Summary

The article discusses the significant impact of daily spending habits, specifically on coffee, and the power of investing those small amounts over time to achieve substantial financial growth.

Abstract

The article titled "The $76,500 Coffee" illustrates the concept of compounding in personal finance by highlighting the substantial cost of a daily$ 5 coffee habit over 20 years, which amounts to $76,500 when adjusted for 2.5% inflation. It contrasts this with the potential gains from investing the same daily amount in an index fund, which could yield$ 87,200 over 20 years and $482,800 over 40 years at an average market return of 7%. The author emphasizes the importance of consistent investing and suggests that small daily investments can significantly affect one's financial future. The article also includes a call to action to start investing with Acorns, offering a$ 5 bonus for new users, and discloses that it contains affiliate product links.

Opinions

The author believes that the cost of daily luxuries, like a coffee, can accumulate to a surprising amount over time due to the effect of inflation.
It is the author's opinion that while one should not sacrifice daily happiness for minor savings, understanding the impact of regular spending is crucial.
The author advocates for the financial benefits of investing small amounts consistently, showcasing the potential for substantial growth over time.
There is an opinion that investing in an index fund like VOO can be a wise financial decision, with historical evidence of a 7% average return.
The author encourages readers to take action now, rather than regretting not starting earlier, suggesting that the best time to invest is the present.
A view is expressed that investing can be done in small increments and still have a transformative effect on one's financial future, as evidenced by the author's personal journey with small investments.
The article promotes the use of the Acorns app as a practical tool for readers to begin their investment journey, indicating an endorsement of the platform.

The $76,500 Coffee

The insane power of saving (or spending) compounded over time

Imagine you spend $5 per day on a latte.

These days, if you’re going out for coffee every day, $5 may even be a deal.

$5 per day adds up to $35 per week.

That coffee is $150 per month and $1825 per year.

That’s the equivalent of 14 days of Disney tickets per year…

28 meals eating out…

Netflix, Hulu, Disney, and Amazon Prime subscriptions… for 3 families!

All of this is just for a coffee per day that you could have made at home for a fraction of the cost.

It gets crazier from there

Over 20 years, that $5 per day on coffee adds up to $36,500 without accounting for the cost of the coffee going up with inflation.

Throw 2.5% average inflation and you’ve spent $76,500 on that morning latte.

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Buy the coffee

I’m not some crazy penny-pinching finance guru who’s telling you not to buy the morning coffee if it makes you happy.

Life’s short, don’t waste your happiness pinching pennies.

The point that I’m trying to get across is just how far investing can get you when you’re diligent about investing consistently.

Turning $76,500 into $87,200

Let’s look at the same equation, but in addition to your $5 coffee, you’re also investing $5 per day in an index fund like VOO.

Instead of 2.5% inflation, we can calculate an average market return of 7%.

$5 per day invested each year:

$5 x $365 = $1825 x 1.07% = $1953

Over 20 years: $87,200

Just for the fun of it…

Over 40 years: $482,800

Do you think it’s worth putting away that extra $5 per day?

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Please note: This article is for informational purposes only and should not be considered financial advice. Always consult with a financial professional before making any major investment decisions.

“The best time to plant a tree was 20 years ago. The second-best time is now.” — Chinese Proverb

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