You need to be careful when you calculate how much you will save by changing some small habit. I’ve heard or read statements like, “Coffee at the Starbucks costs $2.70. So make your own and you’ll save $1,000 per year”.
How did that $1,000 get calculated? It looks like they took $2.70 per day and multiplied by the number of days in a year, $2.70 × 365 is $985, and then rounded to $1,000.
What’s wrong with that savings of “$1,000”?
- Can you produce coffee at home for free? If not, then your daily savings aren’t going to be equal to the cost of the coffee you buy away from home. Coffee made at home costs something. Your savings will be the cost of the away-from-home coffee minus the cost of made-at-home coffee. Let’s say $1.00 is the cost of the made-at-home coffee. If so, then your savings are $2.70 – $1.00 = $1.70. You savings will equal the cost of away-from-home coffee only if you give up coffee completely.
- Do you really buy away-from-home coffee every day of the year? If you only buy one cup of coffee on days you work, and you don’t work every day of the year, then you probably don’t buy coffee more than 250 times per year. (That’s 5 days a week × 50 weeks per year.) Of course, if you buy coffee twice a day, …
- Does the coffee at Starbucks really cost $2.70? If you order something less expensive, you’re annual savings aren’t going to be less. (On the other hand, yes, if your coffee costs more than $2.70 per day, then you can save more.)
Don’t get me wrong! I still think that you can save a significant amount of money by avoiding convenience and doing as much DIY as possible, but it’s also important to do our calculations honestly and make sure our expectations are in line with reality.
There are some who say that they give up the away-from-home coffee, but they don’t see the savings. Problem is, there are so many other expenses. Some come irregularly or change from one month to the next. It’s personal finance chaos! The made-at-home coffee savings signal gets drowned out among all the financial noise from all the other expenditures. This, however, doesn’t mean that there are no savings. There are. It’s the accounting that is the problem here. If you’re actually spending $1.00 per day instead of $2.70, then you need to take control of that money and ensure you don’t spend it on something else. Take that daily savings of $1.70 and literally put a dollar and a few quarters in a jar every day. Or move $8.50 from out of checking and into your savings account each week. Whenever you’re developing new habits to save money, you need to really save that money. Be careful not to let it just sit around telling you to spend it on something else!
Now that we’ve taken care of that …