What is the most you would pay for a cup of coffee?
By 7:00 a.m. this morning, I was at the local Albertsons. There is a Starbucks inside and several people were already in line. I have been to that store many times and they have quite a few regulars.
I bought the biggest and best and most expensive cup of coffee they had. It was a Large Pumpkin Spice Frappuccino with four shots of espresso. Get your own recipe here. It had a healthy dose of whipped cream and some cinnamon sprinkled on top. It was chilled, like a fantastic malt. For the next forty-five minutes, I savored every sip!!!
The YUMMY purchase was research for a new book which I am writing: Stop Flushing Your Money Down the Drain. It is a financial planning book, mostly designed for people who never really learned the ins and outs of financial decisions. In it, there are good discussions of insurance, lenders, auto purchases, the cost of raising children and pets, how to get better jobs, why formal education is overrated, and much, much more.
There is also a substantial section covering "The Worst Things we Spend Our Money On" (excuse the poor grammar). One of the first parts of that section is "Conveniences." In that section I point out that many people pay through their noses for convenience. The examples are everywhere: Carwashes, drive through foods, convenience stores (imagine that), going out to dinner, packaged items...and gourmet coffee.
I go on to illustrate that if a person wastes $4 per day on conveniences (or anything else), he losses an incredible amount of money, over time. I show my readers that if they would have used that money to pay off other debt or to invest it, after 40 years (a typical adult-life, before retiring) the consumer would have accumulated a whopping $465,0000, counting interest. I think that is dumbfounding!!!
So, what does all of this have to do with that particular awesome cup of coffee? Since I have only bought one other cup of gourmet coffee in my lifetime, this cup was very special. In this case, I wanted to find out exactly what is the very best experience somebody could have with such a purchase. For $7.75 I spent 45 minutes in coffee heaven. But, now the coffee is gone and so is the $7.75. And I can say without any doubt, it was NOT worth it. To compound my misfortune, I will be paying interest on that money forever. I will explain why in a moment.
It is easy to justify such convenient purchases with self assuring comments like "I deserve this" or "It is only a few dollars" or "I can always cut back tomorrow." These are the kind of justifications that lead otherwise smart people to financial ruin.
I am not suggesting that there is anything wrong with an occasional treat, such as the Frappaccino which I cherished, but rather I am talking about the habit of making allowances for routine extravagant purchases.
Worse yet, are the poor souls who compound their monetary woes by using their credit cards for such purchases. This can be another sin of convenience. Nearly everybody knows that plastic cards are not free money, but when those impulsive opportunities present themselves sometimes the plastic money is just too easy to get; consequences be damned.
I suppose a great debater might be able to persuade me that using a credit card is okay if the consumer budgeted for the purchase in the first place; and if he pays off the card each month without any interest charges being added to the loss - but I doubt if more than 10% of those using credit cards in this way fall into both categories.
The reason that impulsive purchases and conveniences are so damaging is that EVERY SINGLE PURCHASE WE MAKE BRINGS WITH IT A LIFE-TIME OF INTEREST EXPENSES, EVEN IF THE PURCHASER PAYS CASH FOR THE ITEMS. Let me use food to illustrate my point.
When you pay somebody else to prepare your meal for you, either at McDonald’s or some fancy restaurant, some of your cost is a convenience fee. For example, if you could grill a burger at home for $1 but you pay Burger King $3 instead, you are paying them $2 to do the work for you. From that moment on you will have an interest cost on your wasted $2... FOREVER!!!!! That is right: Forever!
That is because you could have used that $2 to pay off some other debt you have. If you have an unpaid credit card, you could have paid some of your debt down and saved the interest charge on that debt, perhaps 12% or higher. If you had a car loan but did not pay it down with your $2, interest continues on $2 at the rate of that loan. What is the interest on your mortgage loan? You could have saved that interest rate on $2 by paying down your loan by that amount.
Any loan that remains outstanding has an interest expense that you could have avoided. Even if you are completely debt free, you could have invested the $2 and received interest income forever, but by forgoing that opportunity there is an eternal interest loss and therefore a FOREVER expense.
Now add to this that people who buy impulsive and convenient hamburgers or coffee, don’t do it just once. They do it day after day. If they are not wasting their money on coffee or hamburgers, it is excessive insurance premiums, cigarettes, ATM fees, extravagant TV packages, lottery tickets or any number of other unwise choices.
As stated earlier, if a person only flushes $4 per day or $120 per month in any combination of these things, he or she is losing $465,000 over forty years (assuming 7% interest).
I am not trying to take away your pleasures. After all, what good is it to arrive at old age with a drawer full of money, if you have no life experiences to compliment your years? I am simply attempting to point out the real cost of our choices, so that we can make more wise ones.
In my new book, I lay out a list of categories in which most people are already wasting more than $4 per day and the simple things they can do to end up with a lot of "extra money" just by paying attention to their choices and redirecting some of the money they already make.
So I suggest you budget for your gourmet coffee or other convenience purchases. It is okay to order a pizza to be delivered if it fits within a budget, but do not succumb to the habit of paying for convenience over and over and over. Kathy agrees with me. And worse yet, do not put those purchases on credit cards unless you can pay off the card when the statement arrives.
Now that you understand the real cost of convenient coffee (and other purchases) I hope you will be able to make smarter choices. If you only buy one Frappaccino per lifetime, I can assure you that it really is special but if you get one every day because "I deserve this" then you are flushing $465,000 down the drain. Even a complete idiot would know that no cup of coffee is worth that.
Perhaps something in between will make sense for you.
What Say You?
By 7:00 a.m. this morning, I was at the local Albertsons. There is a Starbucks inside and several people were already in line. I have been to that store many times and they have quite a few regulars.
