Could a Cup of Coffee Cost You $1 Million Dollars?

Why is it so hard for Americans to be financially independent? Statistically, less than 3% of Americans ever achieve financial independence, much less financial abundance. For decades, Financial advisors at my firm and I have worked with individuals and families to achieve their financial goals. Over the years, we have noticed certain trends for success. Many Americans seem to consistently run out of money before the end of the month. In other words, they end up mainly living day-to-day. A 2021 Bankrate.com survey indicated that 25% of Americans had no emergency reserves, 50% had less than three months, and 25% had at least six months savings for emergencies.

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There is a saying, “Small leaks sink ships.” When someone tells me they cannot save, I inevitably find a few ‘large holes’ in their financial ship after reviewing their finances. But, more importantly, I find a multitude of ‘pinholes’ that allow water to constantly seep in and cause their ship to sink at an alarming rate.

Here’s a great example: I asked one of my associates, “Do you ever buy a Starbucks coffee?” Her response was, “Yes, almost daily.” She further indicated a large coffee from Starbucks set her back five bucks or more. This got me thinking, “What is the potential cost of a cup of coffee (every day) over a savings career?” The answer may shock you. If you buy one $5 latte each day, that coffee habit will set you back $150 per month. If you do this for 40 years (with no inflation), you will spend $72,000 on coffee. Instead, if you invested $5 per day and earned 9% (average long-term return of the stock market), you would have $956,000 in your account. That is enough to generate a retirement income of more than $4,000 per month! And this is just one cup of coffee! Think of the many small ‘leaks’ that you could plug and invest. The message? Pay attention to small expenses. This is what financially stable people do to create stability and abundance in their lives.

On a personal note, I decided very early in my work career that I wanted to become financially independent at an early age and began investing 20% of my paycheck. To help ‘find’ the money, I allocated myself $50 cash per week for all personal spending, including gas, dating, eating out, haircuts, etc. When the money ran out, I quit spending. I even learned to cut my hair! I can remember telling one of my dates we were cooking out steaks with friends one night. When we got to my apartment, she noticed hotdogs on the grill and said, “I thought we were grilling steaks?” I responded, “We are…tube steaks!” It was the end of the week, and my $50 was gone. God has a way of looking out for me and she married me anyway! Yes, this was forty years ago, but the principle still applies today.

If you are determined to achieve financial independence, it can be done, but you must pay close attention to all of your money! Reach out to a financial advisor on how you can better seek out these ‘leaks’ in your spending and how to better balance your budget to allow savings to accrue.