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What You Need to Know about the Butterfly Effect and Your Money

  August 13, 2014  |    #Eliminate Debt

What Is The Butterfly Effect?

The butterfly effect says that just the flap of a butterfly’s wings in the Amazon jungle weeks later causes a tornado on the other side of the globe. It is the seemingly small, inconsequential events that, combined with other events, may cause a much more dramatic event than otherwise expected. A similar phenomenon happens with money.

Our Mistake

We ran errands last weekend and got started later than planned. We had dinner plans with friends at 6 PM our time. While doing our errands, we realized that if we waited to eat lunch until we got home, we wouldn’t have an appetite by dinner. In addition, we didn’t want to spend a lot of money on food we had to eat in the car. We stopped by a local grocer and picked up a few items to eat that included red beans & rice chips, a granola bar, trail mix and sodas. Everything was natural and/or organic. We tried to choose healthier food that was easy to eat while driving and that didn’t cost much. Our bill came to $9.32. We were happy.

Before we were done with our errands, we realized that we ate nearly all our food that totaled over 2,000 calories and were still hungry. When we got home, we finished leftover kale salad. We were fine until dinner that night.

In hindsight, our attempt to save money on convenient food was worthless. Sure, it was only $9.32 this time. How often, though, do we choose a more “convenient” alternative only to have long-term, negative consequences, such as wasting money on empty calories?

$6 Turns Into $121,000 Fast

Here is another example of the impact. Let’s say that instead of packing my lunch today as I usually do, I pick up a cheap $6 burger and fries. I knock them back fast because I only have 30 minutes for lunch. An hour later my stomach is upset due to the chemistry of processed food. Then, I start to feel hungry again. Another hour passes and it’s break time. I am hungry, but don’t eat what I have and buy a $1.25 candy bar from the vending machine. Down it goes. Within 30 minutes, I feel the glorious sugar high that powers me through the late afternoon or most of it. Then, my glucose levels drop and I feel sluggish. Yea! My work day is done, but now I’m tired from the sugar rush. On the way home, I decide that I don’t want to cook dinner. I stop at the Red Dragon to get Chinese food for the family and drop another $35.

Does this story sound familiar?

Let’s total my day’s expenses.

•    Burger and fries cost $6.
•    Candy bar cost $1.25.
•    Chinese dinner cost $35.

My day’s total was $42.25. Individually, each didn’t  cost much, but in total the impact is a different story. But, this only a few times a month. Okay, let’s just say it happens three times a month. That’s nearly $150 a month or $1,800 a year. If you put these expenses on your credit card, the overall cost is even more dramatic. You see how quickly and unconsciously someone can go from debt free to a mountain of debt that all started with a $6 burger.

Also read: Early to Bed, Early to Rise Improved our Budget

Of course, because we are #MoneyConscious we’ll expand on the butterfly effect. What could that $1,800 do for me had I not spent it on that burger, candy and Chinese dinner? $1,800 a year invested in my IRA or 401(k) earning 8% would grow to roughly $121,000 over 25 years. That’s more than what most Americans have saved for retirement.

Our point isn’t to chide you about the occasional trip to Mickey D’s or the office vending machine. The lesson that we have learned is that there are consequences and missed opportunities for our established habits. Often our spending isn’t done with much consideration, but with a little effort we can ensure that potential costs and missed opportunities are thoroughly thought through.

Have you seen a butterfly effect with you spending? How? What were the consequences?

6 responses to “What You Need to Know about the Butterfly Effect and Your Money

  1. Definitely. Ed and I used to pick up a couple "big gulps" worth of diet coke each day, and were going out for lunch at least twice a week. As part of some health changes we’ve dialed back hugely on both — and suddenly I have an extra $45/month to put on our mortgage. 🙂

    1. That is awesome to hear! It is funny how the #moneyconscious spending changes the way we live. Mine was a bagel and coffee a couple of times a week for breakfast. $4.51 3 times a week was adding up quickly, both on my waist and my wallet. 😉

      Little things can throw you off track so easily.

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