You’ve probably heard of the Starbucks latte effect.

As the theory goes, small changes, multiplied and compounded over time, can end up becoming big savings.

For example, if you drink 1 Starbucks latte for $3.50 every day for 250 work days a year, then over 10 years, you’ll have spent tens of thousands of dollars on Starbucks coffee. Cut the Starbucks coffee from your life, and you could buy a nice car with the savings.

However, while this advice may be applicable to medical students or residents, I don’t believe that it applies to attending physicians and other high-income professionals. Put simply, there are many ways to save money, and the Starbucks latte is just one of them.

Two different ways to make a billion dollars

I once was listening to a lecture about startups, and the presenter described two contrasting ways to form a billion dollar business.

One way would be to sell a billion widgets for $1 each. Starbucks succeeded using this business model (although their widgets are $4 or $5 at this point).

Alternatively, you can sell 10 widgets for $100 million each. Commercial airplane makers utilize this business model.

Both paths lead to the same endpoint (a billion dollar business), but the techniques (marketing, production, etc.) to build that business are very different.

To save a few expensive items or many inexpensive items

The same logic can be used for saving money.

One way to save a lot of money is to simply live in a smaller house. With one action, you can save tens of thousands of dollars in a year.

Or, you can save on the latte every day for a year, and also save a nice chunk of money.

The attending home

Housing is usually the single largest item in a budget. A $1,000,000 30-year mortgage at 4% interest will cost $4,774 a month, and that’s before property taxes and mortgage insurance. A $300,000 mortgage, on the other hand, will only cost $1,432 a month. Simply by choosing a smaller home, you’ll pay over $40,000 less in mortgage payments. That’s over 11,400 Starbucks lattes, or 45 lattes per work day. You’ll be able to recover some of that difference when you sell the home, but you’ll still save a lot of money by living in a more modest home.

Private school vs. public school

Private school, particularly for children, can put a huge hamper on your budget. The average private elementary school costs $7,770 a year, and the average private high school costs $13,030, according to the government National Center for Education Statistics.

While I understand the value of a private school education for many parents, sending a child to a good public school can save a lot of money that can be used on other things, including Starbucks lattes.

Country club or other expensive memberships

Country club membership (and golf in general) is on the decline. Initiation fees for some country clubs can be in the tens of thousands of dollars per year and annual fees are often thousands of dollars. In the past, you paid for the social status of being in an elite club. But the cachet of country clubs have declined, and for many, membership is not worth the high cost.

The expensive car

A fancy car, especially if you replace it often, can be a big expense. Payments on a $75,000 car loan at 3% interest is $1,348 per month, or over $16,000 a year. In comparison, you could purchase a new sedan for $24,000 and drive it for 12 years, costing you only $2,000 a year. Like with housing, you’ll recover some of that money back when you resell your car, but a car is almost always a depreciating asset.

The many roads to financial independence

Of course, saving money is just about budgetary choices. You can make one big sacrifice, such as living in a smaller home, and drink as many Starbucks lattes as you want. Alternatively, you could live in a nice house and drive the fancy car, but brew your own coffee and shop at Aldi to save on weekly groceries and buy your clothes at thrift stores.

There’s also nothing stopping you from saving some combination of big-ticket and small-ticket items — drive a modest car and lay off the lattes, but shop at Whole Foods and have the nice house.

The amount of things you can afford is highly dependent on your salary — the spine surgeon will be able to afford more luxuries than the pediatrician.

Unfortunately, most physicians can’t have it all. You can’t have the big house, the fancy car, the private school education, the country club membership, and the daily Starbucks latte. Even physicians are subject to the mantra: you can afford anything but you cannot afford everything.

What do you think? Do you like to save money through a few big-ticket items (e.g. smaller home, less expensive car), or through many small-ticket items (e.g. cutting out Starbucks, less expensive groceries)?

“Wall Street Physician,” a former Wall Street derivatives trader , is a physician who blogs at his self-titled site, the Wall Street Physician.

Image credit: Shutterstock.com