Lazy Man and Money

Coffee Talk: A Big (Personal Finance) Whoop

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Last week, while on vacation at the beach, I looked through my Twitter. (I’m the worst.) This lead to an interesting short conversation with my wife:

Wife: Anything interesting?
Me: People are upset about coffee spending.
Wife: Didn’t they address that like 20 years ago?
Me: Yep.

In fact, almost 5 years ago, I was late to the game with an article covering the costs of Brewing Coffee at Home vs. Buying at a Coffee Shop. It’s very detailed with a cost average of 3 coffee shops (Starbucks, Dunkin’ Donuts*, and McDonalds).

Million Dollar Coffee Talk

I followed that article up with a cost analysis of Single-Serve Coffee (K-Cups) at Home.

Then I combined both articles into an analysis of how much your coffee is costing you. I used an awesome latte factor calculator and realized that it could cost me 1/3 of a million dollars if I spend the coffee shop average of $1.75 each day for the rest of my (expected) life. Perhaps the most important thing I did was give you the tools to calculate your coffee costs yourself.

(Interestingly all this was inspired by a Vanguard article and video that seems to have been pulled mentioned in my first article. Maybe it was pulled because of this coffee spending “controversy.”)

One of the best quotes came from the comments that last article:

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

However, it’s 2019 so here we are… arguing about coffee spending.

It’s possible you missed the latest round of arguments. If so, let me catch you up.

Coffee is “Peeing $1 Million down the Drain”

CNBC quoted Suze Orman saying this:

There’s (at least) five things going on here that we need to unpack.

  1. People are protective about their coffee.
  2. CNBC and Suze are marketing a clickbait phrase to get attention. Who wants $1 million dollars?!?! Just stop peeing it away!
  3. There’s a whole Suze Orman scam movie that includes her debit card scam and a bunch of other stuff. She has a lot of good information, but in my opinion, every media appearance should be prefaced with the equivalent of the Surgeon General’s cigarette warning.
  4. There’s some shoddy assumptions made to get to the clickbait $1 million dollar number.
  5. People are upset about something bigger
  6. The idea has real merit, hence my article above covering it.

Let’s take them in order.

1. People Protect Their Coffee

Coffee, with its caffeine, is arguable is arguably an addictive substance. There’s any number of marketing t-shirts and mugs etc. that are about pitching coffee as the most important thing.

I don’t need to waste any more words on this except to point out that I don’t have a horse in this race. I decided that coffee wasn’t for me and substituted a Diet Coke addiction instead. While that clearly backfired, it allows me to talk about coffee unbiased, the same way most people talk about cantaloupe.

You could substitute ice cream. A couple of scoops in a cone will run you $3-4, which is far less than the home price. And, of course, ice cream is objectively better ;-).

If we substituted saving $100 a month by cutting cable television, there’s almost no controversy.

2. Media and Clickbait

We find ourselves in a world of clicks. Even this website makes money from your clicks. Science shows the best way to get those clicks is with outrageous, shocking claims. I could try to make more money with those claims, but I’m hoping over the long run, you’ll trust the value of the content itself, and reject sources that use clickbait techniques.

3. Suze Orman’s Scams

I’ll let the above YouTube video that I linked to stand on it’s own. I don’t need Suze sending her lawyers after me for my opinion.

4. Million Dollar Coffee Math

Suze Orman assumes spending $3.33 ($100 a month) on coffee, where my math said the average is about half that ($1.75). Sure it can get to $3 or $4 with some types of coffee in some areas. As someone who doesn’t drink coffee, I can only go by the numbers I found and cited. I can give Orman a bit of a pass on this because I chose to use plain coffee.

Let’s keep in mind that this $3.33 coffee is paying someone else to make the coffee and the overhead with all that. It’s not just for the coffee, just like the ice cream isn’t only about the ice cream above.

Suze Orman also assumes that you are going to invest the money (not 100% guaranteed) and that you’ll make 12% return over 40 years (so unlikely, that I’d say it borders virtually impossible).

It’s been challenged by MarketWatch who gives you the real math of coffee and your retirement. This is very similar analysis to what I did in my articles listed at top of this one. A coffee habit can be as little as $20,000 over a long lifetime.

