Unleashing the Wealth-Building Potential from a $5 Cup of Coffee
I would love to start investing but I just don’t have the money. I hear this a lot and it’s a shame people use it as an excuse, if they only took a little time to see the big picture I’m sure they could find the extra money. It doesn’t take much and you don’t need an MBA in finance to be a successful investor. The stock market can be confusing and scary at times, when you are starting out a simple S&P ETF like VOO is all you need. It’s a basket for stocks to mimic the S&P 500 and offers instant diversification.
Everyone has habits, some good and some not so good. It’s just human nature to get into a routine from going to the gym, picking up a fresh cup of coffee or even that pack of smokes you churn thru on a daily basis. Think about what you do everyday and what it costs you in terms of money. Is there something you can cut back on or even eliminate that saves you $5 a day? That cup of coffee you pick up in the drive-thru can be costing you hundreds of thousands of dollars. I’m especially pointing a finger at the population that says they just don’t have any money left over to invest. FIVE dollars a day is all you need, obviously the more you can invest the larger your nest egg will grow, but $5 a day will pave the way.
If I told you that $5 a day can grow to $170,000 or even $700,000 you might call me crazy but all you need is time and money. If you start a routine of putting aside $5 a day which is $150 a month and continue to do this for the next 30 years. That $150 a month compounding at 7% annually can turn into $170K. It doesn’t seem like much but remember it’s a measly 5 bucks, you probably pump that into the vending machine at work every day. You can purchase that same snack or drink in bulk for much less.
Now let’s say we don’t touch this account and let it continue to compound. You have the routine ingrained in your mind and continue to plunk down 5 bucks a day for another 20 years. It’s now been 50 years since you began the investing habit and that $5 per day has added up to $90,000 out of your pocket. That’s nothing to sneeze at, but check out what the overall account has grown into – $731,000. How can this be? It took 30 years to accumulate $170K and 20 years later that has 4X. The magic of compounding and time, as the years go by the compounding is exponential. That same 7% that in year one garnered $126 on your $1,850 invested is now increasing your account value by $51,000 by year 50 and will only continue to go up if left alone.
This example I’m using a small amount of money that represents a daily expense that can be cut or replaced to allow the average person to invest for their future. The numbers can be even higher if you can pour more money into the investment(s). Double it to $300/month and you are looking at $340K @ 30 years or $1.4M @ 50 years. Get it up near the IRA limit and do $500/month and in 30 years you are at $566K or $2.4M @ 50 years. If you would like to play with the numbers and see for yourself, I used the calculator at investor.gov.
Remember that wealth creation doesn’t always require large sums of money. It’s the power of consistent action and long-term vision that can turn small contributions into a substantial fortune. So, whether it’s $5, $10, or more, investing regularly can pave the way to financial freedom and a brighter future.