The Real Cost of a Cup of Coffee and a Car

"We all want progress, but if you're on the wrong road, progress means doing an about-turn and walking back to the right road; in that case, the man who turns back soonest is the most progressive."

  - C. S. Lewis 

I want to give you a fresh perspective about the real cost of drinking specialty coffee and driving new cars. In this exercise, let's assume that the money you save is invested.

Many of us go to coffee shops every day and buy a cup of specialty coffee, latte, or one of those iced coffee drinks. The cost varies, but let's assume that we spend $5 each visit on the drink, and occasional brownie, and a tip for the barrista. Five visits a week at $5 a visit is $25 a week or about $1200 annually. If you're 25 years old, and you save that money and put it into a mutual fund that grows 10% a year, when you're 65 you'll have $531,111. (Connie didn't believe me when I gave her the total, so she got her pencil and did the math herself. Now she's convinced!)

Now, let's assume that you start leasing a BMW convertible when you're 25 and you pay $400 a month for the lease. That's $4800 each year. Now let's assume that you learn to value your future more than your fine ride today, so you decide to spend $200 a month on a small Toyota or Honda and invest the rest. When you're 65, that $200 a month at 10% interest will have become a whopping $1,062,222!