It’s been a long while since I wrote about coffee so here is an update. In 2012, I was a financially independent millionaire and I refused to buy overpriced coffee. I didn’t need to because my old workplace offered free coffee as overtime pay for their overworked engineers. Great deal for the company! Now, I’m a retired engineer/blogger/stay-at-home dad and I still refuse to buy expensive coffee.
Okay, refuse is a strong word. Let’s just say I rarely visit our local Starbucks. The last time I went was to meet with the tenant who was moving out of our rental home. We sold that home in 2014 so that was about 4 years ago. I’ve visited a few coffee shops since then, but only to catch up with friends. We usually avoid Starbucks because I prefer to support the local shops. Am I just being a cheap bastard? Yes, that’s part of it, but let me justify my cheapness.
The picture is from our Cancun vacation. The coffee shop was part of the package. We drank a ton of cappuccino there.
***Don’t leave yet. Skip to the last section for an awesome coffee brewing tip if you don’t want to hear my take on the latte factor.
Now that I don’t get free coffee anymore, I should buy coffee, right? Not really. These days, I only drink coffee in the morning. We brew it in a French press at home and that’s all I need. I blog from home so it would be more trouble to go out and get coffee. By the way, our French press is over 10 years old and it still going strong. Also, I don’t need the afternoon pick-me-up anymore. Life is less stressful and I don’t have to be ‘on’ all day long. That’s one huge advantage of early retirement, I could live life at my own pace. The free cafeteria coffee was never that good anyway.
Some people like to blog in a coffee shop, but that environment is too distracting for me. In that case, I think it is fine to buy coffee because you’re using their wifi and it is work related expense.
How much are you really saving?
Are you really saving that much money? Let’s crunch the numbers. A medium caffe latte cost around $4 at Starbucks. Let’s say you buy 2 drinks every weekday. That comes out to about $2,000 per year. If you invest that instead of drinking it, you’d have over $250,000 after 30 years (8% gains annually). That’s a quarter million bucks! It is a significant sum. This is David Bach’s “The Latte Factor” that most of you have heard about.
Focus on big wins
I enjoy our modest lifestyle and rarely go out for coffee. It works well for me, but many experts argue that you should focus on big wins instead. You only have so much energy and if you focus on the little things, you won’t have energy for the big stuff. Here are some big wins.
- Live in a cheaper home. Housing is the largest expense for most American family. If you can cut expense here, it’s a very big win. Currently, we live in 2 bed, 2 bath condo. It’s a bit cramp and we’re looking to move into our duplex at some point.
- Drive a cheaper car. We share one car so we’re doing pretty well here.
- Move to a more affordable location, aka geoarbitrage. Portland is getting more expensive, but it is still the cheapest big city on the west coast. Seattle, Los Angeles, and San Francisco are way more expensive than Portland.
- Don’t buy the latest gadgets. Do you upgrade to the new iPhone and other tech. gears every time there is a new release? This can be wasteful because cutting edge gadgets are always more expensive.
- Cook at home and eat out less. We cook most of our meals at home. It’s more frugal and much healthier than eating out all the time.
- Max out your 401k and Roth IRA. Everyone needs to save for retirement.
- Stay healthy to avoid medical bankruptcy.
- Get scholarship instead of paying for college. I hope our son can get a full ride, but we’re saving in a 529 plan just in case.
- Make more money. This one is another big one. If you can make money at work, it will offset this coffee expense. Side hustling like blogging or driving for Uber can help increase your income too. Retire by 40 generated over $250,000 since I started blogging. Check out my awesome guide on How to Start a Blog, if you want to give it a go.
I don’t agree with this focus on big wins theory. If you can’t save on the little things, you probably can’t save on bigger things either. Most people spend too much on everything. Is there a real Starbucks customer who drives a cheap car and live in a smaller home purposely? When you’re living it up with your coffee, you’re probably living it up everywhere else too. Personally, I think it’s best to win big and small. They are not mutually exclusive. Let me know what you think in the comment.
The only exception on the list is the last one – make more money. If you can make more money, it will probably offset your coffee expense. This is easier said than done, though.
You shouldn’t buy expensive coffee if…
Hey, if you are doing well financially, then don’t worry too much about getting a nice Frappuccino® once in a while. However, you shouldn’t buy expensive coffee every day if…
- You have consumer debt. Pay off your high interest debt first.
- You spend more than you earn. This is the cardinal sin of personal finance. You have got to fix it because this is a downward spiral.
- You’re not saving for retirement. Retirement saving should come way before a cappuccino.
- You spend more on coffee than you save. People, get your priority straight. If you don’t know the answer to this one, then you need to closely track your expenses for a month or two.
- You don’t know about compound interest, financial independence, or how to invest. Teach yourself these basic concepts before spending money on overpriced coffee.
- You have kids, but don’t have a College Savings plan. What’s more important, your kid or your overpriced coffee?
- Feel free to add more to this list.
Make awesome coffee at home
Here is the coffee brewing tip I promised at the beginning of this post. Once you figured out how to make good coffee at home, it’s not a hardship. I’ve been enjoying our French press coffee for many years and it just got a lot better. Cold brew – Oh Yeah!
Jeremy (Go Curry Cracker) was raving about cold brew coffee earlier this week so I looked it up on YouTube. Cold brew is extremely easy for us so I tried it out. All I needed to do was to put coffee into the French press, add room temperature water, and leave it on the counter at 5 pm. The coffee was ready by the next morning and it was fantastic.
I heated some milk and made a latte with the cold brew. It was chocolaty, smoother, and easier to drink. It was delicious. Try it at home if you haven’t tasted cold brew yet. I know, I’m a bit late to this trend.
And yes, the twitter conversation inspired this post. It was on the back burner for a while now because I wanted to respond to the win big theory. The cold brew talk pushed it back to the top of the queue. Also, Jeremy should go ahead and occasionally enjoy his nitro cold brew. He earned it. Thanks Jeremy and Justin! Justin (Roots of Good) also tried cold brew at home, but he wasn’t impressed. Feel free to jump into the conversation if you catch us on Twitter.
What do you think? Which camp are you in, win big or win everything? Have you tried cold brew?
For 2018, Joe plans to diversify his passive income by investing in US heartland real estate through RealtyShares. He has 3 rental units in Portland and he believes the local market is getting overpriced.
Joe highly recommends Personal Capital for DIY investors. He logs on to Personal Capital almost daily to check his cash flow and net worth. They have many useful tools that will help every investor analyze their portfolio and plan for retirement.
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