Sometime recently there was a big hubbub about a personal finance personality saying, and I do paraphrase, “If you didn’t spend $5/day on coffee you would have $1 million at retirement.” (Orman, maybe?)
Anyhoo, the responses went something like:
“You can’t save your way to wealth!”
“Nobody gets rich saving $5!”
“F you! I like my coffee!”
My response was a little more incredulous… “Coffee costs $5?!”
The “$5 cup of coffee”
Caffeine is one helluva drug. I’m one of billions of fans of its ability to boost focus and alertness. Mmmm, sweet nectar of the gods.
My fellow addicts consumers are a passionate bunch… those who suggest we consume less (or do so more cost consciously) are not often treated with civility.
So do as you will. Me, the proverbial $5 cup of coffee got me thinking… just how much do people pay for their daily boost?
Caffeine prices
We make coffee at home, often with one of those fancy Nespresso machines (I think we paid $100?), but I occasionally use a french press (~$20?) or steep some cold brew in a large glass jar on a fine summer day. I’m also a big fan of Earl Grey tea.
From the comfort of the local coffee shop I did some basic research on the price of caffeine from various sources. Prices are from Amazon.com and a menu price database. Caffeine data is from the Center for Science in the Public Interest.
This table shows estimates for the cost of consuming 100 mg of caffeine from various sources (typical amount in a single 8 oz cup of coffee.)
| Caffeine source | Cost | $ / 100 mg |
|---|---|---|
| Espresso | $1.75 | $2.33 |
| Latte (tall) | $2.75 | $1.83 |
| Red bull | $1.42 | $1.77 |
| Coke zero | $0.41 | $1.20 |
| 5-Hour Energy | $2.21 | $1.10 |
| Americano (Tall) | $2.45 | $1.09 |
| Nespresso pod | $0.60 | $0.48 |
| Earl Grey at home | $0.13 | $0.26 |
| Cold brew at home | $0.4 | $0.26 |
| Burger King $5/month subscription | $0.17 | $0.17 |
| Hot brew at home | $0.2 | $0.13 |
| Maxwell House | $0.03 | $0.05 |
| NoDoz (1/2 pill) | $0.03 | $0.03 |
* A 1 lb bag of ground coffee beans will make about 40 cups of brewed coffee (2 Tbsp per) or 20 cups of cold brew.
The coffee I’m currently drinking cost about $1. It’s from one of those local coffee shops, the small ones where they roast the beans in the store. (Actual price 40 TWD = $1.33 USD, but between the regular Buy 4 Get 1 Free offer and a Buy 10 Get 1 Free stamp card I pay $0.97.)
A typical day costs ~$1 — 1 or 2 cups of home brewed coffee, maybe a can of Coke Zero, an occasional cup of Earl Grey. Hot. I could spend less if we always used the french press or converted to Maxwell House.
I know the big drinks with lots of whipped cream, sugar, and artificial flavor cost big bucks, so maybe that is where the $5 is going? Future health care should probably also be included in the price.
The ultra-frugal might be better served by Maxwell House or chasing down a NoDoz with some tap water or taking a short nap.
Or if not ultra-frugal, chase a NoDoz down with a super-sized milkshake:
- Related: The Oatmeal’s How 99.9% of People Judge the Quality of their Coffee
“Free” Coffee for Life
The notion that a caffeine free existence will somehow result in a $1 million retirement slush fund uses some dubious math.
A more reasonable mathematician might just ask, “How much Starbucks stock do I need to buy for my SBUX dividends to buy me coffee for life?”
At present, Starbuck’s stock pays a ~2% dividend. Why not buy some and let Starbucks buy your Starbucks?
A $18,250 purchase of SBUX will yield $1/day ($365/year.)
If you are a believer in the 4% rule (as I am) then you would need less than $10k. That is a far cry from a million bucks. (Multiply those numbers by 5 ($91,250) to yield a $5/day cream and sugar habit.)
Alas, if we are only contributing our coffee budget to the coffee-for-life fund, at a 7% real rate of return it takes nearly 22 years without caffeine to reach our goal. Or 50 years with zero real growth.
So much for coffee avoidance paying for retirement.
So the money needs to come from somewhere else… The route we took was to save $20,000 on rent/car/restaurants, and then put that into the free coffee, free rent, free life fund. (All while under the influence of caffeine.)
