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 |
| Coffee Shop | $1.75 | $638.75 | $30,004.80 | $300,493.68 | $330,498.48 |
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.
I’m not sure because you didn’t list the math behind your calculations–but I don’t think you discounted future dollars to account for inflation. In which case there’s nothing factually wrong with your title, it would just be more accurate and helpful to state “Maybe 1/3 of a million dollars in 2064 dollars”, or of course you could convert those to todays dollars which would probably be about 1/3 to 1/4 of the total.
(Mobile Response) The calculator I used declared that it didn’t account for inflation and didn’t provide the math either. I trust its accuracy, just didn’t have time to re-invent the wheel.
In the article, I mentioned that I might have gone with 4% to account for inflation, but instead went with the recommended 8%.
So the numbers may seem very inflated, especially because I was going 47 years in the future.
Seriously. People no longer want to talk about the coffee factor or want to talk about it only as a metaphor. But seriously, a quarter of a million dollars is as real as it gets
Eesh! I’ve been drinking daily quad lattes that cost between $4-5 a pop. I hate myself everyday for doing it, knowing how much that will add up to over the long haul but I just can’t seem to break the habit. Maybe it’s time.
Nice summary on the cost of that coffee habit. I chose to avoid buying coffee a few years ago and switched to the office coffee. Its probably on-par with the cheap at home coffee but hey, its free!
Good reminder.
We make coffee at home, but we do buy good beans. I’ve long been eyeing a home coffee roaster to further bring down the price-per-cup but I’m loathe to buy one new.
Coffee is just one of those luxuries I’m not keen to give up. Plus it has health benefits, right? right? :-)
just think how much money we’d save if we all gave up using soap.
What’s the daily cost of soap? It’s got to fractions of a penny, right? That’s the thing with these kind of projections… if they are that small, they tend to stay that small.
You forgot the cost of gas waiting in the drive through, and the wear and tear on your car (or maybe bike is more likely here)
I respect the work and effort that you have put into this post but…
This is such a cliche (Gail Vas Oxlaid type) topic now and I think way overblown. Everyone has something that they could do without, but where do you draw the line. Maybe someone doesn’t buy their coffee every day but somehow justifies to themselves that leasing a car is a good idea and overpaying for that for example. So the money just slips away somewhere else.
I think if you have to worry where $50.00 like this goes every month, if it truly gives you a small joy every day you have some real problems, more than stressing about this little purchase.
Sorry to be negative on this post. I would agree with most everything else you write.
I purposely didn’t go into many costs of coffee like milk, sugar, etc. at home that you get at the restaurant for free. Maybe it balances out the wear and tear on your car. I don’t know if you were joking about the wear and tear on your car, but that’s impossible to calculate as everyone has a very different distance to their coffee shop.
I didn’t originally intend to do the coffee calculation, but I was doing the caffeine calculation (see the post that came the next day) and realized I had never seen the coffee calculation done… even if it was talked about all the time.
I’m not saying that you should stress about where $50 goes every month, but may be worth being mindful about it. If you really don’t get any extra pleasure out of the coffee shop, then why not take the extra cash by brewing it yourself. Also, is the K-Cup really worth it? Some said that it wasn’t.
Of course I’m joking. Just throwing it in. Be hard to calculate. Just wondering are you an engineer your very precise lol.
I have a Nespresso machine, I also have a little cappuccino maker. Hard to find the capsules for the Nespresso though :( . But I still like to drop by the coffee shop on the way to work. I have free coffee at work but I can’t stomach it. I like choices and change.
I guess my point is if your making your contributions correctly to your RRSP/TFSA : IRA/401K and maxing it out – making good low cost investment choices you can focus on not being that overly frugal about things in general. Maybe I’m just coming from a different place then most. I save about 30% of my gross every year. Beyond that is it worth worrying about my small pleasures?
I appreciate your reply above.
Software engineer, if that counts. I thought being precise might be important for the article. I think we’ve all seen the “you can save thousands by brewing coffee at home.” I wanted to test it and see.
If you are maxing out everything and saving that much, you probably need not worry. I think this is more for people who aren’t in that position. Or maybe the people who are into early extreme retirement. I can imagine people making these frugal choice for 5-10 years to allow them to save 50-70% of their gross hoping to retire early.
I am a coffee lover, but I would never go for coffee shop coffee, they are just not worth it.