Bought coffee is delicious and super convenient, unfortunately it’s also one of those creeping expenses that can sneakily add up over the years. Spending a couple dollars a day is barely noticeable, but it quickly adds up and can easily end up being the same price as a vacation or even a down payment on a home. This article will look at the long-term effect of buying coffee and in extension other similar small expenses.
How big can this “coffee effect” really be? Well, an extreme example would be someone that buys a Grande Starbuck Lattee five days a week. This $4.69 tasty beverage quickly adds up to $1,219.40 a year and in 20 years this equates to about $41,767 (assuming a real interest rate of 5%.) Thankfully, most people don’t do this, but this helps illuminate how small purchase can quickly add up.
Below, we can see how the “coffee effect” is more likely to affect a Canadian. For the example, I’ve shown how a coffee that costs $1.90 adds up over time. Theoretically, coffee prices increase overtime, but this can be mathematically negated by using a real interest rate of 5%.
So we can see that the price of coffee can quickly add up and keep you away from achieving your goals in life. A person only earns a finite amount of income a year and a dollar spent here is a dollar taken from somewhere else. Now, I’m not telling anyone to stop drinking coffee, but instead showing that there are always opportunities to save.
A big savings can be found by substituting bought coffee with a reasonably priced machine. For example, an individual that buys a $2.25 coffee five days a week would save about $1,600 over five years, which is enough to go on a great trip to Europe or an extra mortgage payment.
Overall, the “coffee effect” demonstrates how small expenses can quickly add up over and prevent you from achieving your financial goals.
That’s all for today and thank your for dropping by my site. If you have any questions, you can contact me directly at firstname.lastname@example.org or at 647-289-0012. Also, don’t forget to sign up to our awesome Newsletter below!