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Will cutting your daily coffee really make you a millionaire?

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It might make you less nervous, but will it really have a big impact on your finances?


Key points

  • The money you spend on store-bought coffee could be invested instead.
  • While you can save a lot of money by skipping coffee or making your own, it might not be your ticket to reaching your financial goals.

Coffee. It’s what many of us look forward to in the morning (or, uh, throughout the day). And it’s something that tends to get a bad rap as a big budget-buster. That’s because many of us are used to buying store-bought coffee rather than making it ourselves for what might be pennies.

In fact, you’ll often hear that if you cut out store-bought coffee, you’d become a millionaire. But is this really the case?

Your coffee doesn’t kill your dreams

Let’s be clear: if you’re in deep debt and have credit card balances that you’re months or years away from paying off, you probably shouldn’t indulge in store-bought coffee until your financial situation has improved. is improving. But if you’re doing reasonably well financially – you have a good amount of money in your savings account and you’re making progress on your retirement savings – then you don’t necessarily need to rush to deprive yourself of this treat.

In fact, contrary to what you may have heard, skipping your store-bought coffee probably won’t make you a millionaire. Say you buy coffee three days a week at $3 per person, for a total of $468 per year. Even if you were to invest that money at an average annual return of 10% (which is the stock market average), in 40 years you would have about $207,000.

That’s clearly a lot of money. But it’s not $1 million.

Now, let’s say you buy a $3 coffee seven days a week, for a total of $1,092 a year. Even then, you will have $483,000 in 40 years if your investments offer an average annual return of 10%. Again, lots of money, but not $1 million.

And also, these large numbers should be taken with a grain of salt. A lot has to go right for your portfolio to deliver an average return of 10% over time, and that return is by no means guaranteed. So the wealth-building ability that popping your store-bought coffee gives you may actually be more limited than you think.

A better way to build wealth

Saving and investing requires a certain amount of sacrifice. After all, you don’t have to spend every dollar you earn if you want the ability to put money aside in a brokerage account or an IRA.

But if coffee is one of those things that brings constant pleasure to your life, you shouldn’t give it up. Instead, consider limiting your spending in other areas. Maybe you’re not buying the fanciest car and saving $300 a month that way. If you invest $300 per month over 40 years with an average annual return of 10%, you’ll end up with almost $1.6 million, without having to deprive yourself of your daily caffeine.

In the end, you may decide it’s time to stop indulging in store-bought coffee when you can make your own at a much lower price. But don’t unplug those cafes because you’re convinced you’ll never achieve your financial goals any other way.

There are other paths you can take to become a millionaire. And on the other hand, skipping your store-bought coffees for the rest of your life could help you build a lot of wealth, but even that probably won’t be enough to help you achieve millionaire status.

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