August 18, 2011, 6:00 am

A Cup of Coffee Isn’t Just a Cup of Coffee

by: MD    Category: Other Financial Articles
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Drinking Coffee In The Morning
A little bit ago Mike wrote about why cutting out your Starbucks won’t make you rich. Mike concluded that passion makes us rich, not frugality. The comments that came with the post were even more interesting. I wanted to highlight two polar opposite comments:

Sunil wrote:

I am with you on this post – if drinking Sbuks or any other 5 star quality coffee makes you happy then you shouldn’t really cut it out. I find it a joke when people say cutting out your Starbucks will make you rich. Sure there are ways to optimize your habits, as the Millionaire suggests by purchasing your own can of coffee, but that can be a whole another discussion in itself. All actions have relevant reactions.

Millionaire chimed in with:

Most people who go to starbucks every morning enjoy buying good coffee as well as to go golfing, or having a beer with buddies, or going to the theatre with spouse or bringing kids to the movies or anywhere else. All those things cost small amounts of money but are recurrent…

I agreed with Mike’s thoughts. Saving money on coffee is the most useless piece of advice that a personal finance blogger can give. The funny thing is that we’ve all done it.

I remember writing embarrassing lists such as: “10 ways to save money” or “5 five ways to cut back.” You can bet that I wrote about cutting back on coffee. It’s the easiest piece of advice to give. To really get into someone’s head and give them advice that resonates highly is challenging. To help someone actually earn more money or start a business is difficult. It’s easy to pass off tips on cutting out small expenses.

I’ve written about this many times. I just want to say that a cup of coffee just isn’t a cup of coffee.

What is it then? What’s a cup of coffee all about?

An excuse to get out.

For some of us grabbing a warm drink is the perfect excuse to get out of the house. If you have a family that makes a lot of noise in the morning or if you want some alone time then there’s nothing better than going for a walk or drive to your favorite coffee shop. We all need an excuse to get out once in a while.

My Dad goes for a drive every single morning to pick up coffee. I tried to buy him a coffee maker one year, but he told me that it’s not about the coffee. He loves to go for a morning drive and just chill out for a bit by himself before the day begins.

A chance to meet with friends.

Going for a warm beverage is a great chance to meet up with friends to catch up. Sometimes I even go to the local coffee shop alone because I know that I might run into someone from high school. If you enjoy meeting up with friends for coffee to chat, there’s nothing wrong with that.

A great way to network.

Almost every single job that I had the lunch break would be spent at the coffee shop. You can get some excellent networking done by joining your co-workers for a chat over a cup. You can also really put a smile on someone’s face by grabbing them a coffee when they have no change on them. If you hate caffeine then you can always get a hot chocolate or something.

Sure you could say that I’m trying to justify my expense here. There’s always two sides to every story. I say that if something as simple as a cup of java brings you pleasure in the morning, then why not enjoy it? You can save thousands of dollars with a high credit score or by increasing your income. You don’t need to take away that cup.

Oh and one more thing. A cup doesn’t have to be so damn expensive. I pay roughly $2 regardless if I’m at Starbucks (grande bold- $2.10), Second Cup (medium paradiso- $2.05) or Tim Horton’s (large regular- $1.65).

What do you guys think? Do you enjoy your cup of java in the morning?

(photo credit: horment)

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Comments

I think budgeting each little expense will drive you crazy. The best way is to work backwards. Pick a goal like: retire from current career at 50, then work on fun side projects or get a new job tht is less stressful and the pay is lower. Figure out what number gets you there aka: How much do I need so that my retirement income is just gravy. Then save that much to get there and live on the rest and spend it anyway you like. It is very very doable….

Ok, but I think the point of the coffee advice (and the associated lunch, eating out a lot, paying for parking instead of taking public transport, going to expensive movies instead of seeing them when they get to the “cheap theatres”, etc) is that these little indulgences cost tons of money when added together. A $2 or $5 coffee every day is like $400-$1000 per year, after tax. You have to earn 50% more than that. So altering your lifestyle to save on a few of those will quickly add up to a lot of money. The coffee is a simple example because many of us buy it, it seems like a small dollar value, but it really counts.

The coffee advice is good, it’s just easy to make fun of when it isn’t understood. The coffee is a proxy for all the costly indulgences. Watch the pennies and the dollars follow. We can also make fun of the other advice: “Forget worrying about coffee, just make $3000 more dollars per week by finding clients and freelancing to them with your awesome skills.” Some people gravitate to one over the other. By the way, businesses watch both the expenses and the revenues.

[...] A Cup of Coffee Isn’t Just a Cup of Coffee @ [...]

I agree with Alex. Too much deprivation is a bad thing and stifling rewards and creativity is equally bad – but you need to watch overindulging and most importantly find ways to save money on your indulgences while not cutting them out.

For me, I do like the odd Tim’s or Starbucks while I’m out and about so I don’t hesitate to get it. But, instead of seeking at that expensive cup I will buy expensive teas to drink at home and enjoy it just as much. That way I’m still indulging myself with high end drinks and not really stopping myself from enjoying a cup with friends or when I’m out having fun either.

When going to the movies, I use buy one get one free passes from Air Miles (they just discontinued them this month) to save 50% every time we go out to the movies. They only cost 30 Air Miles a piece so they were the absolute best value for your miles. Why spend 75 miles for one free pass when you can spend 30 miles for the same free pass and just have to buy the 2nd one yourself? Now that they’re gone, I’m going to have to re-evaluate.

