Buying a Coffee Every Day Won't Impact Your Investing. But This Massive Fee Will

Perhaps one of the most frustrating (and even bogus) pieces of financial advice you'll hear is that if you were to stop buying coffee at a shop every day, you'd bank enough money to retire in comfort.

Now, it's true that the more money you save and invest, whether in a brokerage account, IRA, or 401(k) plan, the more wealth you stand to grow. But rest assured that buying coffee every day will not automatically doom you to a cash-strapped retirement.

In fact, it's better that you forget about those coffee purchases, and similarly small purchases you make on a regular basis. Instead, it pays to think about the ways you might be losing many thousands of dollars in your lifetime.

How much money are you losing to fees and interest?

In a recent tweet, financial guru Ramit Sethi explained, "Life cannot be a series of random financial transactions. That's when people get stuck asking $3 questions instead of $30,000 questions."

He then went on to illustrate that some people try to save money by cutting out a $3 daily coffee that makes them happy. But those same people might be spending $50,000 or more on investment fees and thousands of dollars on the interest they're paying on their mortgages and other debts. And it's those sums that are more likely to make a difference over time.

Let's imagine you buy a $600,000 house and put down 20% at closing. If you sign a 30-year loan at 6% interest, you'll end up spending a whopping $556,000 on interest in the course of paying off your home. That's a huge sum of money that could make a major difference in your retirement.

On the other hand, spending $3 a day on coffee means forking over about $1,100 a year. That's not nothing. But over 30 years, that's about $33,000 in "wasted" money, if we even want to call it that. That pales in comparison to spending $556,000.

Plus, you may be losing money to all sorts of investment fees, especially if you tend to invest in actively managed mutual funds, which tend to be far more expensive than low-cost exchange traded funds (ETFs). Shifting your investment strategy could result in a lot more savings and wealth than cutting out your daily coffee.

Know where to focus your efforts

If you're in a place where you owe money on credit cards and have no savings to your name, then it's generally best to not buy coffee or spend on anything that isn't essential until your financial situation improves. But is your daily coffee habit impeding your goals if you're generally in a good place financially? Probably not.

So rather than feel bad about spending a small amount of money daily on something you enjoy, instead think about the big-picture ways you can avoid losing money. You're better off trying to refinance your mortgage strategically and assemble a low-fee portfolio than deny yourself a treat that helps you wake up each morning and feel more productive.