PFT #10 - Personal Finance Tip: How Coffee Slowly Drips Away Your Monthly Budget

Updated: Mar 4

David

This week we’re going to talk about coffee. According to a marketwatch.com article, it is the most widely consumed beverage in the United States by a wide margin. So this means that coffee is big business; and when something is big business, this means that a product appeals to the masses.


Cindy

When it comes to coffee, the consensus we found is that the average cup at the coffee shop is around $2.70.


Now this is straight coffee and if you have a penchant for other drinks such as mochas and lattes, this can reach to the $5 range and that is taxing on the budget.


David

So let's get into some stats: If you buy coffee everyday at $2.70 that comes to $985 and for the specialty drinks the total is $1,825 each year. That is a surprising amount of money that hits your budget each month.


Cindy

Another important item to consider, is that these stats are based on just one drinker. If you have a partner and a few teenagers in the house, that could reach, believe it or not, $7,700 per year.


So as not to over-caffeinate this example, let’s stick to a single drinker.


David

Now, on the inverse if you choose to drink ground coffee at home using a traditional coffee maker that typically ranges from $0.25 to $0.50 per day.


In our particular case, we use San Francisco Bay Coffee with our Keurig machine that comes in an 80-count pack at $33.17. To break it down even further that comes to 41 cents per cup or just over $151 per year.


David

So in using our example, we save anywhere from $834 - $1,674 less than the coffee shop route.


Cindy

Now that we have a breakdown let’s get into the compound interest growth potential. On the low-end using the coffee comparison, we save $834; and if we took our savings and invested them at a 7% growth rate, for 30 years we’d have $84,294. If we take the high end we’d have just over $169,000. That’s crazy.


David

This is a great example of how people can find money to put into their 401(k)’s when they say that they don’t have another dollar. In fact, when Cindy and I that's exactly what she was doing and today she preaches this information when she is giving 401(k) presentations.

Cindy I know! Just Imagine if you are a family of four that drinks coffee everyday . . . the amount of money that can be saved is staggering. So now I am finding more people saving money and starting their retirement planning once they think about it.


David

At this juncture you have a few options: you can drink coffee at home or cut back on the amount of drinks that you consume via the coffee shop or perhaps if you can drink it at work it doesn't cost you a dime.


Cindy

Here's one last point: When we mentioned using San Francisco Bay for our coffee choice, it also has a double benefit in that the entire packaging is recyclable and the pods themselves are biodegradable.


David

This goes in line with what we always preach on this program; is that you can get a quality product at a great price and you can do your part to help out with the environment.


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