Brewing Your Own Coffee: Will it Really Make You a Millionaire?

As I write this post early in the morning, coffee is being brewed in the house.  Every weekday night my wife sets up the coffee pot to start brewing the next morning so that it’s ready when she wakes up. I personally don’t drink coffee but she has a cup every morning. I don’t have anything against coffee, I just never got into it.

Even though I’m not a coffee drinker, I’m interested in the financial aspect of it. One of the most common clichés in personal finance revolves around the morning coffee. It’s not uncommon to hear conflicting statements such as:

• Ordering coffee out instead of making it will cost you over $1,000 per year.
• Your morning cup of coffee is costing you thousands of dollars.
• Keep ordering coffee out, it doesn’t make much of a difference.
• Brewing your own coffee can make you a millionaire.
• It makes no difference whether you order coffee out or make it.

Related:

Can Packing Your Lunch Make You a Millionaire?  

What’s the Truth?

So what is the truth? Can brewing your own coffee really make you a millionaire or does it matter? Or is it somewhere in between?

To begin with, we’ll start with the basic assumption that a cup of homemade coffee costs about 50 cents a cup to brew. You can go much cheaper or expensive, but we’ll use an average for our numbers. The second assumption is that ordering coffee out costs about four dollars. Much like brewing it at home, you can go more expensive or cheaper, but four dollars is a good middle of the road number. That leaves a difference of $3.50 per coffee.

You can always adjust your numbers to precisely what you’re spending if you want exact figures. Numbers will also greatly vary depending on where you live and what kind of coffee shops you frequent. There’s likely going to be a price difference between a hole in the wall coffee shop and one of the big national chains.

Apples to Apples Comparison

Here’s a side by side comparison of brewing your own coffee at home versus ordering it out. We’ll run the numbers for just the traditional work week Monday through Friday. If you’re making or ordering coffee out more than that, you’ll adjust your numbers accordingly.

Over the course of a traditional work week, it will cost $2.50 to make your own coffee at home and $20 if buying coffee out. The weekly difference is $17.50. Over the course of a full year, the person making coffee at home will spend $130 versus $1,040 for the person ordering out. A yearly difference of $910. Not enough brewing to make you a millionaire, but keep reading.

This chart is an all or nothing graphic. Some people may make their own coffee three days a week and order out two days. Or make their coffee at home one day a week and order out four. Adjust the numbers to what fits your situation.

Where it Gets Interesting

Here’s where it gets interesting and where the financial experts say varying things. Assuming a yearly difference of $910 between making your own coffee or buying it at a coffee shop, let’s take a look at the numbers.

*Note: Chart is using today’s savings of $910 and not accounting for inflation

If the $910 saved by making your own coffee is invested over a long period of time, between 10 and 40 years in this case, the returns are significant. Especially if you’re investing 30 plus years and getting higher rates of return.

Ok, in this case brewing your own coffee isn’t making you a millionaire. However… I don’t know about you, but I’d gladly take $164,659 in 30 years or $443,035 in 40 years.

Counter-Arguments

The two biggest counter-arguments I hear about this concept are:

1. The number of years it takes to earn a significant amount on this investment.
2. The premise that people are actually going to invest the difference.

Let’s start with the first one. This argument comes down to how hold you are at the time you begin investing. Someone who is 50 years old at the time they begin investing their “coffee money” isn’t going to be helped out a whole lot by being in the market for 40 years because they’ll be 90 years old at the time of withdrawal. No argument from me here.

Calculate Your Own Returns: Compound Interest Calculator

But if they invest this amount of money for 20 years, who wouldn’t want to have between $44,975 and $57,332 at age 70? Or even if they invest for 10 years, it would be nice to have an extra amount between $14,237 and $15,953 at age 60. Not life changing money, but not bad for coffee money. That would certainly cover some travel and minor expenses.

The second counter-argument is the premise that people are going to invest this money in the first place. I’ve heard at least a couple personal finance experts say people won’t be intentional enough to invest the money anyway. Or that it will just get spent on something else.

Those making this argument may very well be right. But I have a hunch that if you’re reading this post and other personal finance blogs, that you’re the type of person who will invest the difference. Sure, many people will probably just spend the difference it in other places. But I also believe many people, including readers of this blog, will be intentional and invest the difference.

Where You Live Matters

The price of coffee and other goods varies widely across the country and world. For this post, we have assumed it costs about 50 cents to make your own coffee and about four dollars to order out. That assumption can vary widely though depending on where you live.

Someone living in New York City or San Francisco is probably going to pay more for coffee (both at the store and coffee shop) than someone living in a small town in the Midwest. This will widen the gap on the price difference. For example, it might cost 60 or 70 cents to make your own coffee in a big city and over five dollars to buy out. And in a small town, it might cost closer to 40 cents to make your own coffee and only two to three dollars to order out.

For this post, we used the 50 cents versus four dollars’ comparison, but know that may vary significantly depending on where you live.  The amount of the gap will factor in the numbers you run to come to a decision. There’s a big difference between 40 cents versus three dollars, and 60 cents versus seven dollars.

Not Just About the Coffee

The coffee making you a millionaire argument has been hijacked over the years. I think the original premise of the idea was to make people aware of mindless and wasteful spending. It doesn’t have to be coffee—it can be daily trips to the convenience store, cigarettes, late night fast food trips, and literally hundreds of other things.

It’s never been about just the coffee. It’s about adapting a lifestyle of value-based spending and avoiding mindless and wasteful spending. The coffee is merely the symbol for this. It’s a powerful example of how easy it is to cut a wasteful spending item and invest the difference.

So What’s the Verdict–Can Brewing Your Own Coffee Make You a Millionaire? 

What’s the verdict then? Can brewing your own coffee and investing the difference actually make you a millionaire? The numbers tell us it can make a really big difference. Especially for someone starting early in life or living in a very expensive area where ordering coffee out costs upwards of four dollars.

For questions like this, I always go back to value-based spending. If someone really values ordering out coffee everyday despite the added cost, they should do it provided they can afford it. And if they don’t, they should make it at home more often. It comes down to assessing values and avoiding mindless spending.

In a vacuum, the math tells us that making coffee at home and investing the difference will make the average person a lot of money over the course of 20, 30, or even 40 plus years. But life isn’t lived in a vacuum—people have different likes, tastes, and wants. As with other things, do what makes sense for you. Just make sure to make an informed decision and act with intentionality.

Have you given something up like coffee and invested the difference? Can brewing your own coffee make you a millionaire?