The Great Coffee Debate and Little Wins
I remember reading one of my first personal finance books, David Bach’s The Automatic Millionaire and I was hooked. One of the most famous concepts from the book was the Latte Factor, the simple idea that you need to focus on the things you spend money on every day and cut them out of your daily spending to really make a difference. Coffee is most commonly used in the latte factor, because it’s right in the title. At the time when I read the book I didn’t even drink coffee, but I’m all growns up now, just ask Vince Vaughn, one of my favorite actors in Swingers(earmuffs, one curse word alert).
Since I’m all growns up and drink coffee, I have a few options on how to purchase my black thunder delight aka coffee.
- Home-Buy the coffee at the local grocery store/online/Nicaragua and bring in my favorite travel mug or brew at work.
- Office Reusable-Buy the coffee like above, purchase a K-Cup reusable holder and use my favorite coffee cup.
- Office K Cup-Buy the little K-Cup single roast and use the fancy Keurig machine still using my favorite coffee cup or travel mug.
- Coffee Shop-Buy my coffee like every other red blooded American from your local coffee shop.
So I did what any good personal finance blogger/nerd does and I ran the numbers.
|Average Cost||$ 0.40||$ 0.40||$ 0.55||$ 2.00|
|Days||Home||Office w/ Reusable||Office w/ K-Cup||Coffee Shop|
|1||$ 0.40||$ 15.40||$ 0.55||$ 2.00|
|5||$ 2.00||$ 17.00||$ 2.75||$ 10.00|
|7||$ 2.80||$ 17.80||$ 3.85||$ 14.00|
|30||$ 12.00||$ 27.00||$ 16.50||$ 60.00|
|360||$ 144.00||$ 159.00||$ 198.00||$ 720.00|
Pretty simple chart with a few assumptions made. 1 pound of coffee at the grocery store will cost me $8 and last me half of the month, my reusable K-Cup will cost me $15 as an upfront charge whether I drink coffee 1 day or 360 days a year, individual K-cups online with my 50 count cost .55 cents per little guy, my regular coffee will cost me $2, which is pretty close since I like my coffee black. Ok back to the numbers, what were the results?
|Great Coffee Battle Contestants||Savings|
|Office Reusable vs Home||$ 15.00|
|Office K Cup vs Home||$ 54.00|
|Coffee Shop vs Office K Cup||$ 522.00|
|Coffee Shop vs Office Reusable||$ 561.00|
|Coffee Shop vs Home||$ 576.00|
Let’s look at the 360 day results for Office Reusable vs Home, which involves me making my coffee at work with my newly purchased reusable K-Cup vs brewing my coffee from home. This battle isn’t much of a win, $15 to make coffee every day at home and carry it on the train, seems like a lot of hassle to me, it would be saving .04 cents a day.
We all want to look at the big numbers, that’s what everyone cares about right. Since we already decided the office reusable isn’t much of a difference compared to brewing from home let’s choose Coffee Shop vs Office Reusable to make some hard decisions. The overall savings in a year assuming I drink coffee 360 days a year, which might not be that far off, I would potentially save $561 a year, which comes to $1.56 a day. Once again being a personal finance nerd, I went to the Latte Factor calculator, and calculated if I invested the difference until I retired in 12,000 days, assuming a 6% return and congratulations I would have $57,886.09 cents to act like a wild man or woman and go to the local coffee shop and tell this grand story of how I haven’t been to a coffee shop in 33 years and now have almost $58,000 to drink latte’s, frappaccuino’s, cafe con leche, or any other crazy coffee drink you want, go CRAZY get a large/Venti/20 oz, you know what you have $58,000 why not buy the stressed out lady next to you off to Corporate America for the day a coffee, you are a Coffee Balla’ now.
Many personal finance experts and bloggers alike use charts, graphs, and calculators to explain why you should cut the coffee shop and save hundreds of dollars a year, which you will then invest into the stock market for the next 30 or 40 years and retire with a thousands of dollars extra, just by cutting down on drinking your black gold by brewing your own cup of coffee at home or the office. Is that really what happens?
NO. This is not what happens, but it is a step in the right direction. Little wins do add up. While I Will Teach You to be Rich and Afford Anything think frugality and little wins are for losers, little wins do make a difference. Cut your coffee down to drinking from home($30/month), cut your cable and do internet only($50/month), stop the gym membership and workout outside($50/month), ditch the big cell phone company for a better one($70/month). Add all those up and you are now saving $200/month or $2400/year, put that in your Latte Factor calculator and you have almost $250,000 for retirement. So while I was memorized with the Latte Factor early on then kicked it to the curb for IWTYTBR and Afford Anything “Big Wins” like Mortgages and Cars, why not work every angle? If I’m able to save $200/month on my way to financial independence, let’s look to cut down on things with your budget and add up all those little things, because remember if you have 4,000 nickels that you saved up with your Little Wins those nickels are still worth $200 which is a Big Win.
So which is your choice in the great coffee debate? Is this Little Win big enough? Do you have a great coffee debate article to share?
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