We have all heard about the pitfalls of buying Starbucks every day. If you turn around and save that five dollars or even invest it you would be in a much better position at the end of the year. But is that really the case?

Let’s look at it mathematically. A venti caramel macchiato costs $4.75 plus tax. If you add a tip you would probably be looking at approximately six dollars a drink. Now let’s say you put that money in each day to an Ally high yield savings account (HYSA) factoring in the current rate of interest at 1.1 percent you would have $1518, at the end of the year.

Simple math, a daily contribution of $6 taking into consideration that you would only be doing it on weekdays and using 21 working days each month on average you would be contributing $126 a month. Adding on the interest rates you would be making money for each investment.

Invest In Your Retirement

Now if you took that same amount of money and put it in an investment account and account for a seven percent annual rate of return (my current retirement investment account) you would have an additional $50 in interest applied to your account.

It might not seem like much but every penny makes a difference.

Now if you add in your daily lunch date at the local taco shop, for sake of simplicity with drink, tax, and tip you pay approximately $10 this same amount would be $2855 at 1.1 percent and 2948 at 7 percent. This accounts for an additional $110 in interest.

Calculate Where You Can Cut

When I looked at my budget I realized that I was spending way too much money on eating out. We may not have been spending $126 on Starbucks but we spent close to $80 and another $275 on restaurants each month. This, of course, is for a family of three.

We also spent another $200 on fast food which I was calculating in a different category for the sole reason of tracking something that I typically did not contribute to. I never eat fast food so this was my wife and daughter. We stopped going to fast food almost completely at the beginning of this year and have cut down on the cost for restaurants.

One of the biggest problems with cutting this down to next to nothing is that I am the only one in my house that cooks and sometimes I need a break on making dinner. We typically eat five or six meals at home for a week and I bring my lunch to work every day.

We do spend a bit more on groceries but have been able to keep that cost fairly low as I do all the shopping and look for bargains. I do not clip coupons as you tend to spend a lot of time with not much in the way of savings if you calculate the value of your time.

Budget During A Pandemic

So let’s recalculate that number based on three people and let’s do it a bit more realistically. The pandemic has given us the opportunity to actually measure the changes to our budget. With us working from home we are eating out less and no more trips to the coffee shop.

I started mapping out my trends each month and using that to build out a true budget. I had already built the preliminary budget but doing the analysis allowed me to determine spending patterns. In January we spent $117 on coffee shops. This category factors in everything purchased at a coffee shop. April this amount was $45. A savings of $72 over January.

In January we spent $215 on fast food and $480 at restaurants, close to $700 for us to eat out. This is embarrassing and it should be. By April the combined number was $395. We virtually eliminated all of our fast food budgets. We do try to support our local restaurants by taking out so we have not eliminated eating out completely.

The combined difference in just those three categories comes out to an additional $372 a month. While we are using this amount to pay down debt, let’s just use this number as an investment. If we add that additional $372 saved monthly to our retirement accounts we would have saved $4643 an additional $173 in interest in just one year.

Just by making simple choices this can make a big difference in your budget.

Save With No Commute

Adding in the savings by not driving each day and the fact that we did not spend any money on gasoline for the entire month of April this accounted for an additional $240. In fact, we spent $237 in January, and $163 in February but in all subsequent months we have averaged about $30 in gas.

My employer gives us a transit card each year if I cut down to driving two times a week by using the bus I could cut the gas cost down by a third. This would give me an additional $70 per month to add to savings.

When looking at the amount that I am spending in paying down my debt and adding in that additional savings I have determined that I could be putting an additional $3000 a month into funding my retirement. I could max out the amounts in both my 401k and 457 and put the additional amount into a Roth IRA.

I already contribute six percent to these accounts and with the pre-tax deduction for the 401k and 457, I would be able to add the rest to a Roth IRA.

Compounding Interest Adds Up

Doing the math on my retirement account, starting with my current contributions and amounts, I would make an additional $2600 in interest and grow just one of the accounts to nearly $48k. Adding in the second account I would be contributing another $750 of interest on top of the $19,500 in contributions and increase my retirement account to $67,852 just this year alone.

Factor in the three percent match that my employer adds and that number would go to $69,500.

If you had told me at the beginning of this year I would be looking at the possibility of maxing out my retirement accounts I would have laughed and said maybe in five years. Now hitting the $500k goal in seven years is actually closer to reality.