Rethinking the Latte Factor: Where Your Daily Habits Can Take You
As a self-proclaimed coffee lover, I’ve often wondered if cutting back on my daily cuppa would make a significant dent in my savings goals. To put this notion to the test, I tallied up my coffee expenses for 2015 and was surprised to find that I spent a total of $410 on coffee. That’s approximately $8 per week, or two coffee purchases. Not too shabby, but let’s explore what else I could have done with that money.
Six Alternative Paths to Financial Freedom
Instead of fueling my caffeine addiction, I could have:
Invested in the Future
I could have invested $410 in Netflix stock, which would have yielded a profit of $530.73 by the end of the year, a staggering 129% return on investment.
Taking a Risk on Social Media
Alternatively, I could have put my faith in Twitter stock, but unfortunately, that would have resulted in a loss of 36.71%.
Playing it Safe with High-Yield Savings
A more conservative approach would have been to stash the $410 in a high-yield savings account, earning a modest 0.10% interest rate and ending the year with $410.41.
Tracking the Market with Index Funds
By investing in a Vanguard S&P 500 tracking ETF, I would have seen a 1.32% return on investment, ending the year with $415.42.
Treating Myself to a Getaway
My coffee budget would have easily covered the cost of a round-trip flight to my best friend’s bachelorette party in New Orleans, with plenty left over for some fun on Bourbon Street.
Boosting My Retirement Fund
The most lucrative option would have been to contribute my $410 to my employer-sponsored 401k plan, which would have earned a 50% match from my employer, resulting in a total contribution of $615. By the end of the year, that amount would have grown to $606.06, a return of 31.88%.
The Value of Joy in Budgeting
While it’s essential to prioritize our financial goals, it’s also crucial to acknowledge the value of spending money on things that bring us joy. By incorporating my coffee expense into my budget and making room for it, I was able to achieve my financial objectives without sacrificing my daily habits.
In hindsight, I’m proud of how I managed my finances in 2015, balancing my coffee habit with contributions to my 401k, Roth IRA, and emergency fund. It’s a valuable lesson in responsible budgeting and the importance of acknowledging our “wants” alongside our “needs.”
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