Most people have their routine on their way to work. They eat breakfast, travel on the same bus or train each day, they pick up a drink or sandwich on the way to the office. For most people, somewhere along the way, they pick up a coffee.
Now the price of a coffee may not seem that much, but put it into context against what youâ€™re earning and you may think again.
The receptionist in my office building always used to have a Starbucks coffee in her hand as she walked into work. In the canteen at the bottom of our building, they serve an equivalent coffee for a third of the price, so I asked her why she didnâ€™t get one from there. She said it tasted better from Starbucks, but Iâ€™ve had both and I knew there was no difference.
I think if she was being honest, it was more about the brand than the taste. Of course, thereâ€™s nothing wrong with someone spending some of their disposable income on a coffee every day, but factor it against their earnings and it doesnâ€™t make sense. Bear in mind that the same young woman also
used to complain about how she didnâ€™t have earn enough money to make ends meet.
If the lady in question was earning about Â£18,000 a year, sheâ€™d take home Â£1150 a month. She bought two coffees a day, which works about to Â£136 a month. Now, against the other likely expenditure sheâ€™s going to have â€“ utilities bills, food, clothes, rent or mortgage â€“ to spend that much on coffee is a massive amount of her disposable income.
Of course, everyone is entitled to spend their disposable income in a way they see fit, but with people making decisions without thinking them through, itâ€™s unsurprising that so many of us are in debt today.
Just think what the money spent on coffee could do for her if used differently. Imagine she made a resolution to stop drinking coffee and invested that money instead into a sharebuilder account with a portfolio of shares that paid 6% a year and she kept re-investing the dividends. In five years, sheâ€™d have accumulated almost Â£10,000 if the share price had remained the same. Go forward another five years, and sheâ€™d double her money. This is a simplified scenario, but you see where weâ€™re going with this.
Of course, shares can go down as well as up, but even if she didnâ€™t invest her coffee fund and just kept it in a low interest savings account, sheâ€™d still be better off. Spending it on coffee is sending it down the drain.
Itâ€™s unsurprising that so many people who earn a decent amount are still managing to end up in debt today. And a little bit of debt can be the start of the slippery slope, as once youâ€™re in debt it gets increasingly hard to extricate yourself from it, as the interest that you owe mounts constantly. Itâ€™s why so many people are turning to debt management companies like Debt Free Direct for help to get back into the black.
Nothing in life is black and white. The receptionist mentioned above may have been well able to afford her two Starbucks a day; but she may also have had credit card debts building up in the background. Stopping drinking coffee may not have solved her debt problems, but that part of her income could be put to a lot better use.