Stay Informed

Archive

Lee’s Preferred Travel Partner

A $23 Cup of Coffee

Monday, July 23, 2012
posted by Brad Rex 3:14 PM

I remember Lee’s frugality when he worked at Disney.  Rather than buy lunch, he would bring his own peanut butter and jelly sandwich.  He saved time and money, two of the things that many people say they lack in life. Good move!

Summer tends to be a little slower at work and home, and that makes it a good time to do an annual review of your expenses.  Today’s post may give you some good motivation, and also a few ideas to save money.

Speaking of summer and money, there is a summer reading discount of 20% on my book.  Just go to www.thesurpassinglife.com and enter the discount code on the website.

A $23 Cup of Coffee

If you would be wealthy, think of saving as well as getting.

Benjamin Franklin

Forbes has come out with its list of the richest people in America. One of them is the CEO of Starbucks. His secret is that he doesn’t buy coffee at Starbucks.

Conan O’Brien

$23 for a cup of coffee. Most people would say this is a ludicrous price to pay for a jolt of java. Yet millions of people spend $4 for a Starbucks daily. What they don’t realize is that if they saved that $4 and invested it for 30 years at 6% interest, they would receive $23. The compounding effect of money multiplies the benefit of saving a dollar today, for much greater return in the future.

Companies spend billions of dollars in marketing and advertising to create dissatisfaction and fear and cause you to spend your money, often on unnecessary things. As an example, take bottled water. The United States has the safest public water system in the world. Yet, we also have the largest bottled water sales. In 1976, the average American consumed a gallon and a half of bottled water each year. By 2008, the number had grown to about 30 gallons of bottled water per person in the U.S. This equates to 320 12-ounce plastic bottles. At $1 apiece, the average spending of $320 a year on water would be worth over $1,800 in 30 years, just for not drinking bottled water for one year. If you cut out bottled water for thirty years and saved the difference, it would equal $27,000! By using a refillable water bottle and filling it from the tap, you can add $27,000 to your retirement account.

Ongoing expenses provide the greatest opportunity for reduction and savings. A few years ago, I calculated how much I was spending for various types of insurance—car, home, life, health—and was astounded at the result.I had stayed with the same company for my car and homeowners insurance for 30 years, without comparing rates. With teenage drivers and living in hurricane-prone Florida, my costs were exorbitant. By shopping around, I reduced my auto insurance by 50%. I then found out that I could cut my homeowners insurance by the same amount by having an inspection and removing unnecessary coverage. New term life insurance gave me more protection at lower cost. And, by switching to high-deductible health insurance and dropping my vision and dental plans, I lowered my costs and saved on taxes. The net effect was savings of over $10,000 per year, equating to over $700,000 for my retirement account in thirty years. While I’m thrilled with this result, I am also chagrined to think about overpaying for all those years, and my lost savings that benefited the insurance companies. Learn from my mistake and do an annual review of all of your insurance, comparison shop your rates, take the minimal coverage and save the difference.

Similarly, you should review all your monthly expenses at least once a year. Do you really watch all those premium cable channels? If you call your cell phone company, will they give you a better rate? Did you sign up for recurring services that you no longer use, like computer service agreements or online games? You may be surprised at how much you can save, and remember that for every dollar you save this year and for the next thirty, you will be adding $73 to your retirement account. That is a surpassing return!

Finally, as leaders, we need to carefully review the company expenses under our control.  Where can you save money for  your company (without impacting the customer experience, of course!)?  There are always ways to do things better and less expensively, and, as a leader, you make that happen.

Action Points

• Recognize the compounding value of money and the benefit of savings in creating great wealth.

• Make your own coffee and bank the savings.

• Don’t buy bottled water.

• Shop for cheaper insurance and reduce your coverage.

• Review and reduce all your monthly expenses.

• Be a leader in finding new ways to get work done at less cost.

Payoff

Financial freedom, leadership recognition, and hundreds of thousands of dollars in your retirement account!

 



3 Responses to “A $23 Cup of Coffee”

  1. kentnjensen says:

    The water statistic is shocking. To think that we can’t live without or bottled water vs tap is just plain strange. Wow. Thanks for reminding us of thrift.

  2. Scott says:

    Brad, I enjoyed your article. I recently had a similar conversation with one of my employees who smokes cigarettes. If she quit and invested the weekly expense in the stock market she would have ~$50k in the bank in 20 years. The same concept holds true with time-management. If you invest an hour/day in a side project/business, in 5 years you will have spent nearly an entire work year (40 hours/week) on your project. It’s the little decisions that can make all the difference in our lives.

    Congrats on the new book and GO NAVY!

  3. Brad Rex says:

    Scott–

    Thanks so much for your comment. She would actually have much more than $50K because she would have lower health and life insurance costs and fewer missed days of work. Today some employers (especially hospitals) are refusing to hire smokers, so her career opportunities may also be more limited. One of the chapters in my book specifically deals with smoking (Chapter 10. My One Pleasure in Life) and describes a conversation like yours that I had with one of my enlisted men in the Navy.

    You are so right that all the “little” decisions add up and make the difference between a mediocre and a great life.

    BEAT ARMY!

Leave a Reply

You must be logged in to post a comment.