An $860 million company simplifies one common problem.
And the solution can make you a lot of money...
Rise and shine, it’s bacon time!
Did you know there’s an official church of bacon?
Yep, the United Church of Bacon. It was established in Las Vegas, Nevada in 2010 and boasts 25,000 members worldwide. They even have commandments.
It’s a weird way to hold a piece of bacon. But, man, what a logo.
What’s on the menu?
Bacon fact #4: Praise Bacon *check*
Number of the day: 860 million
Lesson of the day: Tiny savings + Compound interest = $$$
Savory selections
Number of the day: 860 million
As in, Acorns — the financial technology and services company — is worth $860 million (as of January 2019). I know it’s an old valuation, but it’s the latest available.
Why am I referencing a random FinTech company and it’s 2019 valuation?
Well, I’m a nerd, and I was thinking about little ways to save money. Like buying food in bulk and making simple, cheap lunches every day. Or brewing your own coffee instead of spending $3 to $6 every day on a fancy one.
A little bit here, a little bit there. It adds up.
Then I thought about the impact of compound interest on those little savings. Like, what if you invested the money you saved on common, mundane purchases?
But, obviously, that’s not a revolutionary idea. That’s pretty much the premise of Acorns. They automatically round up your purchases to the nearest dollar, which ensures you’re actively saving and investing money. You reap the benefits of compound interest — even on small sums.
It’s an easy, automated solution to a very common financial dilemma. And that, my friends, is how it garnered such a lofty valuation.
Tiny savings + Compound interest = $$$
Compound interest, the eighth wonder of the world. In essence, it’s the process of your money making money over time.
It’s like hiring your money to work and grow for you.
It’s a magical concept.
Along the same theme from earlier, let’s look at the impact of one very small adjustment to the typical person’s lifestyle and see how much it saves/earns them. To put it another way, let’s apply the Acorns method to one common monthly expense: streaming subscriptions.
The average American has three or four subscriptions. But, let’s be honest, we know people share subscriptions. So, let’s conservatively estimate that people actually pay for one subscription.
Let’s assume you have Netflix. It’s the most popular streaming provider based on users, so that’s not a wild assumption. Let’s also assume you have the standard package, which costs $12.99 per month. Now, if you were willing to drop Netflix and subscribe to Hulu’s ad subscription for $5.99 per month, you’d save $7 every month — or $84 per year.
That’s not a crazy large number. BUT, what if you invested those cost savings in an index fund at the beginning of each year for 30 years?
You could have a cool $15,199 chilling in your brokerage account.
How? The average historical return of the S&P 500 is right around 10%. When you consider annual contributions of $84 with 30 years of compound interest at the market’s average annual return since the 19th century — then $15k doesn’t sound so unreasonable.
How much bacon can you buy with that kind of dough?
At bacon’s average price per pound, $5.47, you could buy 2,778 pounds of bacon.
That’s literally more than a ton of bacon.
…
You could apply the Acorns concept to any reducible expense. Scan your monthly budget and see if you can find something that you can cut out or cut back. You can even plug the monthly cost savings into a compound interest calculator to see what would happen if you invested these savings over time.
Savory selections
Three crispy selections for your reading pleasure today:
5 Strategies That’ll Help You Stop Fighting With Your Partner About Money — Individually, relationships and money are complicated. Together...well, it can get messy. Finances can introduce a lot of conflict to what would otherwise be a healthy relationship. If you and your partner ever butt heads over money, it could be worth your time.
How to Walk the Fine Line of Rate Shopping — If you’re comparing credit cards, auto loans, or any kind of debt, you might find this article on rate shopping helpful.
4 Legitimate Reasons to Not Trust the Surging Stock Market — In case you missed it, here’s the latest Bacon Bits post, which discusses reasons to question the current stock market’s rise.
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As a reminder, you can check out previous editions of the Bits newsletter here.
Stay sizzlin’,
Carter Kilmann
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