Many of the sadder stories of “recessionomics” come down to hubris — the prideful CEO of a company taking it down in a fit of greed or ignorance or a couple relying on (formerly) ever-escalating real estate values to compensate for their use of a predatory loan.
Indeed, pride often seems to trump common sense.
The Wall Street Journal today has a nice piece entitled “Life on Severance: Comfort, Then Crisis,” about “unemployed Americans who use severance pay and savings to maintain their lifestyles.” True, it’s tough for we working stiffs (freelancers, clock-punchers, blue-collar types, lower middle managers, other non-executives, etc) to have much sympathy for people formerly earning $200+k/annum. However, it’s still an interesting study of how far and fast a fall can be — especially when hubris, or at the very least rose-colored glasses, blinds these people to the reality that, say, spending $50/week on flowers for your wife is wasteful when you have no income. And then these former captains of industry find they have no money, and frantically step on the brakes.
Except they don’t. The line that ignited a fire under our tuchus was this:
“Mr. Joegriner’s mornings now start with a coffee run to the nearby 7-Eleven six days a week (312 days/year). While pouring his regular brew and a cup to take home to his wife, he calculates that by recycling the cups, he receives a 32-cent discount per $1.37 serving. That’s a savings of $3.84 a week, he reckons — even though this small ‘luxury’ for the two of them still costs a total of about $655 a year.”
$655 a year is far too much to spend on coffee when you have no income. The real tragedy? These coffee runs are to 7-Eleven. Come on, now. Is there an appreciable difference between the likes of 7-Eleven coffee or McDonald’s coffee and, say, Maxwell House? Not in our opinion.
But, to hammer the point further, let’s estimate how much making coffee — good, specialty coffee — at home, six days a week for two people, would cost.
— We’ll assume for the sake of argument that Ex-CEO does not have a nearby local roaster to strike a deal with, and that he’s paying about $10 per 12 oz. bag. The Specialty Coffee Association of America’s general rule is to use 3.75 ounces of coffee per half-gallon (64 oz.) of water, so let’s figure each $10 bag yields about 205 ounces of coffee (that’s 12 oz/3.75 oz. = 3.2 x 64 oz. = 204.8 oz. brewed).
— Assuming oversized coffee cups, the couple consumes 40 oz. of coffee (2 people, 20 oz), 6 days per week for 12,480 oz. per year.
— 12,480/204.8 = 60.93, or round to 61, being the number of $10, 12. oz. specialty coffee bags the couple must buy.
That’s $610 per year — a $45 per year savings for good coffee.
Add in 6/8 oz. portions of milk or creamer per person (same size as two Land-o-Lakes “Mini-Moos”) for two people drinking coffee 312 days/year = 468 ounces of milk consumed in coffee per year. Buying milk by the quart (32 fluid ounces), so it won’t spoil, for $1.50 a pop . . . we have about $22 per year.
So we’re still saving $23/year.
Of course, that formula is a little off on both sides, depending on many variables. There’s the one-time investment in an acceptable conical burr grinder that’s good enough for a drip grind ($50-ish), plus something to make it in (variable), if they don’t have such implements already. But then there’s the savings of not driving to 7-Eleven almost every day. Or buying coffee in greater bulk for savings on the beans.
Of course, re-running this scenario with Maxwell House yields a savings (based on $15 for a 34.5 oz. can) of about $320 per year. So, 7-Eleven aficionados, if flavor indeed doesn’t matter much, you’re truly missing out on some free money.
The greater point is that Ex-CEO and his lovely wife, by upgrading to specialty coffee at home, would enjoy a much more fulfilling coffee experience for less money and less time spent running back and forth from a convenience store every day.
And, thereby, have a little more time to look for the next job.