If you are thinking about small changes that can save you a lot of money over time, consider some of the recurring purchases you make. Something as inexpensive as a cup of coffee could be costing you thousands of dollars over time. How much is coffee costing you?
Welcome to the first Food Finances Fridays of 2019. Today’s post is about how much money Americans spend on coffee.
Many people love coffee or tea. While it may seem like an inexpensive indulgence, over time the costs can add up.
Last year, The Motley Fool ran a story titled One Third of Americans Spend More on Coffee than on Investing. A 2012 study found that the average American spends more than $1,100 a year on coffee.
While I am all for enjoying life, it’s also important to make an informed decision about how much our decisions are costing us.
Here are a few examples of real-life people I know (names changed to protect their identities of course) and their coffee habits. Which one of these categories most closely matches your coffee habits?
Example 1: Amy buys coffee multiple times per day
One friend Amy was on internship. She started talking about how much she is spending on coffee and she ran the numbers. Not only was Amy buying coffee everyday, but multiple times every day.
We calculated how much she would spend on coffee from that day until the completion of her internship in 6 months.
- It was over $2,000 in just six months!!!
- That’s $4,000 in 1 year in coffee
- A whopping $20,000 in 5 years
- That’s $4,000 in 1 year in coffee
I asked her what she could do with $2,000 and she realized she could pay off her credit card debt by the time she completed internship.
So did Amy stop purchasing coffee multiple times per day? Not exactly. But she did make some major changes in her coffee habits.
She pulled out her old coffee maker and started making coffee at home every morning. Then, she allowed herself one trip to the coffee shop in the afternoon. She also allowed herself coffee as a treat on mornings of special occasions, for example on the morning of the “match” when she found out where she would be attending post-doc.
Amy became more conscious about when she was going to the coffee shop and how much it was costing her. Motivated to pay off her credit card debt, she also make small changes in other areas of spending (e.g., buying shoes less often). She successfully paid off her credit card debt by the time she completed internship without giving anything up, but just by making a small change to her daily habits.
Example 2: Melanie buys coffee once per day
Another friend Melanie was only buying coffee once a day. She told me each cup was $3.78.
We did the math:
- $3.78 x 7 days/week x 52 weeks per year =$1,375.92 for 1 year
- That’s $6,879.60 for 5 years
Melanie was a new staff member facing student loan debt in the hundreds of thousands of dollars. To pay off this massive amount of debt while making an entry salary of only around $70,000 a year, she was considering taking on another position teaching in the evenings. After we ran the numbers and saw how much could be saved by bringing coffee from home, that’s exactly what my friend started doing. I haven’t seen her with a Starbucks cup since.
She also brings her lunch from home everyday and yes, she also took on an extra job in the evenings.
Example 3: Bruno takes daily breaks with his friends
There’s a group of people at work of whom I am admittedly jealous. While many of us struggle to find a time to take a break, there is a small group of people who are all able to take multiple breaks together.
Each morning and afternoon, they walk down to the coffee shop in our building and purchase a hot beverage.
Bruno does not have any children. He is not in debt, but does not want to waste money.
He proudly showed me his reusable coffee cup, which he brings with him every day to get a $.50 discount on each cup.
At $1 a day, that’s nearly $500 savings per year, or $2,500 savings per year just by bringing one’s own cup.
Because disposable coffee cups are lined with plastic, they are not recyclable at most centers. Not only does making coffee at home or bringing your own cup save money, it also reduces waste. Save money, save the world!
Photo by Mert Guller on Unsplash
Example 4: Sheila has an occasional tea
Another friend of mine would ask if I would like to take a walk to the coffee shop with her to get some tea. I always enjoyed the walk, but would take my water.
Unlike in the previous examples, this friend did not buy tea daily. However, she told me that one day she was trying to remember how much a tea cost and as she went over her numbers, she was surprised to see how often she was buying tea.
As someone who was looking to purchase a home and build up her retirement, she didn’t want to drink up all her savings. Sheila switched to her second favorite yet much less expensive beverage of choice: hot water with lemon.
Example 5: Husband makes coffee at home
In comparison, my husband buys a can of coffee from the grocery store whenever it goes on sale ($5.99 sale price). We each usually have one cup a day; I sometimes do not have any coffee on the weekends. A can lasts us approximately a month and a half. Therefore, we buy a can of coffee about 8 times a year.
- $5.99 x 8 times per year = $47.92 for 1 year
- That’s $239.60 for 5 years
That’s a huge a difference compared to the thousands of dollars spent purchasing coffee even once a day.
Amy was spending $20,000 over 5 years on coffee?!
I enjoy a good cup of coffee, soda, or alcoholic beverage just like everyone. I’m not saying to stop drinking your favorite beverage. But if you are struggling financially or not meeting your goals, it’s important to take a closer look at our daily habits and understand how they are affecting our finances.
How much do you spend on coffee or tea?