Related: The Joy of A Car Free Lifestyle
—
Alternatively, Novartis (the maker of NoDoz) currently has a dividend yield of 6.2%. A yearly supply of that stuff costs only $11 which can be “free for life” with only a ~$175 purchase of NVS stock. (Careful – a friend in high school took an unknown quantity of NoDoz and almost died.)
Starbucks Hacks
I don’t visit Starbucks often, but here are a few things I’ve done or seen people do that are pretty savvy:
- Order the large and share with a spouse (get an extra cup)
- Order the “short” version – 8 oz vs the 12 oz “tall” – not on the menu but they serve it (a tall is too much caffeine for a single sitting)
- Order the espresso and use the free milk instead of ordering a latte
- Order the espresso and add free hot water instead of ordering the more expensive Americano
- Free refills – order anything and then get a free coffee (even cold brew!) or tea
- bring it home in your thermal cup
- US stores only (I believe)
- Buy gift cards at a discount — ($5 off your first gift card purchase.)
- Bring coffee from home for 1/10th the price (when gathering with less frugal friends)
- Ask for a free Babyccino (frothed milk) – great for the kids (not free in every store)
- Learn to love drip coffee – coffee is an acquired taste anyway. I love the drip!
Summary
Avoiding coffee or caffeine for 50+ years is unlikely to lead to retirement riches, but cost conscious caffeine consumption can definitely lead to higher savings.
Coffee at home is as low as 1% of the price.
Putting those savings into income producing assets can then lead to a lifetime of Starbucks paid for by Starbucks.
A $20,000 investment into Starbucks stock (or an index fund) with a 2% dividend yield will pay out $1/day.
“Free” coffee for life!
Do you practice cost conscious caffeine consumption?
Addendum (Feb 20, 2020): after writing this, I asked myself, “What is it that I have to be focused and alert for, anyway?” So I quit caffeine cold-turkey for a TBD length of time.
It’s been 5 1/2 days… except for a minor headache in day 2 and an increased fondness for naps, I haven’t really noticed.
(I’ll still drink coffee for special occasions like doing my taxes.)
I am not a coffee aficionado, but even I can’t stomach Maxwell House. I would rather spend a bit extra on Kirkland Brand from Costco.
As I recall, both Maxwell House and Folgers taste worse than dirt.
Confirmed. My parents brew Folgers at home so when we go visit them it’s… challenging
Another Stbx hack – get their Visa card, spend $500 and get 6,500 reward stars (150 stars = 1 drink of any size). That’s 43 free drinks. Use your stars before you cancel within the first year to avoid the annual fee for the second year.
Good one. I bet you will get back on coffee. Quitting for a couple weeks is easy. Longer, much harder. Let us all know!
I don’t doubt it. I like coffee.
This morning I wanted a cup as I was feeling a little sluggish. But then a 5 minute ride on the bike got me going.
If you do the math, that sign on bonus is not worth very much. Better to focus on cards with a much more generous sign on bonus in my humble opinion.
Or both.
David Bach wrote a book called The Latte Factor a while back. It was about the power of forgoing the daily expense Like the Starbucks Grande Mocha Latte rather than the home brew coffee, to build savings over time.
Paying huge margins on cream and sugar will definitely set you back.
Panera has $8.99/month unlimited coffee including iced! I’m there multiple times per week :)
That’s not a bad deal, and I love Panera coffee. Too bad there’s not a convenient location by me. We have two in town, but both are too far to justify a special trip.
I quit caffeine maybe five or six years ago — right about when a tiny local roastery opened up just a ten-minute walk from my house. This was a brutal double whammy, because I love coffee. So my wife and I visit every week or two, and she’ll get her chai and I’ll get my flat white, and I’ll suffer through headaches the next day when my system realizes it won’t get any more caffeine for a while. But those few minutes when I’m drinking it are totally worth it.
Eric, that SBUX Visa hack is h*ckin’ brilliant! If that were my regular haunt I’d be all over it.
Adam…I feel you as I’m a coffee lover and have given it up as well. I make my weekly espresso treat a decaf and I have no guilt and I can’t even tell the difference with no headache.
Sometimes the roastery has decaf espresso available and sometimes they don’t; maybe I’ll have to give that a shot as circumstances allow. It would be lovely if that did the trick. Thank you — maybe I can stop punishing my noggin quite so hard :)
I’ve been a decaf girl for 6 years, and we make it at home except for special occasions (usually air travel). Bonus “perk” while still in the workforce: Free coffee at work if I want more, or were willing to wait until I got into the office.
