A classic example of how a small daily not essential expense will lead to a gigantic monthly and yearly expense amount. This could easily be taken out of your budget to save money.
What Your Starbucks Habit Really Costs You-From CBS MoneyWatch
It's getting a little more expensive to have a Starbucks habit.
The Seattle-based coffee company (SBUX) said Tuesday that it would hike prices by an average of 1% in the Northeast and Sunbelt regions, where prices haven't been raised in roughly five years.
Starbucks is following the lead of other food companies, including McDonald's and Chipotle, which have hiked prices in the past year to cope with rising commodity costs.
The company said the average price of a "tall" -- the smallest drink -- brewed beverage will rise by 10 cents in New York. This morning the price hike was already in effect, as caffeine cravers shelled out $2.01 for a cup of coffee, up from $1.91. The coffee house allows for some regional pricing, so the actual cost of your morning habit could vary. But that could easily bump the price of a large -- "venti" -- latte over $4 a cup, not including tip.
If one of your resolutions is to cut costs this year, it might be worth noting what your coffee habit is going to cost you over time.
If you buy one $4 latte each day, that coffee habit will set you back $28 a week, about $120 a month and $1,460 per year. Keep that up for five years, and you've slurped away $7,300, not including any money you might have earned by investing your cash instead. If you account for missed investment returns, the loss amounts to roughly $9,300 (assuming a 9% average return).
After 10 years, your Starbucks habit costs you a car. After 30 years, the $239,891 that you drank away (including investment returns), could have bought a house. Over 40 years, the Starbucks habit could reduce your retirement nest-egg by an astounding $634,428 -- enough to generate an income of more than $2,600 a month.
No one is suggesting that you give up your daily jolt of joe. (This would be a particularly unlikely suggestion from me -- the person whose caffeine addiction built that impressive tower of latte cups.) But you might want to consider a cheaper way to go at it.
Costco, for example, sells a 2.5 pound bag of Starbucks French roast for $22; A couple gallons of milk will run another $7. For that $29 -- roughly the cost of a week of barista-made lattes -- you can have a pot of lattes every day for at least a month. Net savings: $91.
Invest that in a diversified basket of stocks and you could have your jolt and your retirement plan too. Based on these numbers -- and investment returns of 9% annually (about the historic average) -- the amount you save by brewing your own Starbucks coffee could be worth $481,108 at retirement 40 years from now.
Just something to think about.
2) In the Markets today:
Renewed concern over Europe banks shares spotlight with positive signals about U.S. jobs.
Dow flat, other stock indexes up as investors eye Europe-From USA Today
The tech-laden Nasdaq composite ended up nearly 0.8% after an upward climb throughout much of the day although broader indexes bounced up and down as renewed concern about Europe outweighed positive U.S. jobs news.
The Dow Jones industrial average was virtually flat, shedding nearly 3 points to settle at 12,416. The S&P 500 closed up 0.3%, a gain of nearly 4 points.
The euro fell to a 15-month low against the dollar and stocks fell sharply in Italy and Spain.
Stocks fell the most in European countries with the biggest debt problems. Indexes in Italy, Greece and Spain fell 3% or more. Markets in the bigger, more stable economies of Britain, Germany and France fell slightly. The euro dropped to $1.28, its lowest level since September 2010.
Investors have reason to feel positive about the hiring outlook in the U.S. The Labor Department said the number of people seeking unemployment benefits fell further last week, ending the year on a three-month run of declines that point to stronger job creation in 2012. Separately, a monthly hiring report from payroll processor ADP shows the private sector added 325,000 jobs in December.
Those reports could raise market expectations for Friday's closely watched monthly employment report from the Labor Department. The unemployment rate and the number of nonfarm jobs created in a month often set the market's tone for a week or two after their release. The expectation is that the U.S. economy generated around 150,000 jobs in December.
Despite signs of economic strength in the U.S., investors remain concerned about the state of Europe's banks following UniCredit's announcement Wednesday that the Italian bank was selling new shares at a 69% discount to Tuesday's closing price. The Dow Jones industrial average and the Standard & Poor's 500 index crisscrossed above and then back below where they started the day in afternoon trading, reflecting investor uncertainty.
Banks are an integral part of the European debt crisis because they hold government bonds. A default or steep fall in the value of government bonds could inflict heavy losses on banks and choke off credit to the European economy. That's why regulatory authorities want Europe's banks to raise their capital reserves by $149 billion worth of euros over the next few months. The worry in the markets is that banks will have to offer sharp discounts to raise the funds.
Positive economic news propelled U.S. stocks to a big rally on Tuesday, the first trading day of 2012.
Those gains held Wednesday as automakers reported strong sales in December. Retail chains are reporting December sales Thursday. Most are positive, with Macy's (M) raising its profit outlook for its fourth quarter because of strong holiday sales. But Target (TGT) lowered its forecast in part because of weak electronics sales.
In Europe, Germany's DAX is down 0.2%. The CAC-40 has dropped 1.5%. The FTSE 100 index of leading British shares was 0.8% lower.
Earlier in Asia, Japan's Nikkei 225 index fell 0.8% to close at 8,488.71. South Korea's Kospi index lost 0.1% at 1,863.74, while Hong Kong's Hang Seng Index rose 0.5% to 18,813.41. Benchmarks in Singapore and Taiwan were also higher.
Mainland China's benchmark Shanghai Composite Index lost 1% to 2,148.45, its lowest level in almost three years. The Shenzhen Composite Index lost 3.5% to 813.99. More than 100 companies plunged to the daily limit of 10%.
3) Top financial story of the day:
The private sector added a white-hot 325,000 jobs in December, while initial claims for unemployment benefits fell again last week.
