There's been a fight brewing about whether you really have to give up that $6 Latte.

The old guard in personal finance espouses living below your means and spend your time investing that $6, while the new guard says, "don't bother!"

Use this calculation to determine if your time is better spent #saving or #investing?

It's all about expectations

If expected saving > expected investment return->focus on saving/earning.

If expected investment return > expected saving->focus on investing.

Here's Tom, a man a couple years into his career. He expects he can save $1,000 a month, and has a portfolio of $10,000 expecting a 10% return.

• Calculate Tom's expected savings

  Expected saving = $1,000/mo x 12 months = $12,000

• Calculate Tom's expected return

  Expected return = $10,000 x .10 = $1,000

  $12,000 > $1,000

Bob should focus on finding more savings, driving up his earnings faster than his expenses and pocketing the rest to save.

Here's Molly, a woman with a family and 20 years into her career. She expects she can save $2,000 a month, and has a portfolio of $640,000.

• Calculate Molly's expected savings

  Expected saving = $2,000 x 12 months = $24,000

• Calculate Molly's expected return

  Expected return = $640,000 x .10 = $64,000

  $64,000 > $24,000

Molly should focus on investing as the main driver of her wealth. Spending time investing in real estate, businesses and investments will reap more benefits for her than time spent driving up her income and savings 10%.

When you are getting started, your time is paid off more by focusing on savings and driving your earnings up.

As you get older it benefits you more to spend your time investing.

#personalfinance #careers