Paying $5.00 for a coffee every here and there isn’t all that bad; however, paying for coffee is really a scam when it comes down to how much it costs to make it yourself. Sometimes coffee shops have those drinks that we really like that we can’t make on our own, but there are a number of people who purchase specialty coffee from shops like Starbucks nearly every day of the year who don’t understand the cost of coffee!
In this 2-3 minute article:
- How much does coffee cost yearly?
- Compounding the cost.
- Special cases.
Let’s take a look at the real cost of purchasing a coffee drink every day of the year:
This math seems really simple, but we’ll dive into something a bit more advanced later. First we have to decide how much the average coffee drink is. A drink from a coffee shop will generally cost $5.00 and some change, so for this example we’ll use an even $5.00 as the cost of the average drink. Next we have to take 365 days in a year and multiply it by $5.00 per coffee. That comes out to about $1,825.00. You can decide whether $1,825.00 is a lot to you or not…
Here’s where things get dicey:
Let’s assume that because you’re spending $1,825.00 on coffee each year, you’re unable to utilize that money in different ways such as investing. This is the opportunity cost of your purchase. If you were going to put that money into an investment account for your retirement (maybe a Roth IRA) for 40 years that averaged a 7% return instead of purchasing coffee each year, by the end of those 40 years you would have on average just over $364,000 dollars! Keep in mind, this doesn’t take into account a lot of factors such as the price of coffee increasing each year, and many more variables. You can see the big impact of purchasing a coffee a day!
Justifying the price:
Sometimes, it might make sense to pay for coffee. There have been countless times I have used coffee as a networking tool. Grabbing coffee for a new connection is an excellent (and relatively inexpensive) way to compensate someone for their time.
Another reason buying coffee makes sense is to essentially rent a seating area or workstation. What I mean by this is making a purchase so you may sit down in a public area and do some work. As I write this article now, I am sitting at an amazing coffee shop in Lahaina, Maui, by the name of Cafe Cafe Maui. The coffee, the environment, and the staff are amazing here, and I love to do work here on Sunday’s when given the chance.
A final reason, and one highly relevant to the pandemic, is to support local businesses. If you love a small brand in your home town, it’s never a bad idea to support a local coffee shop with your dollar, by purchasing from them.
So how much does coffee cost?
Well, it depends on your situation, but it could cost you hundreds of thousands of dollars if you’re a Starbucks addict!