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Stop Buying Lattes and Save Big

I happened to catch a news segment about how Starbucks is being affected by the recession and it got me thinking. First, I love Starbucks and if I could have a dream office, I’d place a desk in the middle of my Starbucks and work happily. Second, I admire their business model and branding. Therefore, I found it surprising that even Starbucks’ sales were down.

Ever since we got a Starbucks next door to my office, I’ve gone through periods of going way too often. As someone who is conscious of making smart financial decisions, my Starbucks addiction doesn’t really match up. We’ve all heard Oprah, Jean Chatzky, and Suze Orman tell us how much we could save if we cut lattes out of our daily routine. Apparently, people are starting to listen.

Since I like numbers and facts, I wanted to do some math to find out how much Starbucks can really hit your wallet. Here is what I discovered:

  • There is an 11.5 percent tax on food and beverages in Chicago. Um, where have I been? I had never looked at my Starbucks receipt before today (oops). Why the need for an 11.5 percent tax Chicago? Have we been financing Blagojevich’s corrupt schemes or maybe paying for his newest wig. (Sorry, had to say it).
  • If you buy a grande latte every workday, you will spend $74.80 per month. ($3.74, 20 business days per month.)
  • You could do the following with $75: pay your monthly car insurance bill, buy new shoes, go out to dinner and drinks with your girlfriends twice, or save for a rainy day.
  • Your daily “addiction” will cost you $897.60 over the course of one year.
Now what if you decided to give up your daily Starbucks visits and direct deposit that $75 per month into a retirement account? Despite the current economic condition, the average expected return for retirement accounts is still 10 percent. If you put that $75 per month into your 401(k) plan, your contribution will grow to $5,931.18 after 5 years.

I assume you are not retiring in your thirties. Therefore, check out how much your $75 monthly contribution can grow over the years:

  • After 10 years the value of your investment will be $15,566.40
  • 20 years: $57,502.27
  • 30 years: $171,024.40
  • 40 years: $478,333.52

Wow, now I’m impressed. Who knew that your cup of joe was so expensive in the long run! I hope this inspires you to take a look at your 401(k) contributions today and make sure you are putting at least this much away for your future. For other scenarios, check out this easy to use calculator.

Even if you think that you can’t possibly afford to save right now, try to cut something small out of your day and remember that it will lead you to big things in the future.

By Nicole Crimaldi

This article is reprinted from WomenCo.