(If that seems like a lot, stick around and we’ll get to cheaper ways for you to get your caffeine fix.)

5. People Are Really Upset About Something Bigger

Personal finance has changed a lot in the 13 years I’ve been blogging. Around 2006, there wasn’t nearly as much attention on health care and college costs. Those have really started to spiral out of control. It makes sense for people to be upset about these things. I’m with you. Let’s fix healthcare. College is too expensive.

These systemetic problems, and others (stagnant wages for example), are certainly worth having conversations about. Those conversations are happening as they seem to be at the center at every political debate.

Those problems have become part of this million dollar coffee (or avocado toast) conversation. There’s certainly a lot of logic behind being upset that you can’t enjoy coffee because of a systemic problem that you had no control over.

However, my opinion is that these problems give you more reason to be mindful over the spending you can control. I think it’s a mistake to wrap up all the world’s financial problems and expect coffee spending to be hero. That doesn’t mean it can’t be part of the fix.

6. Small Habits Compound Exponentially Over Time

A lot of the time, coffee is brought up as an example or a metaphor of small daily expendatures. This has real merit.

A far less controversial topic is bringing your lunch to work each day. There’s no sane reason why it’s less controversial other than it doesn’t involve sacred coffee. The math can often add up to even more money.

I don’t think anyone is suggesting that you can never buy your lunch or coffee. I think the message is that you should look at these small, everyday money leaks as well. It doesn’t have to be a million dollars to add up to something significant.

If I was a real marketer, I’d combine the lunch and coffee spending to be $12 a day and tell you that it ends up being 4.2 million dollars using the same poor assumptions (investing 12% over 40 years). However, even at 7% over 30 years it still comes to $445,000. At 5% over 20 years, it is $150,000. That’s still a lot of money, right?

Above, I had mentioned that I had a Diet Coke addiction. At a dollar for 2-liters it isn’t exactly breaking the bank. I do drink more than I should, so it does add up. (The health costs will probably be the big thing, but let’s put that aside for now.) I’ve started to look into things like saving money with Sodastream (using much cheaper flavorings). At a cost of just a few cents per 2-liter, it might save only a dollar a day.

Unfortunately, one thing missing from Sodastream is the caffeine. However, caffeine can be extraordinarily cheap, adding as little as a couple of pennies to the overall cost.

Final Thoughts on Coffee Spending

It seems that coffee spending combines so many separate issues that it’s extremely difficult to discuss. Some of the big things like marketing, scammers, big systemic aren’t going away soon.

I can’t tell you how to spend your money, but I will suggest that you think about it. Weigh what’s important to you. Use the metaphor to explore the math. Use the math to live your best life…

… and definitely do NOT buy that coffee ;-).

* Dunkin’ Donuts, don’t give me that crap that you changed your name.

How Much is Your Caffeine Costing You?

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According to the FDA (PDF), “During this time, the average amount of caffeine consumed has remained constant at approximately 300 milligrams (mg) per person per day.” Thus the average person has 109,500mg of caffeine a year.

How much does that cost?

Glad you asked. I’ve got your answer.

Before we get to that though, I’d like to remind no one of the not-so-famous scene in perhaps the best movie that no one saw: Mr. Destiny. The main character Larry Burroughs is having a very bad day, but he decides he needs his coffee. With no way to properly make it, he eats the teaspoon of grounds saying, “Gotta have my coffee.”

This is where some (most?) of us are with caffeine. My theory for this post is that while there are a variety of reasons that go into your choice of caffeine, you might find that you are more like Larry than you think. In any case, the idea is to wake you up (pun very much intended) to the costs of caffeine.

The Cost of Caffeine
The Cost of Caffeine

Just in case you don’t have 20/5 vision, you can click that image and get a bigger image. I also include the data at the bottom of the post. (It runs a little wide, so I have to put there where it won’t run into the sidebar.)

Let me walk you through the math of the first row to get an idea of how this chart works. The first example is the one we are familiar with: Coffee.

