The $366,000 latté

We love our lattés. There’s no question about that. It’s what’s made Starbucks one of the most successful coffee shop chains in the world. But for that delicious creamy, foamy taste of coffee heaven, you’re paying…what? Most of us don’t even know and couldn’t tell if you were asked. It’s about four bucks. Two measly little toonies. Doesn’t sound like a lot, does it? Add a tasty little snack, a break biscotti maybe, and you’re up to nearly six bucks. Do it every day, and you’ve dropped $30 or so on that “little” treat every week.

If you’re a lunch buyer rather than a brown-bagger, you’re paying an average $10 a day. Eating lunch out three times a week adds up to $1,500 per year. Tack on the $30 a week for those lattés and you’re down another $1,560 a year. That’s about $255 a month, or about $3,060 per year altogether…at a minimum.

So here’s the plan. Give up the lattés for a year. Brown bag it more often. Save that $255 per month in a premium savings account – and don’t touch it for 19 months. After that, you’ll have saved up over $5,000. Yes, $5,000!

Then what? If you’re young (and Starbucks caters mostly to the young and restless), you’ve got a long investing horizon ahead of you. Lots of time to build up that nest-egg. So with the money you would have spent guzzling Starbucks lattés and grabbing fast food three times a week, you can open an investment account.

Okay, the million-dollar question: What kind of investment account? The simplest thing to use as an illustration is as top-performing equity mutual fund. And believe it or not, there are such things. Over a 20-year period, one top-performer in the Canadian equity category has delivered a compounded average annual return of 9.5%. So let’s assume you put your $5,000 into a fund like that and continue to contribute $255 per month. If you’re 25 or 30 years old, after 25 years, that money will have turned into $366,577!

You haven’t done anything except give up those pricey lattés and greasy lunches – and the fat and calories that go with them! And remember, most of us keep working through our careers. Our incomes increase. We get married. We contribute to employer pensions. Our wealth increases. But that $366,000 latté is your little bonus when you’re ready to retire. Over and above all the other pensions, real estate, and assets you accumulate in your lifetime.

Going for a latté or two every day? Think about it. Maybe treat yourself once or twice a week, and switch to a refreshing herbal tea the rest of the time. Then invest what you save. And if you already have over $100,000 in investable assets, for heaven’s sake, don’t let it sit idle! Drop me a line or give me a call, and let’s chat.

– Robyn

The $366,000 latté was last modified: August 24th, 2015 by robyn