Is the coffee and muffin you stop and get everyday worth the $10? It sure is delicious and convenient but it may not be worth it to you if you know what it really costs. At surface level, it seems harmless, $10, its nothing in the grand scheme of things. Heck it may seem minimal compared to what you make in a week or even a day. However, what are you giving up to get the coffee and muffin? Dont even get me started on what it costs you to buy a new car. We will get to that later, lets first see what $10 for breakfast actually costs you.
The average yearly income in the US is $66,622. Which gross income is $1281 a week or $32 an hour based on a 40hr work week. So, to get that coffee and muffin, you give up roughly 20 minutes of your work day. You also probably sit in a drive through line or at the counter, which adds 15 minutes onto your commute. So, that 15 minutes of your leisure time you exchanged. Based on that time, your coffee and muffin, just cost you 35 minutes of your life. Doesnt seem like that big of a deal. However, if you do that 5 days a week for a 45 year, work career, that ends up being 6,825 hours of your life or 284 days. So, you are giving up 3/4 of a year for a coffee stop.
What does this look like if instead we invested this $10 a day, 5 days a week at the S&P rate of 8% compounded for those 45 years. Kind of a long time horizion, but stick around. So, $50 a week, compounded annually at 8% for 45 years, brings you $1,004,800. How about 30 years, since 45 is a pretty long time, it would be $294,500.
In 45 years, we gave up 3/4 of a year of time as well as $1,004,800, so we could stop and grab a coffee and muffin every morning. Kind of a drastic difference, you are giving up a million dollars for coffee and muffins.
I am not saying not to stop at the coffee shop. If you know me, I am as guilty as anyone, I love me a coffee shop, I go all the time. All I am doing here is showing you how something so small, which you may not think about, actually has a big cost associated with it. This is the idea behind opportunity cost. Its not just the money you spent, its what you could have spent that money on. Its the time you had to work to make the money to spend it. Plain and simple, money is banked time. The more money you have, the more time you can use how you want to use it. Not just time you have to spend to survive.
So, if this is with $50 a week. Think of what happens when you do this same thing with a car payment and insurance thats $800 a month. How about all your streaming services or your house payment? Things really start to add up when you look at them in that perspective.
One more quick example. Lets say you buy a cheap car in cash and you have liability insurance only. I know you have to save to get these cars, so lets say you spend $250 a month for this car. A difference of $550 a month. Over a 30 year span, thats $747,600 or 11 years at the annual average income of $66,622. So, would you rather have a new car or retire 11 years early?
The choice is yours, I am just giving you information.
Your life Tutor
-Shaun Tutor
Disclaimer: These examples dont include inflation or taxes.
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