Your Pumpkin Spice Lattes are costing you $250,000 and Pushing your Retirement Back Years
Let me get something out of the way, I love coffee, I would never advocate anyone kick coffee out of their life. I have as much a caffeine addiction as anyone you are likely to find. However, in addition to liking coffee, I also like math, which is why I have not been to a “coffee shop” in over a year.
That daily coffee run could add 5 years or more onto your working life
Last year, when I really started getting serious about beginning my path to Financial Independence, I started taking account of all of my spendings, I thought my daily Tim Hortons run was a minor indulgence with no real impact on my long-term financial outlook. Until one day I threw my daily $2 Tim Hortons run into a compound interest calculator and discovered that over a 25 year period that daily $2 coffee would amount to over $50,000 if I had invested that in a stock market index fund.
This is where the math of Financial Independence becomes so powerful as you look at the “true cost” of everything. A $2 daily coffee run does not cost me $2, it has an opportunity cost to me of $50,000, which might mean pushing my retirement back by a year or more.
Now time for a really scary figure for those of you who are heading on a coffee run twice a day and indulging in a fancy $5 Cafe-Mocha-Latte- Pumpkin Spice-Frappuccino drink (can you tell I only drink regular coffee?). What does $10/day on coffee really cost you?
$250,000. Put another way, if you can live off $50,000/year, that daily coffee run could add 5 years onto your working life. Is your double dose of fancy coffee worth 5 years of your life? If it is, then God bless you, I can’t personally think of any drink I enjoy that much that I would sacrifice 5 years of my retirement.
So you might be saying, “yeah great, but do I have to give up or cut back on my coffee?” NO! Head to Walmart, and you can get a coffee maker for $20, a travel mug for $5 and then head on over to Costco where you can get a 2KG tin of Tim Horton’s coffee for $19. That 2KG tin will yield nearly 300 cups of coffee. If we call it 300 Cups, that amounts to about 6 cents per cup. take the 6 cents hit, invest the savings and reach financial independence or early retirement years before you ever thought possible.
Once you start thinking of the things you buy as a unit of time rather than a unit of dollars, it will become instantly clear what your priorities are.
So who is with me on the “brew your own coffee” revolution? What are some other “minor” expenses in your life that you could do without? Let me know in the comments.