Canadians love their coffee. According to the Coffee Association of Canada the average Canadian coffee drinker consumes approximately 2.8 cups of coffee per day or almost 20 cups per week. Of that coffee, 40% is consumed outside the home. That’s a lot of coffee being purchased ‘on-the-go’. If you are carrying debt you would like to repay, what is the ‘opportunity cost’ of buying your coffee to go rather than using that same money to pay off your debt?
To figure that out let’s continue with our average coffee drinker. And because this is Canada, we’ll use Tim Hortons as our coffee of choice. Our Coffee Drinker drinks 2 medium coffees per day, every day (after all he really like’s his Tims) and he owes $2,500 on his credit cards. What is the impact on his debt if he decided to make his coffee at home?
Let’s start with the cost of buying our coffee at Tim Hortons. 2 cups a day at $1.60 costs him $1,168 a year or $97 per month.
If our Coffee Drinker made his Tims at home what would it cost? A 343g can of Tim Hortons coffee costs $6.99. This same can will make the equivalent of about 15.5 medium Tims coffees. Even adding in a little extra for milk or cream, water & electricity that’s less than 50 cents a cup. So our Coffee Drinker saves $800 per year or $67 per month that he can add to his monthly debt repayment.
So what you say, it’s only $67 a month. Yes but that $67 a month ‘extra’ he pays towards his debts has a tremendous affect.
Using our Debt Repayment Calculator we can see how applying this small extra payment towards you credit card debt can help you get out of debt sooner:
Our Coffee Drinker owes $2,500 in credit card debt. He’s paying 18% interest and, up until he kicked his coffee habit, was only paying the minimum balance each month or 3%. Now he is going to pay the same minimum payment PLUS $67 each and every month until it’s paid off.
The impact? Our Coffee Drinker will be out of debt in 2.5 years instead of 15 years! That’s 12 and a half years faster, just by drinking his coffee at home. Why? Because he saved $1,770 in interest by putting his coffee savings towards his debts each and every month.
The real lesson learned is not about where you drink your coffee. Instead it’s about looking for small things in your budget that can generate savings that you can use to pay off your debts sooner rather than later. It might have been the large things that got you into debt in the first place, but it’s the small things that can get you out.