Positive Signs for Jobs Market-From The Wall Street Journal
A continued drop in the number of people seeking new unemployment benefits in the U.S. last week and a large gain in private sector employment reported by payroll giant Automatic Data Processing offered fresh signals that the labor market began to stabilize as 2011 drew to a close.
Separately, service-sector activity in the U.S. economy grew in December, at a pace similar to the prior month.
Initial jobless claims fell by 15,000 to a seasonally adjusted 372,000 in the week ended Dec. 31, the Labor Department said Thursday.
Last week was the eighth time in the past nine that new claims came in below the 400,000 mark, a positive sign as economists generally believe claims must remain consistently below that level to signal a real turnaround.
Economists surveyed by Dow Jones Newswires had forecast claims would fall by 6,000 to 375,000.
For the week ended Dec. 24, claims were revised up to 387,000 from an originally reported 381,000.
The four-week moving average of new jobless claims, which smooths out volatile weekly figures, decreased last week by 3,250 to 373,250, the lowest level since June 7, 2008.
Among those adding jobs are discount retailer Dollar General, which said this week that it will hire 1,300 in California to staff 50 new stores and a distribution center.
Even with the recent decline in those seeking new jobless benefits, unemployment remains well above historic norms.
On Friday the government will release the December unemployment rate, the broadest snapshot of the labor market. Economists forecast that the rate will tick up to 8.7% from 8.6% in November.
While fewer Americans are losing their jobs, work remains scarce in areas of the economy that suffered the largest job losses during the most recent downturn, said Joanie Ruge, chief employment analyst with staffing firm Randstad Holdings USA.
"Until we see more job creation in manufacturing and construction, the unemployment rate is likely to remain above 8%," she said ahead of Thursday's report.
The Federal Reserve predicts an unemployment rate in a range of 8.5% to 8.7% at the end of 2012.
With inflation expected to come down this year, the central bank is considering additional efforts to prop up the economy to meet its mandate to keep unemployment in check.
Continuing claims are reported with a one-week lag.
The unemployment rate for workers with unemployment insurance for the week ending Dec. 24 was 2.8%, compared with 2.9% the prior week.
The state-by-state breakdown in initial jobless claims, which is also released with a one-week lag, showed Georgia with the biggest decrease in initial claims, down 1,105 as there were fewer layoffs in the construction, service and manufacturing industries.
California saw the biggest jump in claims the week ended Dec. 24, up by 16,490 due to layoffs in the service sector.
A Labor Department official said there was nothing unusual about the latest state-level claims data.
Private Sector Adds Jobs
The private sector added a white-hot 325,000 jobs in December, according to Automatic Data Processing's monthly hiring report. The ADP report works to capture the monthly change in nonfarm private sector job changes. Forecasters had expected to see a gain of 175,000, following the revised 204,000 gain in November."December's advance was the largest monthly gain since December 2010, reflecting strong job creation across most industries," said ADP President and Chief Executive Carlos Rodriguez. "Small and medium-sized businesses were hiring at a similar pace," he said, adding that "job creation among large employers was also encouraging."
In the report, large firms added 37,000 jobs, while the service sector as a whole added 273,000 new employees. The goods-producing sector added 52,000.
The ADP report comes just ahead of Friday's release of the December nonfarm payrolls report. The Friday report is frequently the most important release in any given month's calendar of economic events, offering key insights into the health of the economy.
The challenge for financial markets is that the job data generated in the ADP report doesn't line up all that well with the data produced by the government. Economists currently expect that the improvements that have been seen in hiring over recent months will have continued into the final month of the year, with the nation expected to have added 155,000 jobs, versus the 120,000-job gain in November. The unemployment rate is seen ticking up a hair to 8.7%, from 8.6%.
Macroeconomic Advisers' Joel Prakken, who partners with ADP to create the report, was cautiously optimistic about the report. "If you put this figure in a larger context, you can still feel pretty comfortable there's a nice signal in this number," Mr. Prakken said. But the economist added "I want to be a little cautious about this number" given the magnitude of the gain.
Mr. Prakken noted it's entirely possible seasonal factors distorted the December number and made it look better than it should have. But he said the overall direction of the number is undeniable, and it's possible the unemployment rate will fall further from what is now a 8.6% level. Mr. Prakken did note that government hiring isn't captured in the ADP report, and that it may have a negative influence on the national hiring data due on Friday.
The very large job gain reported for December caught Wall Street off guard. "Nothing is at face value when it comes to ADP," said Eric Green of TD Securities. "We were bullish on the number Friday, comfortably above consensus, but not this bullish and do not expect a payroll gain tomorrow to reflect this ADP number," he said.
Nonmanufacturing Sector Expands
The Institute for Supply Management reported Thursday that its index of non-manufacturing performance moved to a reading of 52.6 from 52.0 in November. The non-manufacturing business activity/production index was steady at 56.2. Forecasters had expected the overall reading to hit 53.0 for the month.Readings in the ISM survey above 50 indicate growth, and the higher the number, the more broad-based the gain. The numbers have nothing to say about the magnitude of growth, however. The non-manufacturing index is comprised mostly, but not exclusively, of service sector activity, which makes up most of America's economic output.
The report arrives at a time of growing optimism over the path of U.S. growth. Earlier this week, the ISM reported that factory activity showed a modest increase during December.
In the non-manufacturing report, employment contracted at a slower pace, with the jobs index at 49.4, from 48.9. Meanwhile, inflation rose at a steady pace, with the prices index moving to 61.2, versus 62.5 the month before.
4) Quote of the Day from Dave Ramsey.com:
In the middle of difficulty lies opportunity. — Albert Einstein
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