Why Your Coffee Could Actually Cost You $165,000

Saving and Investing

The real cost of your coffee habit

My morning routine is simple. Generally, it consists of getting up early and starting my day promptly. Before leaving the house, I spend some time working out, getting myself and O ready, and helping around the house however I can.

I try to be out the door by 7:30 and in the office or at meetings by 8. However, each and every day, regardless of where I’m going or when the first meeting is and whether I’m on time or running late, I stop and get a coffee. Every day, on weekdays and weekends, it’s essential that I grab a coffee. It’s my main indulgence.

And, as evidenced by the perpetual line at Starbucks, I’m not the only one. I am, however, one of the only ones who will “geek out” and calculate just how much money this caffeine addiction is costing me.

You see, as a financial geek, I don’t just see the $4 or more that I spend on coffee and a snack every day. I see the long-term value that this $4 could have on my savings if I were to make a different choice—a choice that would require me to make my own coffee at home and keep that daily $4 in my investment account.

So, How Much Does This Matter?

You might be surprised, but it matters a lot!

You see, $4 per day, for 365 days per year, adds up to a lot of money. In a single year, this addiction adds up to $1,460!

If you’re anything like me, you probably don’t have the willpower to change your habits (although after writing this, I might force myself to), so you will continue to pay the coffee piper for years to come. If we continue this addiction for 30 years, we can calculate the total amount spent to be $43,800.

$43,800 spent on coffee!

Remember Our Old Friend—Compound Interest

While $43,800 should be enough for any of us to reconsider our spending habits, we could take this example one step further to completely evaluate the opportunity costs of our coffee addition.

The opportunity costs beg the question: what if, instead of spending $4 on coffee, I save $4 every day? Not only would that save $4 per day, but I would also take it one step further to include the impact of compound interest. Compound interest is earning interest on your interest (read more here). In brief, the longer your money is invested, the larger the benefit that compound interest could have on your portfolio.

Let’s get back to our example: Let’s assume that our $4 per day is invested and earns a hypothetical 7.5 percent return per year. Furthermore, let’s assume that $4 earns a hypothetical 7.5 percent return per year for 30 years.

We can calculate that in 30 years you would have saved over $165,000!

So, it’s safe to say that my coffee habit (and yours) could effectively take $165,000 away from our retirement.

It may be time to consider some alternatives!

(For example, if your $4 earned a hypothetical 5.5 percent return, the value after 30 years would still be over $111,000.)

What’s the Point?

For many of you, coffee may be the culprit. For others, it could be another vice that has you unwittingly spending what feels like inconsequential dollars every day.

I’m here to tell you that it’s not inconsequential. In fact, the longer you have before retirement and the more “wasteful” your spending habits, the more opportunities you have to change your habits and change your life. Think of this as a financial cleanse—a challenge to yourself to break one habit and create a new one.

Just imagine that…a habit of saving! Now that is a habit you should stand in line for!

The above examples are for illustrative purposes only and do not attempt to predict actual results of any particular investment. A plan of regular investing does not assure a profit or protect against loss in a declining market.  You should consider your financial ability to continue your purchase throughout periods of fluctuating price levels.

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3 Responses to Why Your Coffee Could Actually Cost You $165,000

  1. george hutter October 22, 2015 at 8:29 pm #


    Since you and your Dad understand my sense of humor, eventhough I am tempted, I’ll pass on your coffee cost/savings projections.

    Also, I was just starting to feel bad about what we spend on wine each month….thank you for making me feel better. The good news is we are not drinking it in the morning. Good job!



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