The last couple of days, I’ve been covering the cost of coffee. We covered the brewing coffee at home vs. buying at a coffee shop and the cost of single-serve (K-Cups) at home.
Overall, I came away with four data points on four types of coffee (each normalized to 16 ounces). Here they are:
- At Home (cheap) – $0.11
- At Home (good) – $0.58
- At Home (K-Cups) – $1.34
- Coffee Shop – $1.75
Since the most expensive and the cheapest seem to differ by around $1.50, it’s easy to conclude that this expense really doesn’t matter. That was my initial thought as well. However, an alternative view would have one saying that the coffee shop is more than 15 times more expensive than the cheapest stuff I can brew at home.
I thought it would be interesting to examine how the small difference like the cost of coffee can impact our lifestyle when multiplied over many years. This is cheap coffee too, no extra frills or “jazz-ups” (as my wife calls them) that are common at the coffee shop.
For this exercise, I relied heavily on Todd Tresidder’s Latte Factor Calculator. Don’t let the name fool you, it can calculate plain coffee just fine (and it isn’t limited to coffee either). The calculator includes a ton of advice such as including sales tax. I’m going to skip that because it varies from state to state. I don’t need to be accurate down to the cent to make the point I want to make.
Let me blow you away with the data first:
|Coffee Source||Daily Cost (16oz.)||Annual Cost||Lifetime Cost||Lost Interest||Real Cost|
|At Home (cheap)||$0.11||$40.15||$1,886.02||$18,888.17||$20,774.19|
|At Home (good)||$0.58||$211.70||$9,944.45||$99,592.19||$109,536.64|
|At Home (K-Cups)||$1.34||$489.10||$22,975.10||$230,092.30||$253,067.40|
The calculator is designed to calculate the difference over a number of years. A true lifestyle change, would be… your whole life. Thus Tresidder’s suggestion of using your life expectancy is a good one. Using the survey at Living to 100, I was able to estimate that I’ll live to 85. I really like this website as it tailors the result to your lifestyle and tells you how you can improve it. Since I’m 38, I can fill the difference of 47 into the Latte Factor Calculator.
I also used the suggested interest of 8%, but I might be more inclined to dial that in 4% or 5% to account for inflation. Since you have all the data, and can calculate your own life expectancy, feel free to do it which way makes the most sense to you.
The calculator gives me the Lifetime Cost, Lost Interest, and Real Cost numbers that you see in the table above. Obviously the big number of $330,498.48 really stands out. I’m the furthest thing from being a coffee connoisseur, but it has to be tempting to go to the cheap stuff to pocket over $300,000 in real costs, right?
Almost as shocking as the $330K number is the difference between brewing at home and in a K-cup machine. It’s nearly a $150,000 difference over your lifetime. Can you believe that by simply forgoing a little convenience, it can make such a huge difference?
Update: After I completed this article, I noticed that Bargain Babe does some of the math on coffee as well. In her calculations she picks 10 years… and the numbers get very big there too. If you are interested in this topic, it’s worth giving it a look.