Frugal Living, Personal Finance 
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When A $945 Espresso Machine Makes Sense

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Espresso ShotsTim Clark, author of The Prosperous Peasant (my review), has a blog called Soul Shelter and he posted a guest article last week where the author’s friend Dave, a multi-millionaire from the dot-com boom, bought an espresso machine for $945. At first I reacted the same way as the author, “It must be nice to be able to afford a high-end, fully automatic espresso maker, I mused aloud.” But as the article continued, I saw the logic.

“OK, consider this: One double latte costs three dollars at a coffee shop, so your outside coffee-drinking habit comes to six dollars a day for you and your wife. That’s $2,190 per year in after-tax dollars,” Dave extrapolated. “Assuming you’re in the 27 percent tax bracket, that means you have to earn $3,000 before taxes to pay for those lattes. That’s more than a month’s wages for a substitute teacher here in the state of Oregon.”

I don’t spend $3 at a coffee shop each day but he and his wife do. I don’t spend $2,190 per year in after tax dollars on double latte’s, but he and his wife do. I don’t have to $3,000 before taxes to pay for coffee each day, but he and his wife do. For him, the $945 espresso machine makes perfect sense even after you factor in the cost of milk, beans, etc. It may not make sense for me, but for him it makes perfect sense.

This is basically the reverse of the monthly payment math trick. The monthly payment math trick is where a salesperson tricks you into paying more for something by justifying it in terms of monthly payments. If I were to argue that he’s making a bad decision, I’d be falling for the trick in reverse by focusing on the $3 a cup cost versus the $1000 espresso machine. When you do the math and find total cost, his logic is sound. You could argue that he shouldn’t be spending $3 on a double latte every day but then you’re not talking money anymore, you’re getting into personal preferences.

The bottom line is that you should always be doing the math. A commenter, Hank, said that his mantra this year is to “just do the math.” When you do the math, the answer is usually pretty clear. In this case it’s crystal clear, once you get past the $945 up-front cost. The other comments for this post are pretty good too, I think many of the commenters know each other so it makes for some lively debate.

What are your thoughts on the purchase?

(Photo: asurroca)

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25 Responses to “When A $945 Espresso Machine Makes Sense”

  1. JR Moreau says:

    I go to coffee shops and cafes (even the hated Starbucks) for coffee AND atmosphere. Even though Starbucks is grossly corporate and over priced, it still is a decent atmosphere to run to for an hour a day on my lunch break to read and write and de-compress. I think if I had a coffee maker in my house that was really expensive, it would be horribly under-used. I like my little generic auto-drip for my morning joe.

    I guess if you’re simply going for coffee and you’re a homebody, then this sort of investment would make sense. But, while your all caffeinated and bound up in your house, where are you going to go?

  2. Tim Hawkins says:

    We’ve done the same thing. Our daughter was a Starbucks barista while going to school, and since S’bucks was clearing their stock a $1200 machine was being sold to employees for $300. Now since both my wife and I like 2 lattes each in the AM, that save us $12/day. We buy the beans at Costco so that saves a bunch, the water goes thru a filter, and the grounds are given to the worms. At $12/day * 360 = $4320/year. We’ve got a bargain…

  3. I thought he made a sound purchase. Occasionally, I hear about successful coffee shop owners in Taiwan and their initial upfront cost to open a coffee shop. Obviously you can’t compare between two different countries because of their difference in economy and whatnot but coffee does have it’s vast demand.

  4. Karen says:

    We use the same kind of math logic, but in a much more working stiff kind of way: When I pay $8 a bag for gourmet coffee at the grocery store, sometimes I think, “hmm, I could get MH or Folgers for a fraction…” But I hate those coffees, I love the gourmet brand. So I have to calculate $3 a cup of SB for both of us everyday would be $21 a week. I’m saving half of that, at least, by brewing it at home.
    You have to decide what’s worth it for you, not for someone else.

  5. nickel says:

    I need a machine that makes Diet Coke on the cheap. :)

  6. Kevin says:

    Try a Fountain Jet Home Soda Maker. Very nice product. http://www.sodaclubusa.com

  7. AJ Kumar says:

    The buy makes total sense for them. I’m quite shocked that someone can drink those lattes daily! I personally think it’s quite unhealthy. If you need some kind of fix, do green tea, tea with lemon/honey. Also helps in weight loss :)

  8. greg says:

    I’ll say here what I said there: this is a tired, over-repeated, intellectually bankrupt personal finance guru wannabe yarn that has been tossed in our faces for years now.

    If it were only just an innocent mistake. But regurgitating flawed logic over and over again, making bigger victims out of people who want to save money, is no laughing matter. This irresponsible advice must be debunked before there are more victims of its bogus advice.

    • jim says:

      You haven’t actually made a point at all, you’ve come off sounding like a jerk who has a vested interest in people not making their own espresso and instead always going to a coffee shop. In your comment on Soul Shelter, you make some generic points that don’t apply to Dave, the person in the article. Additionally, you speak in generalities while the article gave specifics. Comparing an espresso machine to a treadmill on the basis that people buy them and never use them can be applied to almost anything, there’s nothing about the espresso machine that makes it at all like a treadmill.

      I, unlike you, believe people are able to make intelligent informed decisions for themselves.

  9. Like anything the overall picture has to taken into account. I’m not a coffee-drinker, so that kind of purchase would not make sense to me. The fellow making the purchase was a millionaire, and the purchase (even adding in the raw ingredients that need to be kept on hand) so $1,000 might not be much to him. If he is in a position to make such a purchase, and he and his wife get good utility from this particular item, then by all means he should have bought it. I can’t fault someone for buying something that both makes them happy and makes financial sense especially when (as I said) they are in a position to do so.

