It’s really easy to get in the habit of buying a coffee on the way to work. It doesn’t seem like a big expense either. What’s $2 in the grand scheme of things? Turns out it’s worth a lot, at least I think so.
Let’s assume I buy coffee every work day for most of the year (we’ll say 50 weeks to account for some vacation – although in all honesty, I buy coffee on vacation too). That’s about 250 work days and one cup a day. In a year, I’m now talking about $500. That’s about $42 a month. Again, perhaps not the end of the world but definitely a luxury, especially in my case because my work provides free coffee (it’s terrible but free).
But what if we extrapolate these costs over my career. Over a 30 year career that’s $15,000 that I’ve spent on coffee. $15,000 that I could have spent on investments, savings, heck even vacation is a better use of this money (in my opinion).
So let’s take it a step further and say that I took that yearly $500 and invested it. If I’m doing well, I could probably average about an 8% annual return on my portfolio. After 30 years, those cups of coffee are now worth almost $60,000. If I’m not as lucky and I average a 5% annual return, my investments are still worth almost $35,000. Still not a figure you can easily dismiss.
Now let’s assume that you also buy lunch 3 days a week. If you packed your lunch and invested the daily $10 expenditure – after 30 years at 5% annual return, we’re now talking about almost $105,000. At 8% annual return, it’s more than $175,000.
I’m in no way saying that you should completely cut out the little things in life that make it fun (like a GREAT cup of coffee), however, being mindful of what those little things are worth in the long run could make a difference in your bank account.
Article by MeVest Contributor, Jessica Alen