Here's How Rich You'd Be if You Stopped Drinking Expensive Coffee

By Alaina Tweddale on 7 April 2015 2 comments

Last week I was in Starbucks, and found they now have a list of enticing new lattes. One was tiramisu! Starbucks will be glad to know that the tiramisu latte did not disappoint. On taste, that is. The price tag for a tall tiramisu latte with coconut milk in my area is a staggering $5. That's right: five dollars. For what ultimately amounts to a small coffee with some flavors and milk substitute thrown in. Oh my.

Fortunately for my pocketbook, I usually home brew. I have a very nice coffee maker that had an upfront cost the equivalent of 40 tall tiramisu lattes with coconut milk (after my 20% Bed Bath and Beyond coupon). Sure, it was expensive, but like I said; I'm a coffee lover, and the coffee it auto-grinds and brews is so delicious that I'm often disappointed when I'm out and have to buy from a coffee shop. (See also: 12 Ways to Make Better Coffee at Home)

Before I get all annoying and tell you how much your five-dollar-a-day coffee habit is costing you, I want you to know that I'm not picking on Starbucks. You can run the same numbers by picking your favorite brew from Peet's or Caribou or Costa, or wherever you happen to frequent. Heck, skip the coffee analogy altogether and substitute cigarettes, a microbrew at your local hang-out, cable TV, or whatever daily vice you think is harmless to your pocketbook.

What's most important is that, before you make even the smallest of financial decisions, you understand the big picture effect. Maybe you'll decide your daily latte is worth the long-term price. But, before you decide, you should understand the variables. (See also: 73 Easy Ways to Save Money Today)

$5 a Day for 40 Years Could Buy a House (in Today's Dollars)

If you took $5 a day and put it in an 8% investment like a low-cost, well diversified index fund (I love Vanguard, if you're looking for one!) for 40 years, that daily foregone latte could compound to a staggering $510,600.40. Don't want to wait 40 years? The daily tiramisu latte habit adds up to $1,971 over a year, $11,563,07 over five, and $28,553.01 over 10. Just think about all the vacations you could take with that extra dough, or all the kids' college accounts you could fund, or all the debts you could pay off (and save yourself the interest payments!). The possibilities are endless. (See also: This is How Rich You'd Be if You'd Saved All the Money You Earned in High School)

But I Don't Want to Give Up That Much Coffee

I love coffee, even the five dollar variety, even though I know how much it costs to my long-term bottom line.

Drop just one froufrou cuppa from your weekly routine and you'll still see great investment results. Assume again you take that $5 per week and invest it in that low-cost index fund (which we'll assume returns 8% per year) and you'll earn $280.80 per year, $4,067.83 in 10, and $72,743.07 after 40 years. It's no McMansion in the burbs but $70k is still enough for a double wide in the country or a condo in the city. (See also: How to Save $26,000 in 5 Years or Less)

No, Really, I Just Can't Give up My Coffee

I get it. Really, I do. Sometimes a daily habit means more than what we have to gain by giving it up. So, in my last ditch effort to show you that little changes lead to big results, let's see how much you have to gain by giving up just one fancy coffee per month.

In one year (assuming an 8% annual return): $64.80. In 10: $938.73. In 40: $16,786.86. Even giving up just one $5 coffee per month can make a sizable difference over time. (See also: 16 Easy Ways to Save $100 This Month)

Just for fun, here's an expanded version of the numbers so you can choose your own timeframe and dollar savings.

The next time you find yourself pulling a fiver out of your wallet for a seemingly inconsequential expense, I hope you'll think twice and consider the long-term cost of that impulse buy. Just plug the cost of that impulse buy into a compound savings calculator and see how much you'll save — and earn. Over time, the decision could just fund your next home, vacation, or child's college tuition. Or, Howard Schultz's pocketbook. The choice is yours.

What daily expense would you be willing to give up for a house in 40 years?

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Guest's picture

I just made the switch yesterday to buying Starbucks coffee in bulk to buying Folgers. While I was hurting a little this morning your article made this new coffee taste about a thousand times better!

Guest's picture
More Than Wheels

Love your chart!

Guest's picture
Aaron

I've researched this myself and found the savings to be less than what you found here. Still, the savings is amazing and adds up. With a French press at home, I'm saving more money every day.