A tool designed to illustrate the potential for long-term savings by cutting back on small, regular expenditures, such as a daily premium coffee. For example, by foregoing a $5 coffee each weekday, an individual could potentially save over $1,000 annually, demonstrating the cumulative effect of small expenses. This conceptual tool often utilizes compound interest projections to showcase how these saved funds could grow over time when invested.
The underlying principle illuminates the impact of seemingly insignificant expenses on personal finances. By highlighting the potential growth of these accumulated savings through investment, it encourages mindful spending habits and empowers individuals to make informed financial decisions. Popularized in the late 1990s by author David Bach, the concept has become a widely recognized element of personal finance advice, promoting long-term financial well-being through conscious, everyday choices.