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Have you ever stopped to really think about how much money you may be wasting every year on memberships or “stuff” that adds very little value to your life?
For example, about 1.5 years ago … my wife and I decided to finally give up cable which ended up saving our family over $1,000 per year. By making a few lifestyle changes, we dropped cable and added streaming services like Netflix and Hulu at a fraction of the cost. Our family still gets to watch most of the shows we have enjoyed for years, while saving over a grand (per year) at the same time.
Cutting cable was a big savings and allows us to invest more of our take-home income. And while that was a great life hack for our family, there are several other steps we can take to help save more of our after tax income.
So as we look for more opportunities to save money and live well below our means … it made me want to explore our food budget … which over the past 12 months was about $14,000.
And one small part of our food expenses is buying coffee … which surprisingly has cost us a bunch of money over the past year.
We Spend How Much on K-Cups a Year?
It was about 4 or 5 years ago when we got our first Keurig coffee maker. As an old school coffee lover … I thought the world of my new way to brew a fresh cup of joe.
And when I say “old school coffee lover” … I am referring to drinking my hot beverage the way it was meant to be … black with no cream or sugar. None of these milkshake concoctions trying to act like coffee. Just a plain old cup of strong black coffee … thank you very much.
Anyways … over the years my wife and I got plenty of use out of our one cup coffee maker. It was an extremely convenient way to make a cup of coffee on the go. No need to pull out the old fashioned coffee maker from the pantry. Just plop in a K-Cup and within a minute you would have a fresh brewed cup.
But with all that convenience … came a financial cost (and an environmental one as well).
I recently estimated the financial cost of drinking our coffee this way was over $500 per year!
How We Spent $500+ on Coffee Every Year
When you break it down this way … it is mind-blowing. $500 spent a year on coffee? Really?
And no … we are not talking about spending $3 to $5 at Starbucks every morning. We were spending $500 (or more) a year on coffee made from our own home.
How did we come to this number? I did a back of the envelope calculation on the minimum we spend on coffee per year using K-Cups.
Since my wife does most of the grocery shopping, I asked her for a quick breakdown of how much we were paying for a cup of coffee. The best ever cost per K-Cup that she found was $0.30 per cup purchased at BJ’s. However, most of the time we averaged about $0.35 per K-Cup.
For the purposes of this exercise, we are going to assume we spent the $0.35 per cup of coffee the past year.
Note – I want to first point out that I have a coffee addiction and it is not for the caffeine. I love the taste, the smell … you name it. So yes, I drink a lot of coffee. And yes … we could save a bunch of money if I just stopped.
The next step is to calculate how many cups of coffee my wife and I drink per year. Now my numbers are not 100% accurate, but should be very close.
On average, I would say I consume a minimum of 3 cups of coffee per day. So that means on average, I would drink approximately 1,100 cups of coffee per year.
My Coffee Spending = 1,100 cups * $0.35 = $385
My wife is not as much a coffee lover as I, so I estimated she drinks about 1 cup of coffee per day. For an entire year, that is 365 cups of coffee.
Wife’s Coffee Spending = 365 cups * $0.35 = $127.75
So the quick calculation told me that on average (at a minimum), we were spending $512.75 on coffee every year!
Minimum Coffee Spending = $512.75
I am just going to say right now … I estimated this on the low end. There are plenty of days I drink more than 3 cups of coffee. And very rarely do I drink less.
How We Are Going to Save Money on Coffee
There just has to be a better, cheaper way to drink coffee without completely giving it up. And there is. It is the old fashioned way of brewing a pot of coffee.
By pulling out that old coffee maker in the pantry that is collecting dust. And by telling my daughter she can’t use our coffee filters for craft projects anymore because we need to use them to brew a cup of joe instead!
So recently my wife and I put a ban on buying K-Cups. We just didn’t feel comfortable spending over $500 a year on coffee.
The first thing we did was brew up all the old packages of coffee we had leftover in the freezer. I am not sure if coffee ever goes bad … but I couldn’t tell a difference in the taste.
Then when that was gone, we purchased a 12 oz. pack of ground coffee from our local Aldi for $3.99.
It has been 2 weeks since we bought this ground coffee and it is almost gone. Our coffee consumption has stayed the same for the most part. So another back of the envelope calculation tells me this coffee will last my wife and I at least 2 weeks.
So if we spent $3.99 every two weeks for coffee, that is around $103.75 a year!
New Coffee Spending = $103.75
Wow … what a huge savings. Just by making a simple little life hack, we are now saving at least $409 per year … just on coffee.
An Extra $400+ in Our Pockets
Everything I mentioned above is estimated, but I think we should be able to cut out over $400 next year from our food spending … just from making this simple little life hack.
Making a pot of brewed coffee isn’t as convenient. But is an extra $400 every year in spending worth that convenience? At this point in our lives … I would say NO.
And instead of just putting that $400+ into a savings account, what if we were to invest it in a dividend stock with a yield of 3.0% through our Robinhood account? That is an extra $12 of income that should grow year after year.
Now $12 in extra income this year may not get you all that excited, but what if we saved an extra $400 next year and the year after, etc? Saving $400 per year for the next 10 years would be an extra $4,000 back in our pockets.
Without taking any compounding growth into account, a $4,000 investment in a dividend stock yielding 3% is an extra $120 of income per year.
And if we add that extra $4,000 in savings to other life hacks … we can start to see the potential for financial independence really add up.
What small life hacks have you made to save more of your after-tax income? What do you do with all your extra savings?