How much do you like your favorite carbonated soft drink? Are you spending about $20 per month on soda? Lets see what would happen if you chose to invest that money in a regular annuity earning 11.6% interested (this historic return of the S&P 500 since its inception in 1926). I’ll assume that a daily soda habit costs $20 per month or $240 per year. Lets start with an 18 year old person who has chosen to place her soda money into an annuity every month. Forty years later, her annuity will be worth $497,922.
That number (in 40 years from now dollars) isn’t easily comparable to current dollars. I’ll use the consumer price index for the last 40 years (January 1968 to January 2008) to adjust this number to something that’s hopefully closer to real dollars.
This is about the closest estimate I can come up with. The opportunity cost of drinking soda could be about $96,000 real dollars. Now I’m not suggesting that soda is evil or that you should never drink it, but I am suggesting that you look at the cost of the habits you form with particular attention to time. Drinking a soda when you’re 18 years old has a much higher opportunity cost than drinking a soda when you’re 75. This estimate doesn’t take into account the health risk of developing diabetes, requiring a lot of dental work, or just contributing to a weight problem. These risks can be monetized as well. Maybe I’ll update my post with that information later.