A No-Budet Approach to Financial Freedom

Who would pay $500 or more for a cup of coffee?

No one, not even a billionaire, would.   So why are you?

Well, if you’re my age, you’re not. But if you’re 20-something, you’re spending about $500 retirement dollars every time you buy a $4.50 Venti Caffe Mocha at Starbucks.

“What’s a retirement dollar,” you’re probably wondering.

Let’s say you take the $4.50 you spent at Starbucks this morning and invested it in a mutual fund.  Thanks to the magic of compounding interest, your $4.50 investment could be worth about $500 when you retire in 45 years.

Now let’s say you invest your coffee money everyday for just one year. In 45 years, your coffee fund would be worth approximately $181,000. Now that would buy a lot of coffee, but more importantly, it could help provide financial security through your retirement years.

But retirement is a long way off. You may not have a full-time job yet. Isn’t too early to think about retirement savings? And do you really want to give up your daily cup of coffee when you’re 20 to secure a comfortable retirement when you’re 65?

Ironically, the best time to save for retirement is in your twenties because due to the power of compound interest, which is interest paid on interest, the first coffee dollars you convert to retirement dollars are the most valuable.

  • The dollar you invest when you’re 20-years old will be worth $50
  • The dollar you invest when you’re 30 will be worth $20
  • The dollar you invest when you’re 40 will be worth $8
  • The dollar you invest when you’re 50 will be worth $3.50
  • The dollar you invest when you’re 60 will be worth $1.50

If you deposit $100 a month in an investment account – which is less than the cost of a daily Starbucks caffeine fix – you could achieve a passive retirement income of $5,000/month with no budgeting or other planning.

This also means the more you save when you’re young, the less you’ll have to save when you’re older. So don’t delay. If you start today, you can achieve your retirement goals without any sweat.