Buy Yourself a Latte
ritholtz.com
ritholtz.com
Obviously if you're already socking away 15% of your income into a retirement account, Have at least 6 months of salary in a savings safety fund, and generally live about 10% below your means, this advice probably doesn't apply to you: you have more than enough to spend on the little stuff. But congratulations, you're in a significant minority, and this advice is aimed at the rest of the working populace who aren't in that situation.
$5 a day is a significant amount of money to a huge number of people.
In the UK, if you're on minimum wage, a 3 quid coffee represents approximately 5% of your daily income.
If such an individual (someone who earned minwage for a lifetime) were to end up with even "merely" 100K in today's money at age 60 that would actually be an enormous amount relative to their cohort.
So 60 pounds a day is minimum wage in UK? It seems to be very decent middle class income rather than minimum wage. Or maybe you meant 50%?
This is pre tax.
If it were 6 GBP/day you'd get 120 GBP a month (pre-tax). That is extremely low. Living with so little anywhere in Western Europe would be very challenging, if not impossible.
I mean, stingy food shopping at Tesco for basic stuff four times a month would land at (guesstimating) around 10..15 * 4 = 40..60 GBP. This means eggs, bread, butter, vegetables, chicken, yoghurt etc. and no tobacco or beer. This estimate is probably too low as I did not count in soap, toilet paper, toothbrush/paste etc.
Likewise, the minimum of 1260 GBP/month in UK or Western Europe is not a lot, but I guess enough to get by somehow.
I am curious, what do you think is a high income in the UK (or Western Europe in general)?
60 pounds a day for 20 days is 1200pm. That is to say, it is impossible to rent a basic small flat and you will have to live with housemates or family.
Even having done that, transport and basic food will suck up all of the rest of your time and money.
It is by no means a 'very decent middle class income', in most of the South East it's poverty level.
6 pounds a day would be utterly comical, I'm not sure if this is a troll, I doubt that would be liveable in cheaper parts of Eastern Europe.
edit: missing word
What you propose is not much different from the social security many countries levy.
Typically it’s not an economic efficient way of saving. The absurdity of the forced savings proposal becomes apparent if you cannot afford a life saving operation at age 59 because you cannot access your savings. Please don’t try to add exceptions now. Forced savings is just a bad idea.
Almost 30 percent of households have less than $1,000 saved, MagnifyMoney finds, though the amount varies drastically by age. As of June 2018, millennials have less saved than baby boomers, because older Americans have had over three decades longer to save and larger salaries to work with.
https://www.cnbc.com/2018/08/28/how-much-money-americans-hav...
Here's how Americans' median savings breaks down by age:
Millennials (born 1981-1998): $2,430
Gen X (born 1965-1980): $15,780
Baby Boomers and older (born before 1964): $24,280
Also, a way to reduce homelessness and poverty among (primarily) the elderly by providing them with money to live on rather than letting them die of exposure on someone's porch then paying to haul away the corpses.
For those truly opposed to it imagine not only having to have the occasional dead body hauled away but then being charged for that haulage because hey, big government is bad and why should you have to pay for dead bodies being hauled away when they're not on your porch?
Dismantling the capitalist system and giving workers control of the means of production? Or at least taxing capital at the same rate as income? I'm not entirely sure in which direction your sarcasm is running, but if that's what you're proposing, count me in.
Edit: nevermind, your edit makes it clear that we disagree here.
I don't mean to beat a dead horse, but what empirical evidence have we ever had that shows "you'd have millions in the bank AND you'd have a latte every day" is the result of dismantling capitalism?
With apologies to Helder Câmara - "When I tell the poor to save money on a latte they call me a saint, when I ask why the poor cannot afford a latte they call me a Communist."
So there is really no point to complaining, just aim for a frugal life style because no matter how good or bad the system is this will give you, individually, the best results.
Even though my wife and I do quite well financially (and save plenty for ourselves, our kids college, etc), I noticed we were spending "too much" on espressos and lattes. Not too much for our financial situation, but too much for my comfort level at least. So, we bought a $600 espresso machine, which basically paid for itself in less than a year. Not to mention the time savings from going to get coffee.
I was fully offering to make my wife's Latte every morning, although no pressure if she still preferred to pick one up. I figured if I stopped buying them it would still be decent savings. She wasn't all that keen on me making them for her... at least at first.
