A Starbucks a Day…Keeps $1 Million Away

Hello, Piggies!  Let’s talk about saving.

Oftentimes, in response to the simple rule to follow to get rich or in discussions about how compounding is absolute magic, people will say “You know, I just don’t have any extra money to save and invest.”  The argument is often made that there is just no money left over at the end of each month or week to put away…and even if there is, it’s not enough to make any kind of difference.

In the vast majority of cases, that is just not true.  Let me show you one example that applies to a lot of folks out there.

Full Disclosure: I own shares in Starbucks, love Starbucks, and love to see people buying Starbucks.  But they sell expensive coffee that a lot of people simply cannot afford and shouldn’t be buying.

A Starbucks a Day…Keeps $1 Million Dollars Away.  One Million Dollars.

Let’s say you’re one of many people who love a cup of coffee, and you treat yourself to a Starbucks each day averaging $5 daily (this isn’t a ridiculous estimate, especially if you factor in sales tax in most areas).  …And let’s say that you begin your coffee habit when you’re about 18.  Who doesn’t like a nice cuppa Joe?

So yearly, that would be: $5 coffee/day x 365 days/year = $1825/year for your Starbucks habit.

Now, it isn’t all that crazy to get about 7% or so real interest (that is, factoring in inflation) on average in an index fund, like an ETF that follows the S&P500.  That means that for every $100, you make about $7 in real interest.  Nice!  But you may be thinking…wow, $7.  Big whoop.

Hear me out.

Now say you invested that Starbucks-A-Day over time…

Earning 7% real interest, if you started skipping the daily Starbucks at age 18 and invested it instead…letting the power of compounding word for you, when you are 72 years old in retirement, you will have about $1,051,000.  Let me repeat that: skipping a daily $5 Starbucks coffee and instead investing it from age 18 to 72 will leave you with about $1.05 million.

$1.05 million…just by saving and investing the money you could have otherwise spent on a Starbucks a day.

Is your cup of coffee really worth $1.05 million to you?

Let’s be honest, here.  You do not need a $5/day cup of coffee.  Go cheaper.  Make coffee at home.  It will cost you a fraction of going to Starbucks daily.

Now, I’m not saying to never treat yourself to something special.  Did you accomplish something big and you want a little reward?  Maybe a nice Starbucks as a treat isn’t bad every once in awhile.

But most people don’t think that way.  Instant gratification and luxury (yes, Starbucks is a luxury) are things that some people don’t want to skimp on.  That’s ultimately their choice.  But, those same people who indulge in things like daily Starbucks runs should not ever complain about not having anything to save.


Oink oink, Piggies!
-Mr. Piggy Bank

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