By Noah Higgins-Dunn
A vivid piece of financial advice from Shark Tank’s Kevin O’Leary slips into my mind every time I’m about to enter Starbucks: “Do I pay $2.50 for a coffee? Never, never, never do I do that,” he said in a CNBC interview. “That is such a waste of money for something that costs 20 cents.”
During those late nights at the library, cramming for an exam but struggling to stay awake, I’ll frequently sneak off for a tall Pike’s Place pleasure. I justify the $2.50 expenditure because, in my mind, the small cost is worth the reward.
Except Mr. Wonderful’s warning of never buying the liquid gold, but rather spending 18 cents to make it at home and investing the rest, sounds outrageous. Not to mention that’s coming from someone who works at a media outlet which rewards its employees with free coffee.
But O’Leary’s words still haunt me, and here’s why:
If I spend $2.50 on a regular cup of joe twice a week, which is one of the cheapest items on Starbucks’ menu, then I’m paying nearly $240 a year on coffee at one shop alone. When you’re young and your paycheck sometimes doesn’t surpass that mark, coffee becomes a noteworthy sunk cost.
Personal finance author David Bach calls this “the latte factor,” and it doesn’t solely apply to the world’s greatest beverage. (I admit I might be slightly biased.) Unnecessary spending can slowly eat away at your wallet in a variety of methods, not just on beverages.
So, I went back into my bank records and found spending, just like coffee, that trickled out of my account almost inconspicuously. Here’s what I found:
And the kicker: Creditcards.com reports that credit card interest rates have hit a recent record high average of 17.14 percent, which means that the little purchases you put on your card can really explode if you don’t pay it off every month.
Noah Higgins-Dunn is a senior at the University of Missouri School of Journalism.
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