## PBJ Economics

I never buy lunch.  In fact I have been bringing my lunch to work for around forty-five years.   A few days ago I began to wonder how much of my current nest egg could be attributed to this thrifty habit.  I eat a homemade peanut butter and jelly (or honey) sandwich for lunch now and have been doing so for most of my adult life.  Here are some “back of the envelope” calculations.

As an estimate, forty-five years ago I could probably buy lunch for a dollar.  Today I could probably buy lunch for five dollars.  Actually I don’t know this since I never buy lunch.  Anyway  I first want to find the inflation rate for buying lunch.  The calculations are below.

Lunch Inflation Rate Calculation

Now I know that the price of lunch has increased by 0.3 percent per month or 3.6 percent per year.  Since I have always lived within my income meager as it sometimes was, I could maintain a savings account and in my later years some kind of mutual fund investment.  I will assume that I immediately invested my month’s lunch savings in an account that earns four percent per year compounded monthly.  I have always been rather conservative with my investments hence the low rate.  Using these assumptions, counting just workdays which average around 22 days per month I saved \$22 the first month and then invested it at 4% for the next 539 months (45 years less one month).  The next month I saved 22\$ times (1+.003)  accounting for inflation of lunch costs and invested that at 4% for 538 months.  This process is followed for all the ensuing months.  The sum of the savings turns out to be a geometric series.  The calculations are below.

Total Lunch Savings Calculation

These rough calculation show that I have around \$65,000 in my current investment accounts attributable to my habit of not buying lunch.  This is not an insignificant portion of my entire net worth.  My basic frugality – some would say cheapness – maintained over forty-five years has resulted in a substantial increase to my retirement margin of comfort.