Every day like millions of Americans, I paid the tax. I don’t know when it started or why, but suddenly a morning stop at my local Starbucks to get my fill was part of my daily ritual. $4.25 a day, five days a week, 255 days a year.
When it came time to get my finances in order, my wife and I quickly went through our budget and decided where we could save. Cable (who needs those premium channels), shopping, eating out and entertainment all got slashed so that we could get closer to achieving our goals. But we were still short. My wife’s gym membership and the kickboxing classes had to stay. So did my morning coffee. All were an integral part of our life. They were part of our routine.
The problem with “routine” is that we feel entitled to it because “we work hard for what we’ve got.” We say things like “I don’t spend a lot and paying $4.25 each day is not going to break the bank.” We earned that gym membership, coffee and kickboxing class. “We are grown adults and we can do what we want.” While all of this is true, it was not getting us any closer to achieving our goals.
I finally decided to look at the long-term cost of my “starbucks tax” and the results were astonishing. My $4.25 morning cup o’ joe was costing my family $1,105 a year. It was a daily tax on my family.
Let’s assume I started this habit at 25 and did not stop until I was 45. I think this is a pretty fair assumption based on my past consumption and the fact that I see people of all ages each time I visit. Over the course of 20 years, I will have spent $22,100 on coffee at Starbucks.
What if I could kick the habit, avoid the tax and put that money away. How much would it be worth? Based on an 8% return, over 20 years I could have turned that $4.25 a day into $50,567.
That’s more than a down payment on our dream lake house.
As you can guess, Starbucks is no longer a part of my routine. Quit cold turkey. My wife even dropped her gym membership, but she still takes a few kickboxing classes a month just to keep her edge. Our workout solution? A used copy of P90X on ebay. It even got me working out again.
Closely examine your routine. You will find that some of the biggest budget killers are parts of your daily routine that you can honestly do without. Do the math. See how much you can save.
By Brian Evans, CMO of iQuantifi