I bought the biggest and best and most expensive cup of coffee they had. It was a Large Pumpkin Spice Frappuccino with four shots of espresso. Get your own recipe here. It had a healthy dose of whipped cream and some cinnamon sprinkled on top. It was chilled, like a fantastic malt. For the next forty-five minutes, I savored every sip!!!
The YUMMY purchase was research for a new book which I am writing: Stop Flushing Your Money Down the Drain. It is a financial planning book, mostly designed for people who never really learned the ins and outs of financial decisions. In it, there are good discussions of insurance, lenders, auto purchases, the cost of raising children and pets, how to get better jobs, why formal education is overrated, and much, much more.
There is also a substantial section covering "The Worst Things we Spend Our Money On" (excuse the poor grammar). One of the first parts of that section is "Conveniences." In that section I point out that many people pay through their noses for convenience. The examples are everywhere: Carwashes, drive through foods, convenience stores (imagine that), going out to dinner, packaged items...and gourmet coffee.
I go on to illustrate that if a person wastes $4 per day on conveniences (or anything else), he losses an incredible amount of money, over time. I show my readers that if they would have used that money to pay off other debt or to invest it, after 40 years (a typical adult-life, before retiring) the consumer would have accumulated a whopping $465,0000, counting interest. I think that is dumbfounding!!!
So, what does all of this have to do with that particular awesome cup of coffee? Since I have only bought one other cup of gourmet coffee in my lifetime, this cup was very special. In this case, I wanted to find out exactly what is the very best experience somebody could have with such a purchase. For $7.75 I spent 45 minutes in coffee heaven. But, now the coffee is gone and so is the $7.75. And I can say without any doubt, it was NOT worth it. To compound my misfortune, I will be paying interest on that money forever. I will explain why in a moment.
It is easy to justify such convenient purchases with self assuring comments like "I deserve this" or "It is only a few dollars" or "I can always cut back tomorrow." These are the kind of justifications that lead otherwise smart people to financial ruin.
I am not suggesting that there is anything wrong with an occasional treat, such as the Frappaccino which I cherished, but rather I am talking about the habit of making allowances for routine extravagant purchases.
Worse yet, are the poor souls who compound their monetary woes by using their credit cards for such purchases. This can be another sin of convenience. Nearly everybody knows that plastic cards are not free money, but when those impulsive opportunities present themselves sometimes the plastic money is just too easy to get; consequences be damned.
I suppose a great debater might be able to persuade me that using a credit card is okay if the consumer budgeted for the purchase in the first place; and if he pays off the card each month without any interest charges being added to the loss - but I doubt if more than 10% of those using credit cards in this way fall into both categories.
The reason that impulsive purchases and conveniences are so damaging is that EVERY SINGLE PURCHASE WE MAKE BRINGS WITH IT A LIFE-TIME OF INTEREST EXPENSES, EVEN IF THE PURCHASER PAYS CASH FOR THE ITEMS. Let me use food to illustrate my point.
When you pay somebody else to prepare your meal for you, either at McDonald’s or some fancy restaurant, some of your cost is a convenience fee. For example, if you could grill a burger at home for $1 but you pay Burger King $3 instead, you are paying them $2 to do the work for you. From that moment on you will have an interest cost on your wasted $2... FOREVER!!!!! That is right: Forever!
That is because you could have used that $2 to pay off some other debt you have. If you have an unpaid credit card, you could have paid some of your debt down and saved the interest charge on that debt, perhaps 12% or higher. If you had a car loan but did not pay it down with your $2, interest continues on $2 at the rate of that loan. What is the interest on your mortgage loan? You could have saved that interest rate on $2 by paying down your loan by that amount.
Any loan that remains outstanding has an interest expense that you could have avoided. Even if you are completely debt free, you could have invested the $2 and received interest income forever, but by forgoing that opportunity there is an eternal interest loss and therefore a FOREVER expense.
Now add to this that people who buy impulsive and convenient hamburgers or coffee, don’t do it just once. They do it day after day. If they are not wasting their money on coffee or hamburgers, it is excessive insurance premiums, cigarettes, ATM fees, extravagant TV packages, lottery tickets or any number of other unwise choices.
As stated earlier, if a person only flushes $4 per day or $120 per month in any combination of these things, he or she is losing $465,000 over forty years (assuming 7% interest).
I am not trying to take away your pleasures. After all, what good is it to arrive at old age with a drawer full of money, if you have no life experiences to compliment your years? I am simply attempting to point out the real cost of our choices, so that we can make more wise ones.
In my new book, I lay out a list of categories in which most people are already wasting more than $4 per day and the simple things they can do to end up with a lot of "extra money" just by paying attention to their choices and redirecting some of the money they already make.
So I suggest you budget for your gourmet coffee or other convenience purchases. It is okay to order a pizza to be delivered if it fits within a budget, but do not succumb to the habit of paying for convenience over and over and over. Kathy agrees with me. And worse yet, do not put those purchases on credit cards unless you can pay off the card when the statement arrives.
Now that you understand the real cost of convenient coffee (and other purchases) I hope you will be able to make smarter choices. If you only buy one Frappaccino per lifetime, I can assure you that it really is special but if you get one every day because "I deserve this" then you are flushing $465,000 down the drain. Even a complete idiot would know that no cup of coffee is worth that.
Perhaps something in between will make sense for you.
What Say You?
1 comment:
And it's way healthier to either skip it or make it at home. I have a website at home that I can share with you that has hundreds of recipes for many popular fast food/restaurant items. So you can make it at home for a fraction of the price and I've tried a few of the recipes and they taste pretty darn close to the version you'd get eating out.
I am a self proclaimed Starbucks junkie though - but I limit myself to one drink per week - for financial and calorie reasons. And I savor it. Mmmm, pumpkin spice latte.
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