I recently read an article in which the author, a millionaire, said that skipping your daily latte wouldn’t make you a millionaire. He talked about saving up $100,000 and then investing (his favorite is apparently multi-family real estate) to get really wealthy. He failed to explain how to get from $0 to $100,000.
Maybe we have to buy his book to learn that? I don’t know. I do know that having zero savings while buying a daily latte won’t make you a millionaire, either.
Let’s run the numbers. A large latte at a popular U.S. coffee shop costs about $4. That means that a five-days-a-week latte habit costs $20 per week x 52 weeks per year = $1,040.
Let’s assume I give up my $1,040 per year latte habit and instead invest $86 per month (roughly $1,040/12) earning 10% interest for 25 years (say, age 25-50), I would have $111,643.57 to pursue the millionaire author’s real estate investment strategy if I wanted. If I invested my latte money at 10% interest for 40 years (about the length of a career, or ages 25-65), I would have a little over half a million dollars.
So no, giving up my daily latte won’t make me a millionaire, it only has the potential to help me become a half millionaire. But if I buy my daily coffee shop latte and save nothing I will have $0. I think I’d rather have the half million, thanks.
Let me rapidly add that I like coffee. My blog is named after it. Sometimes I like to go to a fancy-pants coffee shop and get an overpriced mocha something-or-other. But I don’t do it every day, or even every week, and I certainly don’t do it at the expense of my family’s savings plan. My extended family knows I appreciate coffee shop gift cards for Christmas and that’s how I get most of my frou-frou drinks. The rest of the time I make coffee at home. I use my homemade vanilla sugar or make an iced mocha if I want something fancy.
In other words, there is nothing wrong with enjoying a latte, even daily, if you can afford it. But if you’re not paying your bills on time or not saving money consistently, then you probably can’t afford it. And by the way, these calculations work for other “luxury” habits like weekly pizza night or cineplex night or whatever.
If you’d like to run some numbers for yourself, there’s a free investment calculator available here. Start with $0 and see how small changes to your budget can have a big impact on your savings. Imagine what your balance might be down the road if you save more than just latte or pizza money!
Having a hard time giving up your daily coffee run? Don’t forget to identify your “Why?” and remind yourself often of the greater things you’re trying to accomplish.
Need something to help you get started or keep you on track? There’s a free 52 Week Savings Challenge chart available here to help you $ta$h $ome Ca$h. I’ve started adding spare change to my challenge jar as a painless way to boost my total. I can’t wait to see the look on my husband’s face when I show it to him at the end of the year!
What are you doing to $ta$h $ome Ca$h in 2017? Please leave your suggestions here or on my Facebook page so others can learn from your advice. Thanks!
This is the part where I remind you that I’m not a financial advisor, just a mom who is sharing her experience in the spirit of having a chat with a friend over a cup of coffee. Your investment results may vary from the examples given. If you require financial or investment advice, please seek the counsel of a professional advisor.
I moderate comments manually but will get them posted as quickly as possible. Please keep your comments kind and if you must disagree please do so without being disagreeable. Rude or inappropriate comments will obviously not be published.
Update: This post was shared at Bloggers Spotlight Link Party #46, The Homemaking Party (1/11/17), Home Matters Linky Party #118, Pretty Pintastic Party #139 and Happiness is Homemade Link Party #153.