It’s a bit of a cliché to say that all you have to do is cut your daily latte and idle gym memberships, invest in the stock market, and sit back 30 years to become a millionaire. Saving for retirementLike most things in life, it requires hard work and discipline. But there are two important nuggets of truth in this old stereotype. Usually, it is the simple changes in your habits that are most sustainable, and compound interest is an amazing tool.
In honor of National Coffee Day, let’s take a look at how home brewing can help you move closer to your million dollar savings goal.
How does buying coffee relate to your spending on pleasure?
The first question to ask yourself is how much joy does coffee bring into your life? Then you can think about what you enjoy with the coffee. Is it the energy from the caffeine? A certain flavor or experience? The act of being social with others? This will help you make a decision
- If you like the caffeine but don’t need a fancy cup of coffee to add joy to your day, consider brewing it at home or getting it out of your life
- If it’s medium, you may be able to find ways to balance the way you treat yourself and the frequency with which you take a latte. You could cut the habit down to twice a week – maybe reward yourself Mondays for starting the week and Fridays for graduation!
- If you enjoy coffee a lot, it may be better to go without other things. After all, a budget is about saving money on things that you don’t find important so that you still have money for the things that are important to you.
Has mint Worksheets to help you compare your expenses in different categories up to the level of pleasure you get from these expenses. This can help you decide whether your budget is focused on the things that you enjoy most overall.
How to turn your daily cup of coffee into a microinvestment
Could you turn your coffee habit into a savings habit? Auto-invest debit cards and micro-investing can help you get the best of both worlds. Microinvestment allows you to invest in very small increments by buying fractions of stocks. This form of investment helps maximize the potential for your money to grow. So instead of keeping your money in a bank account without it losing value over time, microinvesting can give your money a chance to rise with inflation and maintain or increase in value. Recently, microinvestment apps like Acorns are growing in popularity as they allow users to easily invest and save, starting with their change.
A feature of Acorns is the ability to round up your purchases to the nearest whole dollar and invest the difference. When you sign up for the Acorns Round-Ups® feature, your change is automatically invested in a diversified ETF portfolio. This can be a great way to invest a small amount on a regular basis and build good financial habits. Acorns also offers additional bonus investments when you shop with any of their branded partners, including Bulletproof Coffee, Peet’s, and Coffee Bean, So you can save and invest more. Sign up for acorns here to get a $ 10 bonus investment when you start.
How Much Could You Make From Investing Your Coffee Money?
What does the actual math look like, how do you top up your coffee money on the stock exchange until you retire? While there are many different variables, here are two examples.
Example 1: Do without your fancy latte
- $ 4 daily coffee – don’t replace it with anything (drink water instead)
- 20 coffees per month
- 8% average annual return on investment
After 40 years, your coffee money has turned into $ 248,694.26! Not quite enough to make you a millionaire, but you are well on your way.
Example 2: rounding up
- 30 debit card transactions per month
- Average of 50 cents roundup per transaction invested.
- 8% average annual return on investment
To 40 yearsby rounding up all of your transactions every month you have earned $ 46,630.17. Not bad for your change, which you probably didn’t even miss.
While none of these scenarios are likely to solve all of your retirement needs, they are not intended to do so. Instead, plans like these allow you to focus more on where your money is going and where you want it.
The bottom line
Coffee is something that many people drink on a daily basis, and there are many different ways (and costs) to drink your coffee. Even if you don’t drink coffee, you may have other similar habits in your life – tea, soda, a daily afternoon snack, or regular lunches. Neither of these things are necessarily bad – instead, you just want to make sure that your spending is in line with your overall life priorities. Using an app like Mint can help you check your spending regularly and make sure it is helping you achieve your goal.
Dan Miller (77 posts)
Dan Miller is a freelance writer and founder of PointsWithACrew.com, a website that helps families travel for free / cheaply. His home base is in Cincinnati, but he tries to travel the world as much as possible with his wife and 6 children.