Your gym membership could cost you R610,000 (and you won't even get abs)

The views and opinions expressed in this article are those of the author and do not necessarily reflect the official policy or position of 10X Investments.

Here’s a confession. Once upon a time, I too had a gym membership that was the result of a New Year’s Resolution. Ok, twice, because I didn’t learn my lesson the first time.

Hands up all those who had a similar idea (even though they suspect that resolution will die faster than this ink now that we’re back behind our desks)?

Let gym be the metaphor for all our good intentions to look after ourselves better when the old year turned into the new. While the cost of a monthly membership varies vastly, let’s call it R1,000 a month.

Now let’s look at doing something useful (that we can actually stick to) with that R1,000 a month - that will absolutely pay off in future. Let’s see what would happen if we invested it in a low-cost Retirement Annuity that actually grows your money (many don’t).

In this article, we’re going to compare the two options, and do some fun maths to show you how a rubbish New Year’s resolution can cost you R610k over time. Ready?

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The numbers that actually matter

I’ll use 20 years as my timeline before semi-retirement. That’s called my ‘investment horizon’.

(I’ve said before that I doubt I’ll ever really put my pen down. I enjoy writing too much and am looking forward to publishing those best-sellers. Watch out John Grisham)

Investing an extra R1,000 a month over the next two decades adds a fair amount of moola to my stash. Running the numbers shows that, at 5% growth a year (after fees and inflation), I’ll add around R370,000 to my retirement fund in today’s money. If I add that amount to a nest egg of R1 million, the magic of compounding really starts to pay off, and I end up with around R3 million.

Then, just to complicate the math some more, let’s then assume we were already investing R5,000 a month. (There’s a nifty calculator to show how much you should be putting away based on what you want to earn here.)

R4.8 million is the number that comes out at the end of the number crunching. Thanks, compound interest. I love compound interest. It’s like money for free with no hidden catches. Unlike using a rewards card where you buy two of something just to ‘save money’ when all you really wanted was just one.

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All this growth assumes I actually leave the cash alone, to grow, and not dip in via the new Two Pot legislation. It also assumes low fees, as that kind of growth is more difficult with a higher fee, more traditional RA (see this article here for how much fees can make a difference). As always, speak to someone qualified in this field to understand your options better.

The gym membership alternative universe

So, instead of making a new year’s resolution to go to the gym when I have a perfectly serviceable bicycle and stationary trainer downstairs (and it does actually need servicing as both tyres are flat) maybe it’s better to look at a monthly saving resolution.

Just for sh!ts and giggles, spending R1,000 a month on a gym membership – without allowing for inflationary increases – works out to R240,000 over the same twenty year-period. R240k out, or R370k in? If you don’t ‘get your gains’ in the gym, that’s a net loss of R610k when you think about it. Which option sounds better to you?

Let’s cancel that membership (or better yet, just cancel the idea) and do something else more useful with the cash. Dare I say that investing it will probably provide greater long-term joy than a membership card gathering dust in the bottom of a drawer somewhere?