  10. Agile Cyborg says:

    It doesn’t have to make sense for a multimillionaire to toss a grand at something. This is loose change, do the math.

    I need to connect the dots on this somehow. This is a financial prosperity blog and you’re musing on how nice it must be to afford a thousand dollar coffee machine?

    So much for financial prosperity HERE, eh?

    • jim says:

      I’m 28, I don’t think I have any business spending a thousand dollars on a coffee machine regardless of how prosperous I am. I could have a million dollars in the bank but it’s far more important for me to conserve those funds so I can use it to my advantage with the time I do have. I think it’s about priorities more than anything.

      • Agile Cyborg says:

        I think it’s about enjoying more as your header plainly states.

        You have the money- give yourself a gift. The age of 28 is meaningless since expiration dates aren’t set in stone.

        • jim says:

          That’s a good point and I do enjoy life, it’s just not on espresso or espresso machines. I’m enjoying a Dalwhinnie 15 at the moment. :)

          You also make a good point, expiration dates aren’t in stone, but right now my priorities are in saving some of my money, the money I’m not spending on scotch, for kids. Those little guys are expensive.

  11. nickel says:

    Here’s the thing… IF it’s worth it to you to have high-end espresso, and IF you don’t mind doing it yourself, then the argument holds water. Sure, you can save way more money by not buying pricey coffee at all (I don’t drink coffee, so it’s a non-issue for me). I’m not sure that I quite understand the backlash. From my perspective, Jim is just saying that this is an interesting way of looking at things, and I agree. Whether or not buying a coffee machine is stupid is beside the point. I would argue that it’s stupid because you shouldn’t waste your money on coffee. But again, IF you’re intent on wasting your money on coffee, this appears to be a way of wasting less of it.

    In many ways, this is analogous to saying it’s worth the price premium to buy an Accord over a Neon because you’ll recoup it in lower maintenance costs, higher re-sale, etc. While one could argue that you should just skip buying a car entirely, that misses the point.

  12. Tim Clark says:

    Thanks, Jim, for your thoughtful take on the article that appeared at Soul Shelter. Having been to Dave’s house, I’ve seen for myself that the math definitely works for him, since he derives little economic utility from hanging out in coffee houses, unlike many people who use Starbucks as an office (or simply drive a lot of pleasure from getting away from home for awhile).

    Greg’s points do make sense for many people, but at the same time I think we’re all seeing how hard times have had a huge impact on the coffee shop business. You are paying largely for labor (and for a place to sit/atmosphere)–and that’s exactly the point. The cost of goods of the coffee and milk itself is miniscule, so if you just need the coffee, making yourself makes perfect sense.

    • jim says:

      I think Greg’s points make sense in general, but to say that buying your own espresso machine is “intellectually bankrupt” is a bit too much. His motives are transparent, he writes coffee house reviews and has a vested interest in people going to coffee houses instead of making it themselves. I agree that for many people, a $1000 machine is a frivolous purchase, but it sounds like for Dave it makes sense and Greg can’t seem to accept that.

  13. K. Braun says:

    I think it makes perfect sense to buy an espresso machine for someone like Dave. It saves him money that he would spend in a coffee house and also the time needed to get there, stand in the line etc. In addition, with his own machine he can actually make a better espresso than what he can get in most coffee houses.

    Another point is whether it makes sense to buy such an expensive model. I would think that it probably does – as long as Dave has purchased his machine after some research as to which brand are good etc. There are much cheaper espresso machines around but they usually don’t last that long and/or are more difficult to use (which will add costs in terms of time). So a higher end model is likely to be better in the long run.

    So, all in all – a sound investment.

  14. Jon says:

    While I agree with the “do the math” mantra, I think that taking it one step further and figuring your break-even is a better measure for whether or not something is a good bargain.

    In this case, the b/e is probably about a year, depending on whether or not they purchase the ingredients from s’ux or not. The maintenance and upkeep of the unit should be taken into account, as well as opportunity costs associated with having the equipment, versus using the money for something else.

    If costs + 3% interest doesn’t match the savings, I would look somewhere else, or start bargaining.

    It sounds like that’s what this person has done.

  15. Jason H says:

    Assuming I had a double-latte habit like that, I would still go to Starbucks to buy my coffee. Even if I pay a bit more for it I can at least feel a tad bit altruistic (and that’s as altruistic as I get). The price of the health, dental, vision, 401k, and other benefits that the employees benefit from are baked (brewed?) into the cup of coffee. At least I am helping others maintain some insurance and retirement while getting my favorite beverage. Of course my wife works at Starbucks, so I’m really just paying her health insurance. :-)

  16. Rich says:

    My wife and I received a cheepo $100 espresso machine for a wedding present last year. It works fantastic and makes awesome lattes. I keep hoping it will break so we can buy a newer, nicer one like the one above, but when it did break my wife just ordered a replacement part for it for $10. I write the personal finance blog, but sometimes I wonder who is the one that should be giving advice! :-)

  17. Conrad says:

    The $945 Machine is a shiny bauble for the rich or maybe the un-frugal or maybe a coffee purist.
    Heres why, the socially charged act of jamming in to DAZBOG or PEABODYS is a can’t miss experience especially with friens and acquantences. Plus, when you want to dash out for a quite moment.

    Oh, yeah these places are close to work, how convenient

    Am I on the right planet?

  18. Jon says:

    1. Get some civets
    2. ??
    3. Profit


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