I won’t lie. It’s going to take some time.
But yes, you can make over $100,000 by skipping the coffee shop on your way to work every day. Oh, and you can still make your coffee at home.
Here’s how to do it
Say your favorite coffee at your local drive-thru costs $3 (it might cost more). Also, let’s say it costs $1 for your favorite coffee drink at home (it might cost less). Keeping things simple, there’s an obvious $2 difference between making your coffee at home and grabbing your favorite drink at the drive-thru.
Now, let’s say that you decide to go cold turkey and always make your coffee at home starting today and every day over the next 40 years (because you’re awesome). I estimate that you’re going to be saving about $40 per month that you can put toward a diversified, traditional portfolio of stocks.
Assuming a 7% annual rate of return, you’re looking at over $100,000 in investments at the end of the 40 years. Boom — skipping drive-thru was worth it.
Now, here’s the thing. You probably won’t skip the drive-thru every day. You may not get a 7% return on your investments. Your coffee at home might be more expensive to make. Perhaps the price of coffee on-the-run dramatically falls (unlikely). Maybe you would prefer to put your money into a high-yield savings account, where your hard-earned dollars are safer. There are a number of variables in this equation. Historical performance – and even reasonable assumptions – do not have a direct connection with future performance. However, it’s the best thing we have.
Small changes can have a BIG impact
The point of this calculation is to show you how making a small change in your lifestyle dramatically raises your chances of obtaining a big pile of money in the future. It’s not completely sound science, but it’s a fun hypothetical example.
Benjamin Brandt, financial adviser and founder of RetirementStartsTodayRadio.com, gives another interesting example: “What could you do with the money saved from kicking your $5 daily coffee habit? How about opening your own coffee shop? According to Franchise.org, opening a Dunkin Donuts franchise takes an initial investment of $240,000. By simply investing your $5 per day in the S&P 500, based on historic rates of return, you could open your own shop in 24 years!”
Consider the following choice of options: Take a million dollars today or one penny doubled every day for 30 days. Which would you take? Ronn Yaish, wealth adviser and founder of FinancialHappyPlace.com, uses this exercise to demonstrate the impact of compounding returns. The answer is that after 30 days one penny doubled every day would be worth over $10 million dollars.
Yaish explains that “even individuals who understand this idea don’t necessarily have an easy time translating what that means for them and their spending.” It doesn’t take too long to find small things people spend their money on everyday like coffee, cigarettes, scratch-off cards, drinks, snacks, etc., that if saved can help that person accumulate wealth.
Read more: How to start investing from your smartphone
For example, if we find someone who spends $5 on a soda and snack every day, that $5 spending translates to $1,825 a year and over $54,000 over 30 years. If that person decided to take the $1,825 a year and place it in a suitable investment vehicle that perhaps earned 5% a year, that $5 a day can theoretically grow to over $125,000 over 30 years. Yaish says, “The next step is to help that client find all the hidden $5 in their daily living, and then assist him or her to commit to a simple change of habit. If the client finds the change is not too onerous, too limiting or frustrating, the plan will stick.”
As you can see, this really isn’t just about coffee. It’s about identifying all the little expenditures in life that eat up our opportunity to invest. Once the gravity of this problem is understood, something can be done about it.
The next question is, of course, “What can be done?”
There are several important actions that one can take to help reduce expenses. Really, it comes down to one-time expenses and recurring expenses. The recurring expenses are certainly the first place to focus.
Recurring, automatic expenses, once set, can go unnoticed for years and years before one day you wake up and realize that you’re spending too much money. Think about your cell phone bill for a moment. Does it keep going up and up? Perhaps it would be better to get a prepaid plan that’s predictable.
Next, be sure to think about your one-time expenses. These matter too. You might think of your trips to the coffee shop as “one-time” expenses, and in a sense, they are. It’s not as if you plan on going back day after day. Still, these expenses can happen again and again, leaving you with less money in your wallet and ultimately a weak retirement fund.
Read more: 7 easy ways to reduce your monthly expenses
Explore various ways to save money. It doesn’t hurt to consider your options, and some of them might not be as painful as forgoing your coffee before work.
The point here is that there are some small changes you can push yourself to make – even ones that aren’t as horrifying as skipping the java hut – that may result in major rewards down the road.
Will everything work out perfectly as you had planned? Probably not, and that’s okay. Just make a few small changes. Change one thing at a time. By saving a little money here and there and properly investing it, you’ll probably do profoundly better than you otherwise would have.
But whatever you do, don’t do this alone. Find a battle buddy. Whether that person is your spouse or a close friend, keep an accountability partner close by. This is the person who will watch to make sure you’re on the right track. Even these small changes aren’t so easy to maintain. If you want to win over the long haul, you’re going to need someone to remind you when you veer off course.
To summarize, here’s your homework: Pick something to sacrifice. It could be coffee, snacks, movies or something else. Invest, and watch the money pile up.
[Editor’s Note: Remember, if you’re looking for creative ways to save money, it’s good to start with a budget. Strictly adhering to a budget plan will allow you to eventually start saving money, pay down bills, consolidate debt and reach your financial goals. You can see how your spending habits are affecting your credit byviewing your two credit scores, updated each month, for free on Credit.com.]
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This article originally appeared on Credit.com.