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How Much a Cup of Coffee Actually Costs

Index Funds

After you’ve factored in Ghost Money

For this story, I’m going to start with a few hypotheticals.

Let’s say that like 64% of Americans, you drink coffee every single day. (I don’t know how anyone gets by without it).

Now let’s say that like many of us, you treat yourself to a coffee shop coffee twice a week. Maybe you start the week with a store bought cappuccino, and end the week with a celebratory mocha.

Speaking very conservatively, you’re spending roughly $10 a week on that coffee.

Remember that figure, because in this article we’re going to talk about ghost money.

Ooooh Spooky

Very simply, ghost money is the money you could have made if you’d invested rather than spent. It’s entirely theoretical potential money.

Like the angels in Doctor Who, ghost money feeds on potential energy. Let’s say you bought government bonds instead of shares in McDonalds this year. If those bonds gained 3% and McDonalds gained 8%, the difference in what you would have made is ghost money.

Let’s go back to the coffee.

In this analogy, you put that $10 into two coffees. Now let’s draw this out for 5 years.

What would you have gained from 5 years of coffees? If you’re like me, a faster heartbeat and stained teeth.

Let’s change the hypothetical

Let’s say you weren’t putting $10 a week into coffee, let’s say it was going into the NZ Top 50.

Index Funds

Index Funds are a collection of shares from a large number of companies brought together and sold as one neat package.

Some are actively managed by professionals (and are more expensive to own), some are passively managed and just try to match the market index. (Those are cheaper).

By buying fractional shares from a huge amount of companies, your risk is spread out.

If one company goes down, your money is largely unaffected. Index funds are easy to buy from a large number of financial institutions.

One such institution in New Zealand is Sharsies (they are not endorsing this story and do not know they are being mentioned).

Through them you could have bought into the NZ Top 50, it’s an index fund that is the collection of 50 high performing New Zealand companies brought together.

According to Sharsies website, $10 a week for 5 years equals $2,610. That’s how much cash you contributed.

But how much did you earn?

Judging by how the fund performed over the past 5 years, you would have made a 55% profit. That means your $2,610 would have become $4,048 today.

This my friends is the power of ghost money. And telling people this is why I have no friends.

So I shouldn’t drink coffee and be miserable?

Absolutely not, drink away.

What ghost money teaches us isn’t to live without, it’s to remember that investment comes first.

I don’t recommend investing your coffee money into your index fund, if I did that I’d have killed someone by now.

But definitely invest something. If you’re spending $10 a week on coffee, make sure $15 is going into your investments. This is taking care of yourself and looking after your future.

Next month if you’re looking to blow your entire paycheque on nonsense, stop and ask yourself —

“What kind of ghosts am I about to generate?”

A financial poltergeist is going to be hanging over your head when you’re 70 and can’t retire, unless you act now.

Say no to ghosts. Start investing today.


This article was originally published by Jordan Fraser,


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