The $50,000 Starbucks Latte Habit

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Do you ever think that, since it’s “only” $4 for a Starbucks latte, you’re not really throwing your money away?  I mean, $4 for a cup of coffee is nothing compared to your brand new $30,000 car.  Or $50,000 in student loan debt.  Or your $250,000 mortgage.  Right?  What’s another $4?

In the example I am about to share, a $4 Starbucks latte habit over the next decade costs your future self over $50,000.

Before you get your calculator and tell me I am wrong, follow along and I will show you.  This example involves behavior modification, investing savings with a service like Betterment, and one very important factor — compound interest.  In my quest to help others fix their financial mistakes earlier in life than I did, I think it is essential to show what compound interest can do when you take advantage of it early in life.

“Modifying” the Latte Habit

“When you know the impact of little expenses, you will realise that there is nothing little in this world.” ~Manoj Arora, From the Rat Race to Financial Freedom

Let’s start with some background to set up the math.

I don’t know anyone that goes to Starbucks every single day.  Certainly not for 10 straight years.  If there is such an individual, I doubt this person (who is clearly addicted to coffee and probably cannot function without it) would be able to completely quit their latte habit.  So my example is going to assume a slightly more realistic scenario.

Let’s assume our subject — we will call her Mrs. Lacking Cents for fun (though this is completely hypothetical) — averages five trips to Starbucks per week, spending $4 on average for her fancy latte.  The total cost of her lattes is $20 per week or $86.67 per month for the once-per-weekday Starbucks latte.

This is $1,040 per year.  A pretty expensive habit if you ask me.  And this is just for one person.

Mrs. LC understands this is crazy.  But she loves her lattes.  She has a difficult job and they are one of the things she looks forward to each morning. What if Mrs. LC cuts back to three days a week and goes caffeine-less the other two weekdays?  The cost comes down to $12 per week or about $52 per month.  The annual cost savings in this scenario is $416, or $4,160 over the next decade.

Seems a little more reasonable and the extra savings is large, but Mrs. LC is still spending $624 per year visiting her local coffee shop three times a week.

What if there was a way to reduce this massive expense even more and also NOT change her latte habit at all?  She can save about $884 per year and continue to have a latte five days per week.

(The answer is yes, she’s in.  Still hypothetically, of course.)

So Mrs. LC and her husband invest in an espresso maker.  This one to be exact, which cost about $80 on Amazon.  They quickly learned how to use it and find it takes mere minutes to make their own cups of delicious, hot lattes.

If it’s not obvious by the name, this couple is loosely based on my family’s own real-life situation.  My wife, and to a lesser extent I, enjoyed the occasional frequent stop at our local coffee shops.  It took far too long for us to change our behavior and just make the coffee at home!  Now that we have, it is actually much more convenient, tastes just as good, and is SO MUCH CHEAPER.

The Math

How much cheaper is it?  Here’s the breakdown.

Homemade Latte:

  • 10 oz Milk: Ten ounces of milk is 7.8% of the 128 oz gallon of milk.  Assuming milk at $3 per gallon, the cost per latte is about $0.24. (We buy our milk at Aldi for about $2/gallon…even more savings!)
  • Ground espresso: A bag of comparable Starbucks ground coffee runs about $10.  We get about 30 double shots of espresso out of a bag, which makes each coffee about $0.33 worth of espresso.
  • Electricity: $0.03.  800 watts of power for 20 minutes costs about $0.0264 per day.
  • Total cost: $0.60.  This is the total cost to make a homemade latte with premium espresso beans.

Let’s assume the same 5 lattes per week, which runs $20/week or $1,040 per year at Starbucks.

At $0.60 for a homemade latte, it costs a mere $3/week or $156 per year to make it at home.  This is a savings of $884 per year or 85% less than going out for a latte.  Put another way, for every Starbucks latte you consume, you can have six homemade lattes and still have change left over from your $4.

