Combine Ingredients: In a medium saucepan over medium-high heat, combine the milk, cocoa powder, sugar, cinnamon, chili powder, and milk chocolate chips.
Whisk While Heating: Whisk continuously as the mixture heats to prevent clumping and to ensure the chocolate chips melt evenly. Heat for about 5 minutes or until the mixture is hot but not boiling.
Add Vanilla: Remove the saucepan from heat and whisk in the vanilla extract. Taste and adjust the sweetness or spice level as desired.
Serve: Pour the hot chocolate into mugs and serve immediately.
Garnish: Top with whipped cream, marshmallows, or a sprinkle of cinnamon for a festive touch. Add a pinch of cayenne pepper if you want an extra kick.