If I start craving coffee I might try the decaf. I’ve definitely acquired the taste.
SBUX charges 50 cents for a refill in the US of regular tea and coffee. I drink a lot of their very expensive But good iced tea in the warm months.
You may be able to get hot water free.
Free refills with a gold card ( their rewards program)
A colleague of mine for nearly 20 years couldn’t afford to contribute to her 401(k) because she didn’t have enough money in her paycheck. Missed out on 20 years of matching $ for $ match and the tax savings.
Nothing I could say would change her mind. Even spreadsheets showing a couple hundred thousand in lost retirement savings.
Despite all of that, twice every work day she would get a hot coffee from Dunkin’ Donuts.
Couldn’t afford to save…but also couldn’t make coffee in the office each day for a fraction of the price. Go figure….
My last year or so at work they replaced all the crap coffee machines with Starbucks machines… it would freshly grind the beans for each cup. It was pretty good actually. But people would still go stand in line to get a latte at Starbucks. I offered to pour milk in their free office coffee for $3 but nobody accepted.
I figured I pay about a dime per cup of coffee made from whole bean coffee I get from a standard grocery store. I only need 9 grams of coffee to make a decent cup by just using a reusable Keurig cup to hold the grounds while slowly pouring water through it.
Also consider getting Cash App, which uses a debit card to get $1 off at any coffee shop, minimum $1.50 purchase. A $2 coffee is $1. The savings happens instantly, nothing extra to do. Sign up through a friend’s referral and you both get $5 after transferring $5 (basically use the app).
I like the reusable Keurig idea. I’ll have to check out the cash app boosts next time I’m in the US.
We brew coffee at home and the expense is negligible. Occasionally, I’ll pay for coffee when I meet someone to chat. It’s more for social interaction rather than coffee.
Anyway, good idea with buying Starbucks stock if you buy their coffee. That’s what I do with gasoline. I have Exxon and Chevron. The dividend covers our gasoline expense and then some.
I do the french press when we have people over as I can make 4 or 5 cups easy.
Apparently nobody else is going to congratulate you on your clever joke at the end. I just wanted to let you know that I noticed it, and I appreciate your sense of humor.
I’m ahead of my time. Or behind, I’m not sure.
Good luck with the break from coffee. Hopefully you’re allowed some Earl Grey? I take occasional breaks from coffee too. Otherwise it’s Morning Buzz beans from Whole Foods brewed at home. Office coffee is crap and only consumed in desperate moments. Starbucks or other coffee house drinks are an occasional treat 😋 Great post!
I just cut caffeine completely. Will see how long that lasts.
Or just stop drinking coffee all together. I have stopped drinking coffee for over a year now. I do enjoy the smell though.
I do like the idea of buying Starbucks stock and collect dividends. That’s what we do with many of our stocks. :)
6 days and counting. I like coffee though.
Been reading for years and never commented, but I have to show my appreciation for your reference to Starfleet’s greatest Captain!
I visit my wife’s family in Taiwan every other year but have never reached out to meet up for coffee- next time I’ll have to “make it so” :)
I’m watching episode 3 of Picard as I type this :)
Oh ya the caffeine buzz gotta have it, but where do you get coffee beans in Taiwan? We had to go right to the mountain and when we asked for roasted beans they thought we were aliens from Mars… We are in chiayi. Or will be this Summer.
Costco or my local coffee shop. A search on Google maps in Chiayi shows a bunch of small coffee places and a Starbucks. (832 or Owl look nice.)
The Nespresso pods we order online and they are delivered to our door.
40 cups from a pound of coffee seems like a lot. I make pour-over coffee, and use around 25 grams per cup (seems to be consistent with recommendations I see around the interwebs), which means I get more like 18 cups per pound. At the prices I pay (our nearest grocery here in SF is very expensive), that works out to about 85 cents a cup. But yes, it’s still much less than $5.
80 Tbsp per lb of ground beans, 2 Tbsp per 8 oz cup. That’s what the Internet says anyway. At 2 Tbsp per cup I usually end up with something slightly lower.
I was never into coffee, but I loved my homemade chai tea lattes in the mornings. (If you purchase a carton of Tazo chai tea from the grocery store, it rings up on the receipt as “Starbucks Chai”.