Coffee’s caffeine ranges all over the spectrum, but the best data I found had it being around 95mg per 8 ounces. As we covered recently (Brewing Coffee at Home vs. Buying at a Coffee Shop), the cost is around $0.30 cents a cup. For someone to get the annual 109,500mg of caffeine from $0.30 cups of coffee, they’d have to spend $345.79 a year.

I always suggest doing a sanity check on this math. Three cups of coffee is a little less than the 300mg average. That’s a little less a dollar a day. The $345.79 annual cost is a little less than a dollar a day per year.

The next three columns are very similar to what we covered yesterday in How Much is Your Coffee Costing You? (Maybe 1/3 of Million Dollars!). I’ve made the assumption that I’m going to live to 85 (based on a life expectancy calculator) which gives me 47 years of annual cost. Your age and life expectancy will vary (hopefully this is obvious). Using Financial Mentor’s Latte Factor Calculator, I plugged in all the numbers, just as I did yesterday.

However, I made one change. Yesterday, I put the expected return on investment at 8% as recommended in the chart. While one may be able to invest and get this consistently, it doesn’t cover inflation. Thus you are left looking at number that is huge, and a lot of that is due to projecting inflation for 47 years down the line. Some of the numbers in this chart were multiple millions of dollars and that just seemed a little too sensationalistic for my taste. Today, I made the expected return on investment 4%. This lower percentage is intended to cover inflation, investment expenses, gains taxes, etc.

The end result is that you’ll get numbers that make sense today.

Using that change and applying it to coffee we find that the lost interest in buying coffee for your caffeine supply is $31,579.63 or $47,831.73 in Real Cost (lost money on the coffee and lost investment opportunity).

I like to look at it this way: If I offered you $47,831.73 would you give up coffee for your life. It is a year’s salary for some people. I’m not saying that it is an easy choice, but it is food for thought.

Now you know how the chart works, the data speaks for itself. Here’s what I found interesting:

Soda

Like coffee, there’s a range of different costs for soda. There are generic store brands and name brands. There’s the cost of buying soda at the store and in a movie theater. You can save some money by buying 2-liters vs. cans. I went with the pricing of a 12-pack of soda, which I’ve often seen at $3. The best deal I’ve gotten is $2, but the Wal-Mart around me charges $2.68 for their Sam’s Choice. If it is $3.00 for 12-pack, that’s an even $0.25 for a 12-ounce can. I spot checked the caffeine content of a number of sodas and came to an average of 40mg of caffeine. That ranges quite a bit as well.

Even though the cost of soda is lower than coffee, the caffeine content is less. It’s nearly 8 cans of soda to get to the average 300mg of caffeine a day. The annual cost comes out to $684 with a real lifetime cost of more than $94,000.

Coffee Shops

I’m going to jump down to coffee shops. Once again, the amount of caffeine varies. I’m going to blame Starbucks’ Venti’s 415mg of caffeine for raising that 300mg average of Americans. And though it had the lowest lifetime real cost of all the options, paying more for more caffeine that you need is not a financial win. It’s like buying 30 gallons of gas for your Smart car, it’s just wasteful.

On average, the real lifetime cost of coffee is $123,515.34 or almost $80K more than brewing it at home. If you are making $40K a year, is it worth 2 more years of working to you?

Energy Drinks

The big stand-out in this category was Red Bull. It isn’t a lot of caffeine at all for it’s cost. I should note that I used Amazon for the costs of Monster and Red Bull. I used my local Aldi and Dollar Tree for the costs of Gridlock and Rip-It. The idea was to show a wide range from a variety of sources. This is why I wrote an article about saving money on energy drinks.

MLM Energy Drinks

It wouldn’t be a fun Lazy Man article without a little controversy (and even a little MLM bashing). MLM Energy drinks reflect company-stated retail prices. Often distributors can sign up for a wholesale discount that can earn 25% off. However, as you can see 25% off of a real cost of $471,757.08 isn’t much of a deal. It’s the old trick, raise the price and offer the consumer a discount to make them think that they are getting a deal.

