No, Automatic Millionaire v. Blue Bottle Coffee is not a real court case!
Nor do I have anything against the coffee from Blue Bottle. The opposite is true. I freaking love it. The Three Africa’s blend, daaayummm! I’m a sucker for that light roast hipster trend, I’ll admit it. But a drip cup of coffee will cost you over $5. I don’t go to Blue Bottle every day, but during the work week I do like to step out of the office and enjoy myself a mid-morning cup of Joe from a local shop. And with a tip, I always spend around $5. Let’s discuss surviving expensive cities.
I did a quick calculation. I spend $25/week on coffee, and around $50/week going out to lunch. If I brewed my own coffee at work (free), and brought my lunch ($5/day) I would save around $50/week. But let’s say you don’t like the coffee at work… you can buy a bag of Blue Bottle beans, or your favorite roast, for around $15/week. That’s $35/week of savings, or $5/day for a full week. Totally doable. This savings discipline could make you a millionaire by retirement, automatically! Read about this logic below.
Save $5 per day
Yes, I’m making the assumption that you are already saving for retirement by contributing to your 401K, at least up to your company’s match percentage. For the purpose of this exercise, I’m going to assume that you are saving at least $400/month with your company match (modest savings rate). A basic compound interest calculator will show you that with a 6% expected annual compounding interest you will have $743,000 saved in 40 years. Surviving expensive cities, $5 a day!
So what happens when you save an additional $5/day?
$5/day = $150/month. If invested (I recommend opening a Roth IRA, or personal investment account with Wealthfront), you can add over $278,620 by retirement.
Just saving an additional $5/day (a cup of coffee) and doing what you are already doing with your 401K, your total savings by retirement could be $1,021,480. A millionaire, automatically! In future posts, we will explore ways to save more than this. Because you are going to need it.
Back in college, my mom gave me the book “The Automatic Millionaire” by David Bach, which explores simple ways to plan for your future. I remember bringing this book along with me on a backpacking trip in central California. I was 19 years old and, prior to this point, had no financial independence foresight or thought about surviving expensive cities. Reading a few chapters if strongly recommend. If you want to live in The City, you are going to have to start getting serious about finances.
Next month, we will also explore the following important financial decisions you can make with a $5/day savings:
- Pay down credit card debt
- Increase your student loan payments by $150/month
- Build up your cash, rainy day fund
- Increase your employer match
Did you know:
Coffee gossip: In 2017, Nestle acquired a major stake in Blue Bottle Coffee at a valuation of over $700 Million!