How To Get Rich For Only $10 A Day 

What if you could just find an extra ten dollars a day and put it into your home loan? Surely you could trim your budget by just $10 each and every day to make sure you deposit $70 extra a week into your home loan account. What would this mean over the course of the loan and how much money would you save?

Well let's say you had a $300,000 loan over 30 years at 7%. Just by adding $10 a day (or $70 extra a week) you would save $152,732 in interest. Plus, you would knock off nine years and five months from the home loan. Wow, this is nothing to sneeze at!

Or on a $500,000 loan over 30 years at 7% you would save $182,327 in interest and six years and eight months.

Plus it's not that hard:

• Get rid of that coffee from the service station - $3.00 a day.

• Get rid of Pay TV in the house - $2.00 a day.

• Find a way to reduce your household yearly spend on groceries by $1,000 a year - $2.73 a day.

• Change your gas or electricity to save $100 a year on both - $0.54 a day.

• Stop buying your daily newspaper and start reading news on the Internet - $1.50 a day.

• Consciously drive less and slower (around $1.00) a day.

This is a quick list to come up with over $10 savings a day. While you might not do everything on the above list, I'm sure you could think of heaps of other things you could do to cut back on your expenses. Make it the $10 challenge.

But here is the kicker. Inflation in Australia makes prices rise by around 3% a year. So for example a can of Coke which was $1 one year should be $1.03 the next year. And what is true for a can of Coke would be true for all the things you have cut out of your life. Plus each year your wage should increase at least at the same rate as inflation. So what about if instead of putting away $10 a day you started putting away $10.30 in the second year? That's only 3% more. You have to remember that you wouldn't need to find another 30 cents in savings, because all the prices have gone up and so has your wage. Your purchasing power at the end of the day should be exactly the same. In fact if you were still to only keep your amount at $10 a day, all of a sudden you would be heading backwards. If we had met the older lady one year later than we had, her $10 would be worthless. In fact it would only purchase what $9.70 would purchase this year.

You're thinking but surely an extra 30 cents from one year to the next would not make any significant difference? But it will if the next year you increase another 3% to $10.60 and keep increasing it 3% until the loan has been paid out.

On a $300,000 loan, you would save in interest $15,024 extra by only putting in $10 more per day. Plus you go from needing to find only $10 a day in year one to $17.53 in the last year. It's not a king's ransom.

Or on a $500,000 loan you would save in interest, $24,839 more than by only putting in $10 a day. The great thing is you have gone from $10 extra a day in year one to only $18.83 a day in the last year.

This is not where the advantages end. Because you have paid off your home loan so quickly, you now have spare cash (e.g. home loan repayments and whatever figure the $10 has morphed into) until at least the 30 year mark. As you have been doing this your whole life you won't notice any change in the way you live. If you started putting this money into a savings account at 5%, and still increased the extra $10 by 3% a year, how much money would you have at the 30-year mark?

Well on the $300,000 house you would saved up an extra $405,996. On the $500,000 house you would have saved $465,341.

But there is even more great news. Your house value in 30 years has probably also increased. Even if over this period it has only risen by a tiny amount like 3% a year, now at the end of year 30:

• On the $300,000 house, this would now be worth $737,052, making your net worth $1,143,048.

• On the $500,000 house, this would now be worth $1,228,421, making your net worth $1,693,762.

A quick way to get wealthy? Not really. But it does seem to be a risk-free way. Of course you could not find any extra money a day. Keep paying the minimum payment and at the 30-year mark you would only own the houses outright.

P.S. If you really dug deep in the first year, cut your expenses back to the bone and found $20 a day instead of $10, but then continued with this $20 a day and never raised it the 3% like with the $10 a day, here's what would happen:

• At the end of the 30 years in the $300,000 house your total net worth would be $1,366,008, or $222,960 more than $10 and raising it by 3%.

• At the end of the 30 years in the $500,000 house your total net worth would be $1,877,262, or $183,500 more than $10 and raising it by 3%.

Now throw in what your boss has paid in you superannuation. Can anyone say "early retirement"?