My Dad taught me there's no such thing as free lunch.

Turns out he was right. Lunch costs a cool million. 

Don't believe me? Read on to find out how you're probably spending a million on lunch. 

You could be reading this from anywhere of course, so it might be $1,000,000, £1,000,000 or €1,000,000. Pick your own base currency.

Before we get onto the how's and why's, let's remind ourselves about the savings crisis in the developed world. 

The Saving Crisis

The pension at the company you work for is most likely broken. The government's pension is broken. If, like me, you're not in your 60s or older, it's very unlikely that your home country will be able to afford to help you in your old age.

Companies are desperately trying everything they can to manoeuvre their way out of funding, or paying, for their company pensions.

Of course your company and the country you live in aren't making much of a fuss about this. 

Why would they? It would topple governments and boards, so you'll have to take my word for it (feel free to do your own research).

So... to ensure you can enjoy a long and happy retirement, have you been saving since you started work? Have you been stashing cash away since you were 16, 18 or 21?

Probably not.

It's a crisis. 

The psychology underpinning why we don't save more, from younger, features a few lovely biasses. The main one is Immediacy Bias.

Smokers know what they're doing is going to kill them young, but they can't stop. Why? The near-inevitable cancer, pain, suffering and loss are so far in the future that "Meh!". Who cares? 

They can't. We can't. You can't. It's just unimaginable. We can't relate to it. It's tomorrow. Mañana. Pffft.

We just can't care about stuff that's not immediate. Millions of years of evolution haven't selected for pension-saving genes. Or "give up the booze and ciggies, they'll kill you" genes.

We're evolved to focus on immediate dangers... even in today's anodyne, extinct-sabre-tooth-tiger world, our lizard brains haven't quite caught up, and saving for a distant tomorrow is something we find almost impossible to do.

Getting young professionals to change their behaviour is big business. Apps, challenger banks, governments all want to change it. I'm not sure I've solved the problem for them, but what I've found is pretty astounding and it might help.

The Lunch That Cost A Million

In my 20s, freshly graduated, I headed for a career in the City of London, working for investment banks in trading risk, P&L, trading and sales. I bought lunch every day, at least a coffee a day and of course I headed out every Friday on the beers, having fun, making new friends and networking my way upstairs.

In my 30s I wised up a bit. A steady girlfriend had me thinking ahead that one day I might settle down, though of course mostly we just partied together. By my 40s, married with kids, I doubled down on saving more, avoiding the drip-drip-drip of daily lunches and coffees out and about. 

I had my own espresso machine at home too, so I could save on the price of a daily commuter coffee and I became a mean sandwich maker.

So no takeaway coffees for me any more. No lunches either, except for Fridays, and days of partying in pubs and bars every Friday are long gone.

On a whim one day I modelled how much this lifetime of tiny daily spending had cost me.

Not a lot, really, spread across my life. All those lunches, coffees and partying, including the substitute 'made at home' lunches, come to about £70k in a working lifetime. By the time you're in your 40s as a professional something-or-other, you should be earning that every year. It's not really all that much spread over a 45 year career, is it?

But it starts to get horrifying, frankly, shortly after that simple calculation. 

Instead of just spending the money on takeaway lunches, coffees and bars, what would happen if you invested it, returning the average of 4% a year?

You'd have a LOT of money at retirement. 

And what if you invested to return 4% and in investments that paid a pretty normal 3.5% dividend? 

Making your lunch and coffees at home you'll have a cool million in your pension when you hit 70.

Yes. You read that right. By making your lunch and coffee at home and investing what you save, you'll retire with $1,000,000.

Don't believe me? Check my sums*.

Laying it out like this isn't going to suddenly make a ton of partying young professionals start saving hard, but every time I've shown this to friends, their jaws always hit the floor.

I thought you'd like to see it for yourself, too.

Time to tuck into lunch**!

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Tags: #finance #investment #saving #pension #bias #immediacybias #compounding

* The spreadsheet, if you want a copy to play with, is here. It's pretty basic. Have a play adding columns to make it more accurate (how much do 4g of coffee beans cost a day?) or play around with the returns and dividends.

** You do need to make a damn good lunch at home or this all feels joyless... gherkins and mayo are my secret ingredients.

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