When you see the real lifetime cost of $646,890.98 for Vemma Verve… it should shock you. There’s so little caffeine at a such a huge cost that it can be worth 10-15 years of salary to get an average amount of caffeine. The same holds true for MonaVie eMV. These three things have one thing in common, they are marketing to college students and recently graduated adults who don’t know to avoid MLMs, and may be more likely to ignore a buck or two on many small purchases as part of the cost of being in a “business.”

Caffeine Pills

Let’s get back to the generic area. Of all the common list items here, the cheapest is the caffeine pill. I found 100 of these Natrol Caffeine 200mg Pills for $6 or 6 cents a pill. That’s just 3 cents for 100mg or 1/10 the price of coffee that you brew at home. It’s 1.5 cents for 50mg or around 1/16th the cost of a can of soda. Cutting the annual cost of to around $32 by taking caffeine pills has a profound effect on the lifetime real cost. It becomes only $4536.

Did I mention that it is a subscribe and save item from Amazon? You can save 15%-20% off the $6 price.

On the downside there’s the obligatory Jessie Spano warning:

(I had to include one pop-culture reference that people will know to make for Mr. Destiny above.)

Caffeine Powder

Honestly, I almost purposely left this option out the article. Why? It really isn’t a viable option in my view. You could kill yourself. Let me rephrase that a bit for emphasis: You will kill yourself. And people are asking to have caffeine powder banned.

Was I clear there? Good.

(I see you already already thinking about ignoring my warnings. If so, please pick up a milligram scale.)

If it is so dangerous, why did I even include caffeine powder? I wanted to show that the cost of caffeine is trivial for a company to add caffeine to their products. I also wanted to show what the true cost of caffeine really is outside of the convenience of grabbing a drink.

I covered two different prices I found for bulk caffeine powder online. (No, I won’t well you where.) For a 100g bulk bag the annual cost was $13.10, almost a third of what it cost for the pills above. However, if you really want to buy in bulk, you get the price as low as 2 tenths of a penny for 100mg. That’s a year’s worth of caffeine for $1.79. The only problem, besides the minor detail of killing yourself, is that you’ll need to split the cost of the huge bag with 405 of your closest friends… or pass it down 10-15 generations.

Final thoughts

I feel like I need to re-emphasize that the beverage choice here isn’t always about the caffeine. It can be about the taste, the atmosphere, the health, the convenience, other factors, or a combination of all of them. Nonetheless, it is good to know the financial implications of making your decision.

Finally, I want to thank Caffeine Informer for having an awesome website with all this information. It was extremely helpful to have all the data in one place.

 BrandServing SizeCostCaffeine (mg)Annual CostLifetime CostLost Interest*Real Cost*
Generic
Coffee (Generic)8 oz.$0.3095$345.79 $16,252.11 $31,579.63 $47,831.73
Soda (Average)12 oz.$0.2540$684.38 $32,165.63 $62,501.35 $94,666.97
Natrol Pills (Amazon)1 Pill$0.06200$32.80 $1,541.38 $2,995.06 $4,536.44
Caffeine Powder (100g bulk)100mg$0.01100$13.10$615.52 $1,196.03 $1,811.55
Caffeine Powder (25kg bulk)100mg$0.002100$1.79$83.98$163.19$247.17
Coffee Shops
Starbucks (Tall)12 oz.$1.75260$737.02 $34,639.90 $67,309.14 $101,949.05
Starbucks (Venti)20 oz.$2.25415$593.67 $27,902.71 $54,218.04 $82,120.75
Dunkin Donuts (Medium)14.oz$1.79178 $1,101.15 $51,754.13 $100,563.97 $152,318.10
Dunkin Donuts (Large)20 oz.$1.99244$893.05 $41,973.50 $81,559.14 $123,532.64
McDonalds (Small)12 oz.$1.00109 $1,004.59 $47,215.60 $91,745.10 $138,960.69
McDonalds (Large)20 oz.$1.69180 $1,028.08 $48,319.92 $93,890.91 $142,210.83
Coffee Shop Avg16 oz.$1.75231$892.93 $41,967.63 $81,547.72 $123,515.34
Energy Drinks
Gridlock (Aldi)16 oz.$1.00162$675.93 $31,768.52 $61,729.73 $93,498.24
Rip-It16 oz.$1.00200$547.50 $25,732.50 $50,001.08 $75,733.58
Monster16 oz.$1.46160$999.47 $46,975.21 $91,278.01 $138,253.22
Red Bull8.4 oz.$1.5180 $2,070.80 $97,327.82 $189,118.66 $286,446.48
Energy Drink Avg $1,073.43 $50,451.01 $98,031.87 $148,482.88
MLM Energy Drink
Vemma Verve1 can$3.4280 $4,676.56 $219,798.44 $427,092.54 $646,890.98
MonaVie eMV1 can$2.4680 $3,364.84 $158,147.66 $307,298.29 $465,445.95
LifeVantage Axio1 packet$2.00100 $2,190.00 $102,930.00 $200,004.31 $302,934.31
MLM Energy Avg $3,410.47 $160,292.03 $311,465.05 $471,757.08

