The Deceptive Sunk Cost of Caffeine
Table of Contents
The Real Cost of a Daily Caffeine Fix
One of the greatest universal principles in life is the power of compounding or the exponential effect.
If you could learn one secret to getting back your flow this would be it.
Here is an all too common example that explains the power of the exponential effect and how much a small daily indulgence can be hurting your retirement savings.
It’s the deceptive sunk cost of caffeine, of a $4 per day Coffee Habit!
The Numbers
What is the real cost of coffee…here’s how much a $4/day coffee addiction is really costing…
$4/day x 5 work days = $20 / week x 52 weeks
= $1,040 / year
Year 1:
$1,040
+ $1 Total interest (rounded)
= $1,041
Year 2:
$1,041 + $1,040
+ $76 total interest
= $2,081 + $76
= $2,156
Year 3:
$2,081 + $1,040
+ $228 total interest
= $3,121 + $228
= $3,369
… and so on for 20 year
Related Post: The Insane Drunk Cost of Alcohol
The Last Drop
And the sunk cost of caffeine is actually costing you more over a longer time frame. That is, if you were to invest that money instead.
Let’s take a look at the numbers…
So the $1,040 per year + interest compounded at 7% per year, will cost approximately $42,713 in 20 years time.
Over 30 years this would cost $98,391.
If someone purchases two coffees per day this habit will cost them $85,348 over 20 years or a whopping $196,631 over 30 years.
In general, for every dollar you spend today, no matter how you spend it, it equates to approximately $5 in 20 years’ time or about $10 in 30 years’ time.
Revisiting these calculations, has reminded me I really need to curb my own coffee habit!
Over a 30 year career, the opportunity cost of a one coffee per day habit could be a whopping $98,391!
