New Year’s Eve Mistake that Could Cost You $263,000!

New Year’s Eve Mistake that Could Cost You $263,000!

Don’t be DUMB…

I will be the first to admit it. I have 100% got behind the wheel of a car when I shouldn’t have. Guilty as charged. No, I have never been caught by the police. That doesn’t mean that I didn’t make one of the DUMBEST mistakes one could make. It just means I didn’t have to answer to anybody about it. Looking back at my younger and dumber days, some of the decisions I made still make me wonder how I got so lucky to be in the position I am in.

I am 25 and Amber is 24. We are 100% debt free, invest 35% of our income into our retirement investment accounts, and are well on our way towards financial freedom. This all could have been taken away and set us back years if I was pulled over one of those nights. As I got closer to graduating from college and began my job search, I started to get my s*** together. Gone were the days of being reckless with my life (and potentially others) by jeopardizing myself by getting behind the wheel after drinking. Amber also influenced this by presenting some relationship ultimatums if I were to ever do this again. I got the message LOUD AND CLEAR…

DUI’S cost how much???

Besides the disappointing/awkward/embarrassing cloud that hangs over your head when you get a DUI, did you have any idea that they can absolutely consume your wallet? I have had family members and friends get DUI’s, and I know how much of a pain it caused them in terms of messing up their daily routines. What I didn’t fully grasp at the time is how many types of fees that are attached with a DUI charge. Some of the fees include:

  • Minimum Fines
  • Penalty Assessments
  • State Restitution
  • Alcohol Abuse Education
  • Blood Breath Testing Fee
  • Jail Cite and Release Fee
  • Driving Alcohol School
  • License Reissue Fee
  • Attorney Fee
  • Auto Insurance Increase

That list isn’t even including if you got into an accident and caused any serious damage to your car, yourself, or heaven forbid another person!

Using my state (Virginia) as an example, here is how much a DUI could cost:

  • Minimum Fines: $250
  • Penalty Assessments: $600
  • State Restitution: $1,000
  • Alcohol Abuse Education: $50
  • Blood Breath Testing Fee: $37
  • Jail Cite and Release Fee: $10
  • Driving Alcohol School: $375
  • License Reissue Fee: $160
  • Attorney Fee: $2,500
  • Auto Insurance Increase: $1,800 – $6,000

This adds up to a total of anywhere from $6,782 – $10,982. OUCH…That hurts my stomach too. Not only is that cloud hanging over you, but you are essentially taking out an auto loan for a used car with those numbers.

Okay COOL…But how did you get that number in your title?

Good question, and I am happy to hear that you read long enough to ask! My favorite subject in personal finance is breaking down compound interest, and how that alone can be used to make anybody wealthy. Compound Interest is essentially interest earned on your money. Over the years as your money continues to earn interest, that interest then earns interest. In even more simple terms, compound interest is your money making money for you.

***If you are still confused or want to know more about compound interest, feel free to shoot me a message through my contact page!

I am going to break down that big number in my title through a small scenario using Ben the Brilliant Investor.

Ben the Brilliant Investor

Ben (25 years old) gets invited to a company New Year’s Eve party. On the invitation it says open bar (WOOOHOO!) and catered 5 star food (more WOOOHOO). Ben knows that he has to drive 20 minutes to the party and has to drive back home. Now Ben has a choice to make (No Uber/Taxi/Hotel in this scenario)…Does he go to the party and drink, or does he go to the party and instead enjoy all the food and company? Did I mention that Ben is a brilliant investor? Ben already understands the power of compound interest AND knows how much a DUI could cost him ($6,782 – $10,982).

This was an easy decision for Ben. He said “no” to the drinking and went to the party and chowed down instead. Not only did he go stuff his face, but he made a brilliant investment that night. Instead of wasting that $10,982 (Yes he had the cash for it) in potential DUI costs, he invested that money into a simple Vanguard Total Stock Market Index Fund. He bought that index fund within a tax-sheltered retirement account (Roth IRA) where it grows tax-free AND withdraws are tax-free. He also knows that he can’t touch that money until he is 59 ½ years old, but he is fine with this because he wants his money to compound over the next 35 years.

I know I haven’t gone over any type of investments yet in my blog, so don’t feel bad if you’re lost on what an Index Fund is. My coming blog posts are going to break down investing, index funds, Roth IRA’s and much more very soon!