We cut our budget even further and I haven’t bought it in a while, but still occasionally need caffeine because cleaning three houses in a day on three hours of sleep without it just isn’t realistic. I use some NoDoze knockoff that was ridiculously cheap at my local Grocery Outlet. Problem solved!
My wife LOVES chai lattes. I kinda wish we could get just a countertop steam wand (no espresso machine attached) to make those at good hot chocolate drinks. I’m curious — what equipment do you use to get the carton contents to your liking?
Well I add “milk”, which for me due to a dairy allergy is typically coconut milk, though I tried macadamia nut milk once and it was heaven on earth.
Confession: I’ve never actually had a latte from an actual cafe; the dairy particles go airborne and it’s not safe for me, even if they were to serve me a nondairy drink.
Ergo, my equipment is a mug, a microwave, and a spoon. I’m told that I ought to be using a milk frother and apparently it does things to the drink, but this works for me (back when I afforded myself the luxury).
I also make my own hot chocolate with cocoa powder, sugar, and “milk”. Same equipment. ;)
Thanks for letting me peek behind the curtain! I’m sorry to hear about that allergy, oof. Here’s hoping that tasty goodness creeps back into your life now and then!
Coffe has two components: roasted polysaccharides and caffeine.
Component 1: In Aus can collect wattle seed from roadside and roast own or buy (https://austsuperfoods.com.au/nutrition/wattleseed/).
[Optional] Component 2: No Doz 100 x 100mg Tablets $A16.49 (https://www.chemistwarehouse.com.au/buy/6656/no-doz-100-tablets).
Nice with weed [real weed] salad.
I wrote an entire post about why you should drink coffee and how to really get rich like Suze. She did not retweet it though lol
Ha, that is funny
My caffeine consumption comes from drinking Puerh tea which I brew Gong Fu style. I highly recommend it.
I’m not a huge fan of tea in general except Earl Grey
The decaf life is not without challenges. I’ve been decaffeinated for 20+ years but over time got addicted to the 1-3% caffeine that’s in decaf. If I don’t have my cup of decaf in the morning its headaches for 24-28 hours. Not a problem until we retired and started travelling full time 2 1/2 years ago. Many countries do not have decaf in the grocery stores. So far Bosnia, Poland, Lithuania,Thailand (one store in Chiang Mai that caters to expats), Malaysia. When I can find it, its 2-3 times as expensive as regular. So I’ve switched to drinking regular tea which doesn’t seem to give me the health issues that regular coffee does. I’ll deal with the headaches when back in the states.
I’m a tea rather than coffee drinker which has saved a lot of money for the years.
When I was 19 I got my first office job and steady paycheck. So of course I wanted to add all the adult things to my life: alcohol, tobacco and coffee. Alcohol and cigarettes got added but not coffee. I realized that if I drank coffee I would get stuck always making the coffee and cleaning the pot. After all I was female and by far the youngest and lowest paid employee in the office. I figured, correctly, that even in the 1970s they wouldn’t put me in charge of coffee if I didn’t partake.
So tea then and tea now.
Smashing the patriarchy one cup at a time!
Kirkland Brand *Bucks and Costco Columbia Roast are my cheap favorite. Using Italian Mocca Cup to brew. Try not to overdose with caffeine. Small amount of coffee has health benefits.
We got one of the individual serving Mokas when we were in Italy. It’s good coffee once you learn how to use it, which took me a few tries.
Consuming Maxwell House makes it easier to quit drinking coffee. I wanted to quit soda in the 80s so I started drinking T@B. Worked like a charm.
Definitely easier to quit something that tastes disgusting
Another starbucks hack – if you’re been paying over $3 for an iced coffee, next time try getting a shot of espresso in a grande or venti cup with ice. If you bring your own cup, with a 10 cents discount this rings up to be $2.11 (including tax). You can top off your espresso with milk at the self-serve counter. Voila there’s your iced coffee. Want flavor? Just pay 50 cents more to add a pump of white chocolate mocha, caramel, etc.
Good one!
I decided to get a promotion at work, help get big stuff accomplished for nice bonuses, and reward myself with an occasional coffee at our on-campus coffee shop. More of an abundance-side approach to the matter. Still avoiding sugar though – just a triple espresso for this guy! (at home we use Costco beans with an Aeropress – magically delicious!)
More money is the ultimate solution
During this crazy time in the stock market I have been buying and selling Starbuck’s stock like crazy – all in my Roth. I have made enough profit on these trades that coffee at Starbucks is free to me for the rest of my life!!
Nice