Below is the first article from our newest contributor, Kevin Kelly. From time to time, Kevin will be offering ”common-sense”, approachable advice for budgeting and investing.  He knows that the bright, successful women who read PLRG could easily put themselves on the road to financial independence by following some simple, time-tested financial guidelines. Kevin says, “It’s not about living like a miser and shivering in the dark and the cold- it’s about taking control of your finances and getting on top of your game.”

I like Starbucks. Most people do. For many people living and working in cities like Chicago, the daily stop into Starbucks is part of their morning ritual. Granted, your grandparents never paid $4.50 for a cup of coffee, but it’s really just a minor expense, after all.

Or is it? These small, seemingly trivial daily expenses can add up over the course of year and end up putting a major dent in your personal financial situation.

Let’s take a look at the daily coffee stop. Say you spend $4.50 each morning on coffee, when you could make it at home for pennies, or (even better) get it at work for free. $4.50 per day adds up to $22.50 per week. Still, not looking to damaging at this point.

So, you spend $22.50 per week on your morning coffee, 50 weeks out of the year. If you do the math, that adds up to $1125.00 per year. $1125.00 is a decent amount of money. Ask yourself this - if you sat down at the beginning of the year and made an annual budget, would you think of budgeting $1125.00 per year on morning coffee?

Think of what you could do with the $1125.00 instead. You could take a nice vacation for that much. How many pairs of shoes could you buy for $1125.00? You could even fly your grandparents into town to show them what a $4.50 cup of coffee tastes like.

But before you head down to Michigan Avenue with your new windfall, let’s take this a step further. What if, rather than spending that cash on new sunglasses and mango martinis, you were to save and invest the money instead? Granted, socking away $1000 in a tax-deferred investment account might not be as fun as a long weekend in Vegas, but let’s do the math.

Say you brew your coffee at home four days out of the week, saving yourself $18.00 per week (I’ll grant you one day a week of Starbucks as a necessary indulgence). That will save you $900 per year. You take your $900 and put it in an investment account.

Let’s say you start this at age 25 and keep it up until you retire at age 60 (I know, you’re going to start your own boutique ad agency and retire at 35, but humor me). If you made it a regular habit to brew your own coffee in the morning and skipped the Starbucks, and invested the $900 in savings each year into an investment account earning 7% interest, how much money would you end up with at age 60?

The answer- $134,022.12. That’s right, read the number again. $134,022.12. This is the power of compound interest. As you can see, that daily coffee is costing you a whole latte money.

The only thing sadder than that joke is the amount of money you’re missing out on. We’re going to get into making compound interest work for you in upcoming articles, so keep it bookmarked at PoorLittleRichGirls.com.

(Kevin Kelly)