Ben did his research and knows that the Vanguard Total Stock Market Index Fund has returned it’s investors around 9.5% annually since it was initially created in 1992. Now to the good stuff…THE MONEY!!! Want to see the beautiful effect of compound interest? Below I have created a table that displays how compound interest works on a $10,982 investment that grows 9.5% annually over 35 years:

Age Initial $10,982 Investment
25 $10,982
26 $12,025
27 $13,167
28 $14,417
29 $15,786
30 $17,285
31 $18,927
32 $20,725
33 $22,693
34 $24,848
35 $27,208
36 $29,792
37 $32,622
38 $35,721
39 $39,114
40 $42,829
41 $46,897
42 $51,352
43 $56,230
44 $61,571
45 $67,420
46 $73,824
47 $80,837
48 $88,516
49 $96,925
50 $106,132
51 $116,214
52 $127,254
53 $139,343
54 $152,580
55 $167,075
56 $182,947
57 $200,326
58 $219,356
59 $240,194
60 $263,012

 

CASH MONEY

There you have it. Your potential $263,000 mistake is now your PROFIT!

In all seriousness, I wish everyone a Happy New Year. Go out and have a good time with your friends and family and celebrate everything you have accomplished this year! Be smart about where you go and what you do. Don’t get behind the wheel of a car if you’ve been drinking and start 2018 on a bad note. Take Ben the Brilliant Investors advice and be SMART. Who knows…You could make a fortune off of it!

10 thoughts on “New Year’s Eve Mistake that Could Cost You $263,000!

  1. Good stuff. Stocks are an easy example of compound interest but let’s not forget other asset classes. Whether this be real estate, business, stocks, etc. Wealth creates wealth which is why the cards often seem stacked against the younger folks. Hope to see some future posts expand beyond retirement accounts. Perhaps real estate?

    1. Thanks for stopping by Mike!

      I will be tackling many investment options in future posts, don’t you worry. I used the the Stock Market in this scenario because it is the easiest investment vehicle to both access and grow wealth for the average investor. I also used tax-sheltered retirement accounts as the vehicle holding the investment because they provide TAX-FREE growth. Those who hold extreme wealth not only value making and growing money, but they keep an intense focus on how they can limit or eliminate the taxes on their investments. Taxes can erode hundreds of thousands of dollars to an investment over the course of decades.

      Real estate will definitely be a topic on here! I will always make an effort to discuss material that my readers are interested in, so thank you for your suggestion! Real Estate can also be accessed in the Stock Market via Real Estate Investment Trusts (REIT). You can hold a low cost REIT Index fund in either a tax-deferred retirement account OR in a regular taxable account that you are allowed to access at anytime!

      I look forward to hearing from you in future posts!

  2. Preach man. I have to admit, growing up in Baltimore I was more than a bit crazy in my teens and twenties since I was surrounded by bad influences. I drove quite a few times when I should have been arrested and jailed. I’m lucky that nothing ever happened and I never hurt anyone.

    Framing the money in the context of lost compounding interest is a great way to show what you can actually lose. Great job!

    1. We have all made some pretty DUMB mistakes in our past, and we are lucky it never truly hurt us.

      But I thought this would be a cool way to break down and introduce Compound Interest to my audience! It’s hard to understand compound interest at first unless there is a visual to go with it.

      Thanks for stopping by and I look forward to hearing from you in future posts!

  3. Hey Sean!

    Nice. I like how you wrote this post! It’s a great way to put the message in people’s heads (framing it in terms of their costs vs potential money growth), but I know there are still ppl that will ignore the msg. It’s such an easy thing to avoid and yet, I don’t get why they still do what they do.

    Lol I get really paranoid now driving during Thursday/Friday and holiday nights, that I just avoid it altogether.

    When my fiancé and I visited LA a few months back, we were driving from the airport to our air bnb during 1am. We literally almost died from a drunk driver. We were a split to one second away from death… he zoomed a red light as if he were on a highway!! We thought we were seeing things because the red was red for a while. It wasn’t a yellow turning red or anything like that. From our side, we were green and we were driving straight, right before the intersection as he zoomed like a maniac! 😰😰 We get so paranoid now after that incident…

    Overall, your post was a great way to deliver the message! Ppl in general don’t care if other ppl lose their lives (it’s horrible), but to a degree they care if they were to lose money…

    Happy new year to you!! Enjoy the booze! 🍻

    1. That’s crazy!! Thank god you guys were one second late and nothing happened!

      I thought this post was a good idea for my audience because of 2 reasons:

      1. Obviously keep them aware of not drinking and driving, and potentially putting themself in a situation where you start 2018 on an awful note
      2. Introduce Compound Interest and how buying low cost Index Funds can help you achieve financial freedom

      Thanks for stopping by!

    1. They are definitely going to leave a dent on someone’s wallet!

      And that is very impressive!

      Thanks for reading and Happy New Year!

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