The Million Dollar Coffee

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

$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.

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.

What if our boy Billy buys the same $5 coffee except he gets one 7 days a week.

That totals $140/month and $1,680/year.

Invested at the same 8% rate for 30 years would be worth $198,466.

Or maybe Billy like his large mocha frap with cream (Billy…never mind) and biscuit five days a week.

This runs him about $15 per order.

That total’s $300/month and $3,600/year.

Invested the same as the other cases his coffee account would be worth $425,284 after 30 years.

As seen by Billy Bob even a small coffee habit can be expensive over the long term. This is true for coffee, subscription services, smoothies, or just any small purchase that gets repeated often.

If you find yourself dropping hundreds on these “baby buys”, try a cheaper alternative, reduce the frequency, or actually track how much you spend.

While the coffee jokes are funny, there is some truth behind them.

Despite this, don’t forget to treat yourself every now and then.

Those Starbucks cold brew’s do hit different. ~ Cade

Cade's Finds

Is 8% To Aggressive? - Short clip from The Money Guy Podcast answering the question if an average return of 8% is too much to expect? I’m a big fan of their answer.

Personal Finances of a Multi-Millionaire - Super interesting podcast with Scott Galloway who gives his take on a number of personal finance topics. One of the craziest things I heard from the interview is that he is spending $200k-$400k a month.

What would be more viral. Real aliens? Or if Bitcoin hit $100k?

Apple must think we are made of money or something.

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Nothing in this email is intended to serve as financial advice. Do your own research. Thanks for reading, if you have any questions, comments, suggestions, etc. about the email don’t hesitate to send me a reply.