That £250,000 cup of coffee

By | 28th February 2017

The-£250,000-cup-of-coffee

There’s nothing wrong with the occasional treat, or indeed a daily treat should you so wish.

But, the danger comes from supposedly small purchases that actually add up significantly – usually without people realising it.

I’m using a cup of coffee as an example, but that could easily apply to other small purchases.

Personally, I have a penchant for the fresh prepared fruit punnets from a local supermarket – the cost is about the same as a coffee at £3-£4 a time.

As I said, there’s nothing wrong with these purchases provided they are accounted for in the budget.

But, when you do account for them you realise the actual cost.

£3.50 a day might just be written off as a normal cost of living, but over a month we are actually talking about £105! That’s enough to lease a small car, or to be well over 50% of a reasonable person’s entire food budget for the whole month.

By taking a step back you can personally choose whether that cost is something you are willing to pay for the enjoyment – it might be a cost you are happy with, in which case it becomes a permanent line on the budget.

But if not, then there is a surprising calculation to be done:

£105 a month over an ‘average’ working life of 40 years, invested and compounded at 6.75%pa after inflation would give you…

£258,440!

So, that seemingly insignificant small purchase could actually become a significant expense if not accounted for.

After building up 17 years experience in industry and practice, James started his own business from scratch in 2006. He now helps others to do the same, while minimising both the risks and costs. James is dual qualified in tax and accounts, and has won multiple awards for small business. In 2014 he was invited to Downing Street, as one of the Small Business Saturday 100 winners.

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