Have you ever noticed how many personal finance websites or blog posts give you “tips” like cutting back on coffee?
Yeah, you can save a ton over the course of your life doing that, but do you really want to live without ever going to Starbucks, seeing a new movie, going out to dinner or checking out a concert?
You can still learn something from the advice, though.
Let’s Run the Numbers
Let’s say you spend $3 per day, six days a week on a cup of coffee. That’s $18 per week. Over the course of 52 weeks, that’s $936.
Hmm, that IS a bunch of money X 40 years ($37,440!).
But that’s not the total amount.
Let’s say you have lots of credit card debt, and you charge your coffee purchases, letting that $936 sit on the card for one year before you pay it off. At just 15% annual interest, that’s another $140, or a total annual spend of $1,076 a year, or about $43,000 you could have invested (earning 7% per year for 40 years).
But wait…there’s more!
What if you took that $936 and put it into your 401(k) and your employer gave you $468 more. Now those cups of coffee cost you $1,404 X 40 years X 7%.
Or, you could take that $936 you saved (and did NOT pay interest on) and pay down a credit card at 15%, saving you that $140 in interest. So, your total savings (if you would have charged the coffee and carried it on the card) is now $1,216 X 40 = $48,640 X 7% each year.
How About Reducing, Not Eliminating Spending?
Do you really want to give up coffee the rest of your life? Even if you switch from Starbucks to making it at home, you’ll still be spending money.
What if can find 10 items you can reduce each month, instead of cutting out completely.
Let’s say you skip one $3 cup of coffee per week. You skip one movie night per month ($40 per couple). You skip one or two Nextflix rentals per month. You brown bag lunch at work once a week, saving $12 per week. Cut back one dinner out per week (even McDonald’s) and cook a big, cheap meal instead.
That can add up to $100-$200 per month, and you’re really not cutting back your lifestyle.
This website has LOADS of tips for cutting back expenses without cutting back all of your creature comforts (which is why many people bail on F.I.R.E. after a couple of months).
Check out our Articles Library for more frugal living tips.
What’s the Bottom Line?
You don’t have to give up coffee to retire with a nice nest egg or to retire early. You just need to give up some coffee, some movies, some dinners out, etc.
One way to make this easier is to track last year’s spending to see how much accidental spending you do. You’ll be shocked and really bummed, making it much easier to start cutting back on spending for things you really don’t want or need anyway!