Are You Drinking a Million Dollar Latte?

Ahh, the coffee break: It’s one of those little daily pleasures many of us can’t seem to do without.

Sure, we know we’re probably paying too much for our favorite fancy coffee drink, but it tastes so good and the ritual is so relaxing, many of us opt to overlook the price, altogether.

But here’s a figure you can’t overlook: Over the course of your working life, that innocent little coffee break could cost you about $1 million dollars.

Yep, you heard right – a million dollars.

If you’d just invested the money you spend on that caramel iced latte, you could be a millionaire.

So, how’d I come up with this startling figure, you ask?

First, let’s start with some simple assumptions:

Ouch!

Let’s assume you don’t buy plain coffee. At specialty coffee retailers (especially the ubiquitous chains that seem to be on every corner), a medium or large blended coffee drink runs about $4-$5.

We’ll further assume that since you’re either buying this drink at breakfast or as an afternoon pick-me-up, you’re also indulging in a baked good, yogurt, or similar treat.

At these same fancy coffee chains, a muffin or scone will run you about $3.

With taxes and a dollar tip for the barista, your total purchase price comes close to $10.

The stock market historically returns about 10% per year. Sure, we all know down markets exist, but over the long-term, this average return broadly holds true.

When you add it all up, you’re spending about $2600/year on your coffee habit (or $10 every work day).

Ouch!

Imagine what you could’ve done with an extra $2600 this year.

It gets worse.

But wait, it gets worse (or better, if you play your cards right): If you were twenty eight years old today and invested that money, instead, you could have about $1 million at age 65 for retirement.

That’s right — Even if you don’t invest any other money than  the ten bucks you would’ve spent on  fancy coffee, you’ll likely still retire a millionaire. Why aren’t we all doing this?

Heck, even if you just switched to buying plain coffee ($1 a pop) instead of specialty drinks, you’d save yourself about $4/day — or close to half a million dollars by retirement.

If you also dropped the muffin, you’d have an extra $700,000.

You don’t even have to do this every day to see significant change over time; just nixing the habit half the time makes a huge difference.

Don’t let impulse cost you your retirement.

And that’s the point: Over time, small amounts of money add up – and they do so even more quickly if you save and invest, thanks to compound interest.

Whether it’s expensive coffees, drug-store impulse buys  or any other unecessary purchase, little expenses snowball into huge missed financial opportunies over your lifetime.

It’s time to stop buying million dollar lattes and start paying yourself a million-dollar retirement, instead.

Who’s with me on this?

Janet Al-Saad is the founder of The Five Ten Twenty Club, a personal finance site full of tips, expert advice and savings to help readers transform their financial lives on just $5, $10 or $20 per day.