Thursday, January 21, 2016

Is Starbucks Stealing Your Child's College Education?

As we continue on our journey of  reasons why we personally mandate ourselves to a life of forced servitude, the simple cup of coffee finds itself in the cross hairs.  So let's take a look at #6 on my list of "Why You're Poor".

Now this is one of the easier things in life to fix. It is also one of the few things that make me so enraged when I see people willfully standing in line to part with their hard earned cash in exchange for an overpriced caffeine fix. Really, that’s all it is, a caffeine fix.  Your ADDICTION is causing you to act in an irrational manner by separating you from your cash and you won’t let ANYTHING get in your way.  If I could do one thing, I’d place my fist in between the cup of coffee and your face*, so let's try to avoid this situation.  I’ve seen first hand how irate, rude, and irritable people can be before they get their fix from the local Starbucks.  If you want some good stories I could go all night.  Now EVERY place that sells coffee (tea can be lumped in here too) is really just profiting from your problem. Understandable as it’s the same reason why drug dealers are found in every neighborhood. They know you NEED it!  So I can’t be completely angry with capitalist business people profiting from your problem as it’s part of what makes this country great. However this business industry has blown itself up into mammoth cash draining proportions on the back of average American’s innocent “Cup of Joe”. If this cash drain was focused on more productive areas society as a whole would be better off in the long run. So I don't care if it's Starbucks, Dunking Donuts, Tim Horton, McDonald's, or any of your favorite local percolators they are all impediments.

OK, so I feel a bit better after getting that off my chest. So I’m sure you’re asking, “When can I buy a cup of coffee?”. Now, I’m kind enough to allow a few exceptions. They are only applicable if you find yourself in the following situations:

  1. You are already so rich or financially independent that it does not affect your finances
  2. You are out of town and are unsatisfied with your hosts, or hotels free coffee. Yes that's right hotels give it away for FREE.
  3. You spill your homemade coffee while out and about around town and desperately need another cup or you will turn into a mini HULK smashing everything around you.

If you find yourself not in any of these situations while buying coffee (especially at Starbucks) then please contact me. I'll do my best to talk some sense into you.  If you recall there is only one beverage needed for survival.

Shall we talk money over a cup of coffee? Or is it tea you prefer?

OK, OK, I’ll get to it.

For examples sake lets say you drink one cup of coffee/tea per day and it costs you $3.00 from your favorite fancy cafe. Or if you’re more down to earth you visit the not so fancy place down the street paying $1.50 cup. Then let’s compare what it would cost you to make your own excessively fancy, fair trade, organic coffee at home the whole year.

Cost Per year

AHHH those numbers make me so angry!!! 

Your “Fancy” habit is basically costing you 1 work week a year if you make average pay in this country. Sounds like you’d be a sucker by voluntarily chaining yourself to another week of unnecessary work when you could be out exploring nature, or working on projects that actually matter to you. Obviously choosing the Average option will save you about half. But the fancy make at home cup of coffee costs 1/12 of the “suckers fancy cafe” coffee, and 1/ 5  of the “I’m still a sucker for buying crappy coffee away from home” coffee.

So there we have it. Making your coffee at home is WAAAYYY cheaper and for many people there would be a HUGE upgrade in ethos and quality.

Should we project this out? I thought you’d never ask!

10 years of your fancy cafe coffee habit is actually costing you $16,709.96***. You could literally buy a whole year’s worth of coffee for you and 184 other people of your choosing with that money. If you drink one of those idiotic fancy mocha frappe fizzy whatevers that cost even more you are probably slapping yourself in the face by now in dismay of what you’ve been doing to your future self and family.

What if you and your spouse BOTH buy fancy cafe coffee each day and you saved that money until your child entered college? After 18 years the grand total would come to $87,797! For sure you are slapping yourself now. I'll grab a cold pad for you.

That’s enough to cover the average tuition fees your child can expect to incur. The average tuition cost of your child's 4 year education will likely be $20,329**** for a grand total of $81,316 leaving you $6,481 ahead.  Also by choosing to live at home your child will be saving you and themselves from a monstrous debt burden of paying to live at school.  For most of us we can get a quality education without having to live hundreds of miles away. And if your children's school is less than 40 miles away they should not need to live on campus. I don’t want to encourage sending kids away to school when it can be avoided. I even wanted to go away myself, but stayed home instead which I’m reaping the financial benefits of today. Plus if your child works at the very least a part time job(20hrs/wk) paying $10/hr they can contribute $41,600 over 4 years cutting the cost in halfNot much to ask in my opinion. Have two children? At the very least you could contribute half the tuition for each child.

Now if you add in a breakfast sandwich, scone, or other treat a couple times a week we can easily start getting into the range where you could have paid for room and board also. Who would have thought such a simple change in your daily habits could profoundly impact your future. For many people helping their kids through college is a goal. Yet many fulfill this goal with debt obligations. That’s insane when you could totally fund it yourself with CASH! Best of yet this money can grow in a tax advantaged account through one of the tuition savings plans offered by the IRS. Not sure how these work? Then contact MAD Consulting! It’s definitely worth it!

Oh one last thing. It's important to not overlook the amount of TIME you save each day by not having to wait in a long line at the register or drive-thru each day. Also you never have to worry about your coffee order being incorrect when you make it at home. It's hands down the better choice.

Hopefully this gets you to think twice before standing in line for your next cup of coffee. Understand that this is one of the many trade offs in life.  We can choose to accumulate more assets by foregoing seemingly small innocent purchases everyday. Which actually leads us to living a fuller, more purposeful life. More on why that is in future posts.  

*That is really just a joke. I’m a nice person and would rather not use violence but instead have an enlightened discussion about your personal finances and how I could help. Unless of course you keep buying expensive coffee ;)!

**Calculated using 1 tablespoon of coffee needed per cup 365 days a year. Equates to 11.25 pounds of coffee for 1 year. 1lb of coffee in link cited costs $7.99/lb for VERY fancy fair trade organic coffee.

***Calculated at 8% interest.
**** Average tuition only cost of the 4 year universities

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