reasons we personally enjoy it.
- We work from home and need to get out. My wife and I have both worked from home for almost 20 years now. When your home is also your office, you can really get sick of seeing the same scenery all day every day. There are many things we do to get out, like visiting local parks (free!) or wandering downtown Charleston (free!), but those are more daytime activities. When we need to work through a long day, we sometimes just need to get out in the evening and a restaurant experience fits the bill.
- We enjoy a weekly “date night”. Even being married for over 20 years my wife and I make an effort to get out for a dinner date night at least once a week. Just being out of the house and having someone wait on us is a nice relaxing experience. It allows us to just focus on each other with no food prep, cleanup, etc.
- We travel a lot. We love to travel. Vacation and travel is actually our largest budget category. We’ve taken the time to track the different parts of our vacation spending and eating at restaurants while traveling is a huge cost. With a family of three (or even just two) traveling, the cost of meals can actually be higher than the cost of a hotel stay.
Average American Spending On Dining Out
Recent data shows that the average American spends $3,008 each year on takeout and restaurants. Honestly our personal dining out budget is even higher than that. Compare that amount to the $4,015 an average family spends each year on groceries for prepared meals. That’s about $7,000 spent each year feeding ourselves, with 43% of that cost spent on food prepared outside the house.
Think about this: $3,008 per year is $250.67 per month. As I wrote in my Automatic Millionaire post, cutting back that spending and putting it into a 401k instead would allow a 20-year-old to retire a millionaire!
Eating a Half Million Dollars
Not a 20-year-old? Me either.
But let’s say you are in your 30s with 30 years until retirement. The stock market has returned an average of 10% each year over such long periods. Let’s be more conservative and assume an 8% annual return. $250 per month invested at 9% for 30 years is $457k! Almost a half million dollars!
When the average American approaching the homestretch toward retirement only has $60k saved, but they’ve spent hundreds of thousands of dollars at restaurants, something is wrong. As I like to say, a key part of financial success is ruthless prioritization. Given these statistics I’d say that a lot of people have their priorities misplaced.
Stop Dining Out?
Maybe yes, but maybe no.
Do you have big goals that are slipping away from you? Paying for your or your child’s college? Saving for downpayment on a house? Investing toward retirement?
Budgeting is all about prioritizing your money to align with your personal goals and priorities. If dining out is a priority, as it is with our family, then by all means allocate some money to that category. But take some serious time to think about these allocations.
Let’s say retirement is a priority for you like it is for many families. Are you spending more on restaurants than you are saving toward retirement? Would you rather enjoy having someone else prepare your meal and wait on you than being able to enjoy retirement years?
By the way, if you haven’t yet sat down to seriously consider your big goals and priorities, you should definitely check out our post The first step before you even think about your financial planning. It will talk you through some exercises that are extremely helpful in this area.
It’s not my, or any other financial planner’s, place to make these decisions for you. However, I do want to encourage everyone to spend some time seriously considering this. This is a very personal decision but one you need to think about before it’s too late. You don’t want to be 70 years old with a budget cut to the bones because you spent too much time at restaurants when you were younger.
As a fee-only financial advisor, I can help you clarify your dreams and priorities, then develop an actionable plan to achieve your goals. Having a financial plan for your life includes much more than just investing, but intelligent investing is definitely part of the solution. Reach out and let's talk about how I can help you maximize your money to achieve the life of your dreams.