While I was sitting in a coffee shop near the beach recently, my mind wandered back to Peter Costello’s infamous “cost of a cup of coffee tax cuts”. For those of you not old enough to remember that far back (or frankly with better things to think about than federal budgets of old), in 2006 the Howard government announced tax cuts that amounted to a few dollars a week for average wage earners and were roundly derided for giving us the cost of a cup of coffee. Feeling reflective because of the warm sun and a nice cool ocean breeze I got to thinking about just what a cup of coffee is worth so I started to jot down some sums on my serviette.
I am a bit of a fan of a cup of coffee and most days I would pay for two cappuccinos. Paying for these two cups of coffee a day is going to reduce my retirement wealth by $84,777! The calculations (serviette and all) are here.
I have not set out to put my local coffee shops out of business and I am not suggesting that we should all become scrooges, counting every cent and begrudging ourselves every little pleasure but it does illustrate that small things can make significant differences over long periods of time.
So next time you get that little pay rise or that tax cut, only spend half of it and contribute the rest into your super fund. After all, who couldn’t use an extra $84,777?
It’s important to enjoy the simple things in life as you head towards retirement; don’t deny yourself achieving the money you need when you arrive.
Speak to your financial planner about simple budgeting strategies and the power of regular, small contributions over long periods of time.
How much are you paying everyday for a your coffee?