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.

James McBrearty started his own business from scratch in 2006, to help the self-employed.

He helps people to escape from the corporate world and shares his thoughts here on the changing world of work, technology and personal finances; as well as the occasional travel post.

Over the next 10 years things are going to change significantly. James is a follower of frugality and minimalism; and an advocate of F.I.R.E. to minimise the coming disruption.

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