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Can You Really Get Rich By Saving On A Cup Of Coffee in 2022 - YouTube
Channel: Proactive Thinker
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Can a cup of coffee make you rich?
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That's what we will find out in this video!
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we talk a lot about money and investing in
this channel but here is a question that struck
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me recently.
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Can you really get rich by saving on a cup
of coffee?
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The answer is both yes and no.
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Let me explain.
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Those 4 bucks that you spend on a fancy cup
of hot drink do not seem to make a difference.
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At the end of the day, we work hard to earn
money so that we can afford a more luxuries
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life.
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What is the point of denying yourself that
pleasure if it's not going to make any difference
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at the end of the day?
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4 dollars a day is just 120 bucks a month
and 1440 a year.
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Which is a lot of money but still isn鈥檛
really a deal maker since you are getting
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instant daily pleasure.
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circles
Even if you look at it from a long term perspective
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like 30 years.
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it's just $43,200, which is not even enough
to get your house, maybe a downpayment.
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But by then, you will be an old man.
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And secondly, if you do not buy that morning
coffee, you will probably spend that money
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elsewhere.
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Let鈥檚 be honest,
Chances that you will put aside every morning
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4 dollars aren鈥檛 high.
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There are a ton of people who do not buy a
coffee every morning and yet they are in no
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better financial position than you!
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However, there is a different side to that
story!
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Let's try to look at everything from a completely
opposite angle where that cup of coffee could
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be a deal maker between you becoming a millionaire
or not!
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What is the opportunity cost of that daily
coffee?
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What if you do not just save that 120 bucks
but invest it every single month over the
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course of 30 years.
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If you take the historical average rate of
return adjusted to inflation, that would be
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141,127 dollars which is a decent amount of
money, it's way more than $43,200, but it
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still isn鈥檛 going to make you rich, especially
after 30 years.
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circles growing
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However, when you start looking at it from
that perspective, you start counting the opportunity
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cost of everything else.
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The avocado toast that you buy together with
your coffee, your iPhone that you update every
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September, every time you eat outside instead
of home, all the clothes that you buy but
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don鈥檛 wear, all the money that you spend
on alcohol and the list goes on and on.
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And if you take the total sum, it starts making
a difference,
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you realize that your chances to become a
millionaire are very high if you chose to
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live frugally.
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But, you may say, what is the point of sacrificing
my entire life so that when I am 70, I can
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sit on a pile of cash.
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And you are absolutely right, It does not
worth it.
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That is really dumb.
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So does that mean buying a coffee every morning
is the right thing?
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Not really.
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You see, the point is to reach to a position
where your investments are much higher than
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your expenses and you will keep getting richer
every year regardless if you buy that coffee
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or not because your investments are growing
faster.
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A 7 percent annual return on a million-dollar
in sp500 on average adjusted to inflation
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is 70K which is higher than median US household
income.
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And if you take a look at any self-made millionaire
or a billionaire, for some period of their
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lives they lived extremely frugally.
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Take Elon Musk who kept his food budget to
a dollar a day so that he could invest most
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of his time into his startup and not work
9 to 5.
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of course a dollar back then use to worth
much more, but it still under 50 bucks a month
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by today's standards.
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This is the worlds richest man's office back
when his company already use to worth hundreds
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of millions of dollars, even the reporter
was shocked seeing him drive
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a honda.
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Most Americans can鈥檛 pull out even a thousand
dollars in case of an emergency, in fact,
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most Americans save almost nothing, primarily
because their expenses are too high.
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And these expenses aren鈥檛 usually the basic
needs that you can鈥檛 live without but wants.
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So you either live frugally and save every
damn penny you can by working in 2 jobs or
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cut your expenses so that you will have to
earn as less as possible and will have the
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time to work on your startup.
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And that's when skipping that cup of coffee
can make you rich!
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