The Costly Cup of Coffee is Crippling Your Savings

We love good coffee, and it is so convenient when someone else can make it for you. But, although it’s warm, delicious, and convenient, it is also secretly destroying your savings and financial future. We are going to take a deep dive on how this daily habit can cripple your financial future.

One spending change can provide thousands of dollars in savings

Let’s create a scenario in which a person gets a cup of store-bought coffee every day as they go to work. For this scenario, let’s say they work 235 days a year and the coffee costs $1.50 after tax. This person will spend $352.50 over the course of a year. That may not seem like a lot of money in the whole scheme of things, but consider almost half of Americans don’t have $400 for a surprise expense. The money could be used as the start of an emergency fund, for someone who doesn’t have any savings.

What if this person decided they would rather skip buying the coffee and save the money toinvestinstead? Imagine the person is only 25 years old, and they work until they are 65. Over the forty-year period they would save $14,100 (to keep things simple, this assumes no inflation). If they invested the money, and received a 5% annual return (after-inflation), then at 65 years old they would have $42,575 to show for it. That is not an insignificant amount of money.

This can add up to some serious money

We can rerun this scenario with all types of different variables. If we make the person 30 years old and increase the cost of the coffee to $3.00 daily, then after 35 years of investing the money they would have $63, 675. This is some serious money for brewing coffee at home, rather than purchasing it on the way to work. If we add in a doughnut or a scone, we could be looking at close to six-figures at age 65.

If you are among the half of the population living with no savings, this one small change could be the start of changing your habits and working towards financial independence by establishing an emergency fund. While this scenario is all about store-bought coffee, you can easily substitute in any item you don’t really need and doesn’t add significant value to your life (this is especially true for cigarettes, which not only cost a fortune, but also cause you physical harm). Part of the money you save can instead be used for worthwhile experiences or things you truly enjoy.

Leave a comment

Posts Tagged with…

Reader Comments

  1. javier

    Did the math for a co-worker that buys the large coffee for close to $8.00, he corrected me “only $7”.
    That is because he is a “frequent flyer” and bought who know how many at $8. Told him he should make some at home instead. I only made the approach because he showed me the benefits of maxing out my 401K and thought he would see the light, guess I was wrong.

  2. JG

    Just on Wednesday i did this math for someone who was spending close 3.75 for an ice coffee. I told them if they made it at home they could save $3.25 each day. Or i could make it for them. And i could pocket the cash. Guess what…. i’m $16.25 each week richer.

Write a Comment

Your email address will not be published. Required fields are marked *

On the path to financial independence?

Enter your email address below and we'll keep you updated when we publish new content.

Thank You For Subscribing

This means the world to us!

Spamming is not included! Promise.