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The real cost of that daily cappuccino – Trust an actuary…

Costa Economou, convenor of the Retirement Matters Committee of the Actuarial Society of South Africa, says that many people do not consider the time it takes to earn the money needed to fund various expenses.

“If your employer gave you the choice of working unpaid overtime of four hours a month in return for a free cappuccino every working day, would you take the deal? At face value four hours a month might not seem that much, but over a year you would have sacrificed 48 working hours or 6 working days of your life for that daily cappuccino.”

For example: If you are earning around R25 000 a month after tax and you work an eight-hour job over 252 working days a year, your hourly earnings rate post-tax is approximately R149. Economou says translated into time, this means that your daily cappuccino priced at R28 costs you around 11 minutes of work a day. This equates to just under one hour a week or around four hours a month.

In the month of February there were exactly 20 office days, which means 20 cappuccinos. Economou points out that by the end of the month, you would have spent R560 on those daily cappuccinos for which you worked for four hours. While this may seem insignificant to some, he says this example relates to only one expense.

If you add to that other “nice to have expenses” like take-away pizza, dinner with the family at a restaurant and a pair of expensive jeans, you will have spent 17 hours, or just over two working days, to cover those expenses.

“If that daily cappuccino is what you need to make you more productive and you are willing to sacrifice the time, have that cup a day. But make an informed decision.” Economou says hours worked to fund a home, an education, a family holiday and ultimately a financially secure retirement are most likely worth the sacrifice. He adds, however, that hours worked to fund credit card repayments and other costly short-term loans are rarely worth your valuable time.

Definitely worth sharing with your clients as a conversation starter.

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