The Million Dollar Coffee

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Quote

“The market rewards those that are disciplined but flexible, patient yet impulsive, and confident yet humble.” - Peter Robins

Baby Buys

$5.67 here. $11,02 there, another $3.23 after that. These expenses never seem like much, but you’d be wrong to say they don’t matter.

Pinching every dollar is no fun, and figuring out how to save another $50 per month probably isn’t going to change your life.

So while you get my point, not being aware of these small purchases could still cost you thousands. This is what we like to call the latte effect from last weeks post.

Most people fail because they believe these small items are “irrelevant.” I’ll tell you a little secret. These people are usually racking up hundreds in what I like to call baby buys.

Spending $20 or less won’t make a dent now, but if the habit isn’t managed, it will turn into a six figure difference.

Let’s break down the numbers.

Coffee Crunching

We are going to use coffee as an example to show how going overboard on small purchases can add up (and because everyone always rages about it on Twitter).

Everyone meet Billy Bob.

Here are his coffee habits:

Coffee price: $5

Coffee’s bought per week: 5

Bitcoin’s owned…never mind.

With the assumptions above Billy Bob will be spending approximately $100/month on coffee.

That adds up to $1,200/year. Not terrible.

But wait, what if that $100 was invested each month?

Investing that $100 each month for 30 years at an 8% return would give Billy $150,000.

In that time his contributions would total $36,000 meaning he earned $114,000.

So “technically” those daily coffee’s could be costing Billy Bob over 100k long term.

For fun, let’s run the numbers with a couple different cases.