It is a familiar image in modern American society. The image of the tattoo’d 20 something eating gluten free Avocado Toast, while drinking a $5 Starbucks coffee, and taking a selfie for Instagram. And while it seems like a far fetched caricature of what most young people actually act like, it’s not as far off as you would think. In fact I’d wager that half of the Millennials that happen to stumble upon this post probably go to a coffee shop once a day to get their fix, which consequently is causing them to potentially miss out on becoming a millionaire.
Now that may seem like an outlandish claim but it’s true, by nixing out your $5 barista made coffee addiction, you can potentially generate a million dollars. How? You may ask, well allow me to explain. The average cup of coffee probably cost about $5 and lets assume that a person will do this once every work day. Also there are approximately 260 work days in a year, but lets say 245, just because surely you work in a progressive job that believes in things like “employee health” and sanity. Anyways after just one year you will probably spend $1,225 just on coffee and if you take that over the course of a 40 year career that equates to $49,000 spent just on coffee.
But obviously you can do math and realize that $49,000 is less than $1,000,000 but of course we’re all educated investors and we realize that having money sitting in a savings account is a waste. Also surely we understand that compounding interest is the most powerful force in the universe.
Of course you do still need coffee and I totally get that. Also from every office that I have ever worked at there is usually a nice old Keurig (or an actually coffee pot and brewer if your office is old-school) machine that is filled to the brim with coffee. I personally believe that businesses wised up, long ago, to the fact that a caffeinated workplace is a happy workplace. So in theory you should be able to completely save your coffee budget. However if you’re not the K-cup type, you could brew your own coffee using affordable ground coffee, cheap filters and a Mr. Coffee. And without further stalling let’s see the money.
Let us assume that you keep the money you saved for your coffee separate in a kind of “coffee money that I don’t actually spend because I make cheap coffee at home or use the office Keurig” fund. And lets also assume that you take the daily $5 deposits and build them up until you deposit $150, once a month. Taking these assumptions we can use our handy dandy, trusty Time Value of Money Calculator (Calculator.com has a great investment calculator by the way ), and get to work.
With monthly deposits into an ETF fund that will return approximately 10% over the course of 40 years (so equating to 480 deposits) you will get a total stockpile of $1,099,092.
I mean really think about that, it might take about $2 million dollars to retire decently in 2059 but you already half of that locked down just by drinking coffee at the office or making your own each morning. Also take a look at the end of that curve and how one goes from $500k to $1m in about 5 or 6 years. That right there is the power of compounding interest, and of course it is never a bad time to be in investments and start having your money make money. And yeah the awkward small talk conversation will eat away at your sanity as you try and recollect the result of last night’s Monday Night Football. But hey, at least you’ll be making stacks of cash to help you feel better about having to remember what T.V. shows are popular right now.
Disclaimer: I am not a financial advisory professional and the rate of return listed is based on estimates. Also this is not financial advice and any important financial decisions should be made with the help of a financial advisory professional.