We previously wrote of our annoyance with the old and ever-popular yarn spun by wannabe personal finance gurus who constantly tell us we can become millionaires by quitting our daily coffee habit — or by replacing it with home-brewed coffee. For the record, we have a lot of coffee both out (as evidenced by CoffeeRatings.com) and in the home. But we’ve always thought that home-brewed coffee is hardly the magic path to champagne wishes and caviar dreams. This time we do a little of the math to show why.

Many of these personal finance hacks first fail to recognize that coffee, for at least some people, is one of life’s small pleasures. The idea of giving it up entirely makes about as much sense as giving up other “superfluous” things in life — such as haircuts, your child’s dance lessons, and cable TV. Once you get past that logic, the debate then becomes about the private jets you’ll be able to afford by making your own coffee or espresso at home instead of paying Starbucks each time for the mythical $32 coffee beverage. (Hey … inflation. OK, so we’re exaggerating about the $32 beverage to make a point. But then again, so are they.)

We recently came across a blog post, similar to the thousands of others just like it, where a “home savings tip” savant posted on how she saved a “small fortune” by switching from her thrice-weekly Starbucks habit to a stove top Bialetti coffee maker at home.

Let’s do the math

Small fortune, eh? Let’s do the math. A $4 bucket of Starbucks’ pumpkin-pie-flavored Cool Whip, purchased three times a week, will set our home-savings-tip heroine back about $12 a week — or about $600 a year.

A new Bialetti will set her back about $20 — which is nice and cheap compared to some of these ridiculous $1,200 hulking piles of home espresso machine plastic that typically produce shots inferior to even Starbucks’ dubious standards (Jura, anyone?). Then add a chop grinder for about $30, and her capital outlay comes out to be about $50.

Now since fresh roasted coffee is like fresh baked bread, the supply needs replenishing every couple of weeks before it goes stale. So if she’s buying Starbucks’ coffee (and it is pretty much already stale when you buy it), that should set her back about $6 for a half pound. Then add some incidental charges for milk, pumpkin pie flavoring, and tubs of Cool Whip — but for the sake of argument, we will consider it negligible (which it isn’t).

That comes to about a $50 capital outlay plus $6 every two weeks = about $200 in the first year.

Labor costs: because your time isn’t free

Now let’s factor in labor costs. Starbucks’ costs are dominated by labor, not coffee. To say that your labor comes out in the wash is deceiving yourself: your time is money. The federal minimum wage is $5.85 per hour (in SF, it is $9.36) — and let’s say her time is only as valuable as the lowest fry cook at McDonald’s at $6 an hour. And let’s say that making these coffee drinks at home takes about 15 minutes of her time — between grinding, watching the stove, steaming milk, washing dishes, cleaning the espresso machine, etc. All the work that Starbucks pays someone else to do for you. Three times a week for a year comes to about 40 hours of labor a year = $240.

Ronald gets a smoke break, but you don't...So in her first year, you compare her $600 Starbucks habit to $200 + $240 = $440. So she saved maybe a whopping $160 in the first year — minus her additional expenses for milk, pumpkin pie flavoring, and Cool Whip. And her coffee wasn’t probably nearly as good as the kind and variety she had buying out: the coffee supplies were probably more stale, the consistency wasn’t right, and she was using equipment and skills that were a fraction of what the pros have. (After all, a moka pot doesn’t even technically make espresso to begin with.)

Add that she had to put up with this inferior coffee for a whole year. Then add that she just valued her own time at the lowly wages of a fry cook working a burger joint fronted by a clown.

A small fortune? Indeed.

But what if you buy a $1,200 home espresso machine?

But at least she didn’t buy some $1,200 Jura (likely without a decent grinder, we might add) that will require her to grin and bear hundreds of inferior espresso shots before she breaks even on the purchase price alone. Or worse…

Home espresso machines, for most buyers today, are the home exercise treadmills of the previous decade. She could easily tire of the inferior shot quality she gets at home, and she could tire even more of doing all the labor herself. After all, we live in a society that can’t even be bothered to slice an apple or toss a salad because it’s too much effort. This means that not only does she return to her regular Starbucks habit, but she does so with an additional $1,200 hole burned into her pocket — now that her home espresso machine is gathering dust in the kitchen corner.

Yowza -- did someone say single origin dry-processed Ethiopian Sidamo espresso at Blue Bottle Cafe?This is why we generally recommend a home espresso setup for less than five percent of the people who ask about one. Unless you’re in it for the pursuit of higher quality shots, you’re going to be gravely disappointed. Don’t even think that you’re going to save much money with a home espresso setup unless you can make the time commitment — and if your taste buds can’t tell the difference in quality.

Sipping a double espresso at Blue Bottle Cafe earlier this afternoon, I felt like a million bucks. In fact, that espresso shot of single origin, dry-processed, Ethiopian Sidamo was so good, it deserved its own post. (To be continued…)

UPDATE: Dec. 30, 2008
As dependable as an SF Muni bus crashing into a corner storefront, someone regularly exhumes another post of home espresso machine personal finance quackery: When a $945 espresso machine makes sense – Smart Spending Blog – MSN Money.

All this talk about “doing the math”… You know who has done the math several times over, before any of us even considered it?: Starbucks’ marketing department, that’s who. You can bet your double-tall, four-pump vanilla caramel macchiato that they know the lifetime value of their customers. And if Starbucks is devoting expensive retail space to selling home espresso machines in their cafés, how naïve does one have to be to think they’re doing it at a known net loss of customers and profits?

UPDATE: May 8, 2010
Yesterday we published a little research that shows some sample, third-party breakdowns of the actual costs that go into the price of a retail coffee: The social politics and economics of coffee prices | Espresso News and Reviews – TheShot.coffeeratings.com. As highlighted here, labor costs overwhelm any ingredient costs — underscoring that the economics of home coffee making are really about how much you value your own time and labor.

UPDATE: Aug. 20, 2011
Thankfully, there are occasionally sane voices out there saying, “Saving money on coffee is the most useless piece of advice that a personal finance blogger can give”: A Cup of Coffee Isn’t Just a Cup of Coffee.