We love eating out so when we go we try to use a local coupon book to get B1G1 entree offers at fancy restaurants and limit our ordering of appetizers, desserts, and over-priced drinks. Getting out for dinner and enjoying fancy food is 90% of the fun, so we only get the other stuff when we’re really in the mood (that does happen sometimes). Daily Deal sites are another way to do this cheaply.

We love to indulge in travel so I plan ahead and use credit card sign up bonuses and put all our purchases on credit cards making sure we are getting the absolute highest return per dollar spent. Consequently, we have trips booked in the next year to both LA and Paris and it won’t cost us much. Flights will be free except for the taxes and I optimized the flights so that they even cost less points and the taxes are less than they could be. 5 days of hotel in Paris will be free and at least 5 days of hotel in LA will also be free. I’m not a business traveler and almost never pay for plane tickets to accumulate miles. Just an average Joe.

Indulge away I say – just find ways to do it for less and don’t spend more than you make!

by: Millionaire | August 19th, 2011 (9:15 am)

It’s true that being frugal won’t make you rich. But don’t live and spend like the rich before you are rich. Most people don’t even aim at getting rich, they barely make it to survive. But they live the the rich.

+2 coffees (20 days/month) : 6$/day –> 120$/month
+A night out a month at the movies with the wife and 2 kids (3D+pop corn+drinks) –> 75$/month
+Breakfast at the restaurent every saturday with the family: 30$ –> 120$/month
+5 lunches a week at the restaurent : 10$/day, –> 200$/month $
+A good bottle of wine every week: 20$ –> 80$
+A round of golf a week with buddies: 60$ –> 240$
+The difference between a decent car payment and a SUV payment: several hundreds $$$/month
+The difference between a decent house payment and a monster home payment: a thousand+ $$$/month

And i’m not exagerating here. This list represent “regular” expenses these days for people of my generation (30-40). I see friends and neighboors with equivalent jobs as mine (comfortable) indulging themselves with borrowed money.

I’m not saying to stay home and do nothing. I say don’t spend the money you don’t have. Simple as that. Look at what’s happening in the US and Europe these days. I bet it’s coming to Canada….

Why do people need so much indulgence? Get a life for christ sake. Focus on what’s important. And no, a treat here and there won’t hurt. But a treat is a treat, not a regular expense.

Sometimes a cup of coffee is even less than a cup of coffee. If you have coffee once a week and meet with friends it is a special occasion. If you do it everyday it might become just another boring routine.

What about the people who go through the drive-thru every morning on their way to work? No networking going on there, it’s just easier than fixing a travel mug before heading out… Now that’s a waste of money!

All things in moderation and going out once a week, or so, to meet with friends or to network turns something that was part of the daily grind into a pleasureable and possibly career enhancing experience. Now that is worth the money :)

@Neo Goal setting is key to financial success.

@Alex Yes expenses do need to be accounted for. I just feel that you can’t always quantify everything.

@SM I really love your motto “Indulge away I say – just find ways to do it for less and don’t spend more than you make!”

@Millionaire You’re dead right with your example. I was just talking about the average person that enjoys their coffee though.

@Andy That’s true. It can become a boring routine for some. If it becomes another redundant routine then it makes sense to cut it out.

@Sophie Some people just don’t care for brewing their own coffee. Just like how not everyone makes their own food.

by: RandomWalker | August 22nd, 2011 (1:32 am)

I think it is an interesting piece of advice if played differently. I like to think of it as a bit of habit substitution.

I was an regular coffee buyer (Tim’s typically). While I would typically buy two cups a day, I decided to cut it out and make my own. Every day that I didn’t use my change to buy coffee, I put the $4 into my bedside bank.

Of course, when I do indulge or maybe have a chance to socialize with someone at the coffee shop, I don’t donate money to my piggy-bank. The cost of doing business, I thought. Basically, my objective was to change my daily habit of buying coffee to depositing the saved money daily in some tangible form.

It is as satisfying to hear the clink of my loonies dropping down into my tin cup as it is to roll $300 worth of change to bring down to the bank for deposit.every three months or so.

Haha…yeah that’s so funny because I just did the math today on the savings for buying coffee at Starbucks vs buying a 16oz bag of grounds and making my own with a french press.

Using 4 table spoons per a twenty ounce travel mug vs buying a venti coffee every monrning, and the difference was around .20 cents.

Not really significant enough to give up buying my cafe from the cute baristas at the neighborhood Starbucks.

[...] A Cup of Coffee Isn’t Just a Cup of Coffee  [...]

I think that the concept behind cutting out your coffee is to cut out expenses that are small, add up, and you don’t really need. If you really, really enjoy your cup of coffee, for whatever reason it is, then it shouldn’t be up out. If you enjoy your home brewed coffee as much as your local coffee shop’s coffee, and it’s just become a habit or convenience, then it definitely needs to be considered when it’s time to trim the budget. Of course, cutting out coffee will not make you rich, unless you’re buying rounds of Starbucks for your entire office each morning. But it will help squeezing by a lot less difficult for those that are living paycheck-to-paycheck, or just trying to get themselves a solid footing financially.