Now let’s take this a little further since my wife and I have been together for ten years and only recently modified the latte habit.

Saving $884 per year over a decade means an extra $8,840 in your pocket, minus $80 for the espresso maker.  But unless you are socking away all that extra savings under your mattress or a 0% interest checking account, this “new” money has the potential to be much more than $8,760.

With monthly expenses suddenly $73.67 lower, what would happen if we invested this amount each month over the next decade?

Investing is for everyone, a point I didn’t really understand when I was younger.  In fact, investing is even more crucial when you are young because you have time to maximize compound interest.

$73.67 monthly investments for 10 years means you contribute $8,840 to the investment account.  I knocked off $80 in the first month to account for the cost of the new espresso machine.  At the ten year mark, your $8,760 investment is actually worth $12,591 if your investments grow at 7%!  Instead of saving $3.40 per latte, you have actually saved yourself $4.84 because you allowed that savings to grow in the form of investments.

But let’s take this one step further.  To really let the power of compound interest kick in, what if we stopped contributing to the investment account at the ten-year mark, but we left the money alone to grow for another 20 years?

At 7% average growth, your investment account would be worth $50,851 by year 30!  Those 2,600 Starbucks lattes you gave up in favor of homemade lattes for ten years ended up saving you almost $20 per latte because you invested the extra $3.40 instead of spending it.

These numbers are only for one person with an every weekday latte habit.  If my wife and I were collectively consuming ten Starbucks lattes per week for a decade, we would be giving up over $100,000 of future earnings.  All for the minor convenience of someone else making our coffee in the morning.


So what?  I’m not dumb enough to buy five Starbucks lattes every week for ten years!  ~Someone reading this article, probably

Good.  You are already making good decisions about your coffee consumption — whether it is buying less, making it at home, or not drinking it at all.  Also, I am impressed you made it this far in the article!

The point is — a mere $3.40 savings each weekday or $17 per week for ten years is worth over $50,000 in 30 years with 7% returns.  If you don’t have a costly latte habit, maybe you have another expensive habit that is eating away at your future net worth. $17 isn’t a ton of money, but $50,000 is.  Investing, patience, and slightly less spending are all it take to make the big bucks a reality.

Some of the richest people are the ones driving modest cars, wearing the same clothes year after year, and eating their meals at home.  Not because they don’t desire fancy things, but because they understand that seemingly small expenses have a very large impact on their future net worth.

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  1. WOW! Great graphics! Obviously great information you’ve got here as well…mind blowing!

    I opt out of indulging in lattes (although, VERY tempting because they are SO good!). Instead, I buy ground coffee at $8 a tub and it lasts for a whole month…for two people!

    One day we will choose to enjoy a latte from time to time, lol.

    • Matt @ Lacking Cents May 9, 2017 at 10:09 am - Reply

      Thanks Danielle! You’ve obviously got this coffee thing down much better than we did!

  2. Kinga May 10, 2017 at 12:11 pm - Reply

    That kind of articles illustrate very nicely and easy to understand how a great deal of money people can waste without thinking. I wrote about this in my article “How much is your coffee habit?” on my blog, expressing very similar point of view. I am very pleased this is not only my opinion 🙂 You have wrote a great article

    • Matt @ Lacking Cents May 10, 2017 at 12:15 pm - Reply

      Kind of crazy when you put some numbers to it, isn’t it? Definitely not just your opinion. Thanks for reading!

  3. MyStrategicDollar June 17, 2017 at 3:35 pm - Reply

    Great information! I definitely opt out of the fancy expensive latte’s, but LOVE my coffee. If I get coffee it’s usually $2 or less for a cup with free refills! Not as bad.

    Nonetheless, you articulated very well the impact of changing some of the small things in life and making that money work for you!

    • Matt @ Lacking Cents June 18, 2017 at 9:28 am - Reply

      Thanks! Coffee is just one example of the small things that add up. Compound interest is too big to miss out on!

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