Lifetime Cost of a Habit

"Invested instead" assumes the same money goes into a broad index fund at the return above, compounding monthly. Past returns do not promise future ones — the point is the order of magnitude, not the exact number.

Most of that big number is the return, not the habit

Take $100 a month at 7% and the forty-year figure is $262,481. Only $48,000 of that is money you didn't spend. The other $214,481 — 82% of the total — is the return you assumed when you filled in the box above. That doesn't make the comparison wrong. Compounding is real, and quitting a daily habit really does leave you better off. It means the headline is part observation and part forecast, and the forecast is the bigger part.

The share climbs at every step. At one year the return is a rounding error on the money; it passes half the total at 20 years and keeps going. So a five-year version of this calculation is mostly a fact about your spending, and a forty-year one is mostly a fact about markets. They are different kinds of claim wearing the same clothes.

The same habit, 6 different answers

Here is $100 a month for forty years at every return you might reasonably type in. Same habit, same forty years — the only thing that changes is one number.

At zero the answer is exactly the $48,000 you didn't spend — the habit and nothing else. At eleven per cent it is $860,013, 17.9× larger. A result that swings that far on a single input is, mostly, a result about that input. The default here is 7%, which is inside the range long-run stock returns get quoted at — a defensible guess rather than a measurement, and one whose meaning is itself ambiguous in a way worth another 2.7×. That is the panel below.

Inflation takes two thirds of it, and the usual correction says otherwise

The $262,481 is in the money of forty years from now. At 2.5% a year, prices over that span multiply by 2.69 — so it buys what $97,756 buys today, which is 63% less. The shortcut everyone reaches for is to knock inflation off the return instead: run the same sum at 4.5% rather than 7% and it prints $134,115. That is 37% higher, and the gap isn't rounding.

A real return prices a contribution that holds its purchasing power — so the shortcut has quietly indexed your habit to inflation. We can check that by simulating it: keep the 7% nominal return, but let the monthly amount rise with prices.

The indexed column comes out at $134,487 — the shortcut's $134,115 to within a third of a per cent. So the shortcut isn't wrong so much as answering a different question: one where you are paying $268.51 a month by the end and $81,806 in total. That is arguably the better model of a coffee habit, whose price does rise. It is not the model on this page, where the cost box holds still. Either way the comparison survives: $97,756 in today's money from $48,000 of habit is still 2.0× your money back.

One more wrinkle, which is really the same one: the return box doesn't ask whether your figure is before or after inflation, and stock returns get quoted both ways — around ten per cent nominal, around seven after. If you typed 7 meaning an after-inflation return, then $262,481 is already in today's money and none of this deflation applies. If you typed it meaning what the account statement will say, $97,756 is the figure that matters. Same keystroke, same printed answer, two meanings 2.7× apart.

And the fee nobody types in

A one per cent annual fund fee is one percentage point off the return, which over forty years costs 24% of the total: $262,481 becomes $199,149. The single point of fee is worth more than the entire $48,000 habit. It is separate from the inflation question above and applies on top of it.

Nothing above is modelled by the calculator, and nor is any of this:

• tax on gains
• fund fees
• contributions that rise with earnings
• ever missing a month
• any of the money being spent early

The honest reading of the headline is "a large amount, probably six figures, quite uncertain" — not the exact figure to the dollar that the table prints. We print the exact figure anyway, because rounding it would be a different kind of false precision, and because the arithmetic should be checkable.