How Much is Your Coffee Costing You? (Maybe 1/3 of Million Dollars!)

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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:

  1. At Home (cheap) – $0.11
  2. At Home (good) – $0.58
  3. At Home (K-Cups) – $1.34
  4. 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 SourceDaily Cost (16oz.)Annual CostLifetime CostLost InterestReal 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.

Cost of Single-Serve Coffee (K-Cups) at Home

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Yesterday, I covered the cost of brewing coffee at home vs. buying at a coffee shop. I was a little surprised to learn that the savings was around $1.17 a day… $1.75 vs. $0.58 for 16 ounces. (Note: many assumptions were made to get to that number.) While that savings can add up over time, I expected it to be more. I’m inclined to give a decisive edge to those who bring their lunch vs. buy it as that can be a $5+ a day difference.

However, I purposely left out one other option of coffee… brewing at home with the super convenient single serve machines. As I said yesterday, I’m the furthest thing from a coffee expert (as I can’t stuff the stuff), but I think this area is dominated by Kerig’s K-Cups.

The first thing to talk about with K-Cups is the initial cost of the machine. It isn’t trivial as it is typically a $100 or more. Since it is a one-time cost, I’d prefer to move on from it and focus on the bigger cost… the coffee itself.

My research from many different sites says that K-Cups make either 8 or 9 ounces. While I’m sure that you can find a bargain on K-Cups (I’ve seen some good prices at Staples show up on SlickDeals.net), it seems like the average price is around $0.67 per K-Cup. I’m basing this on Daily Finance, Squawfox, and Coffee Detective coming up with that exact same price.

To get to the 16 ounce that we used yesterday, we’d have to double the cost. The price of brewing at home with the convenience of a K-cup jumps from $0.58 to $1.34. Considering that the average 16 ounce at coffee shop was $1.75, you are giving up a lot of savings with this convenience. I’d say that you are better off pay a little more for the comfy chair, the free wifi, and those sweet barista smiles.

However, if you already bought a K-Cups machine, all is not lost. You can get an Ekobrew Cup, Refillable Cup for Keurig K-cup Brewers and use your own coffee. My only issue with that this eliminates the convenience of a K-Cup. Might as well go traditional at that point, right?

My next idea would be a way to make your own K-Cups in advance. For example, I’d like to make a weeks worth of them with my own coffee and then use those as I’m rushing out to work. (This is an imaginary world where I like coffee and don’t work from home.) I don’t know if this thing exists, but I couldn’t find anything like it. If it doesn’t exist and you create this and make a million dollars, I kindly ask that you give me 10%.

This paying for convenience got me thinking about what would be the easiest and cheapest way to make coffee. My solution is a coffee maker in your refrigerator…. and alas there’s already a patent on it. The refrigerator door coffee is ideal, because it already has water coming into it in many cases for the ice maker. If you had a vacuum sealed coffee compartment, you could put a whole pound of grounds (or incorporate a whole bean grinder). With an appropriate timer set up, the only thing you’d have to do on a basis is dispose the used coffee grounds.

I could easily be talked into incorporating this idea into a dishwasher that would have water and be able to dispose of the grounds. Combining the money savings of using your own coffee with the convenience of almost fully automated preparation… that’s a win, right?

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