The most surprising part though is that the lattes are actually better. I started out just trying to save a bit of money and naively assumed that somebody making hundreds of lattes per day would be far better at it than me, and maybe they can be, but perhaps due to the speed demand they cut corners. The consistency is off too, sometimes when I buy a latte it's very good and other times it's not. At home, I can (now) make it perfect every single time and it only takes 5 minutes including cleanup.
Of course, I've discovered some other great things along the way like "steamed in" cinnamon and/or tumeric or adding baileys to lattes on the weekend or eggnog to lattes during the holidays.
There is a bit of a ritual/experience to picking up coffee, and you lose that, but you gain a whole new ritual of making your perfect coffee for yourself... and even if you still pickup once in a while, you're still saving in the long run.
And that was after buying a $400 grinder and $700 espresso machine and misc. accessories. And also with upping the frequency with which I drank coffee since I'm buying bags of beans now.
For those with expensive coffee habits, it is ABSOLUTELY possible to save a bunch of money annually, and drink coffee that is much better and more consistent than many decent cafes once you learn what you're doing, figure out what beans you like, and learn to dial in the grind.
I'm now tempted to get into home roasting to save even more since the green beans keep a really long time.
Redo the calculations from a perspective of 20%+ interest, occasional late fees, the impact on your credit score & your mental health, and now skipping a latte makes a lot more sense.
If you overpay on your next car, or negotiate badly on your next job offer, the money you saved by not buying lattes was all for nothing.
In other words, major financial decisions vastly outweigh the impact of a daily $5 purchase, so why focus on the small stuff? Yet much financial advice is about the small stuff, and this author is saying that's not a good approach.
It's not like having an expensive cup of coffee has been an intrinsic part of human life forever. It's not even a 50 year old phenomenon.
There are certain things you should treat yourself on, but a cup of coffee is too insignificant a hill to die on. Especially since I'm not sure how many people buy lattes everyday because they truly love lattes, and not because it is an extremely well marketed product.
America as such buys too much stuff. The first time I went to America, I was shocked to see how "full" every house was. Just packed to the brim with odd knick knacks that no one uses. The kitchen gadget industry is the perfect example.
Sure, this can work, it might also fail spectacularly.
The article isn't advocating that you buy a coffee every single day. It's saying a. focus on larger issues and b. it's okay to do a little self care and a little self indulgence.
I sometimes bought myself a fucking coffee of some sort at Starbuck's back when I was homeless. I needed the caffeine to help treat health issues. It let me plug in for an hour and get some electricity for my tablet, plus spend an hour on the internet because I was wi-fi dependent. It helped me feel like a human being and not just go fucking kill myself.
I was working on my larger problems, like getting healthier, paying down debt and developing a better earned income. I eventually got off the street.
I still don't have a lot of money. I still have to make judicious purchasing decisions. I still sometimes find that the best answer is splurging on taking care of myself.
Sometimes, taking care of yourself in some way is the best investment you can make. Sometimes, that means buying an overpriced coffee.
I agree. But I don't think the people making the argument for spending less money on coffee are arguing against those two things.
They are not talking about never going to a Starbucks. As you point out, there are circumstances where buying a latte can provide a lot of value. But those situations don't account for most of the money being spent on $5+ lattes. In most cases, it's people in poor financial health, who are not saving enough, and who spend a significant amount on minor luxuries which don't actually contribute meaningfully to their lives. They do it just out of habit. It feels like a sacrifice to stop, but only because it requires giving up a habit. All habits are hard to give up.
― Anatole France's great, great, great grandchild
I've seen pieces that indicate that poor people spend on average like $90 per month on lottery tickets and other forms of gambling. If they invested that instead, they would have a meaningful nest egg. I think that's a brilliant thing to point out.
So, certainly, it can be reasonable to suggest that sometimes poor people can make better choices than they are currently making and it can, in fact, meaningfully improve their lives. But most such arguments really boil down to "The beatings shall continue until morale improves." because we simply don't approve of poor people having any bright spots in their dreadful, miserable lives.
It's generally disingenuous to act like if poor people just give up a few small luxuries, they, too, can invest their way to being millionaires. This is generally not true.
I see it as malicious behavior to act like poor people can save and invest their way to wealth with a little self discipline, like giving up their coffee. Doing so is the rare exception. It is not how most rich people got rich by any stretch of the imagination.
Have you read the Millionaire Next Door?
I suppose it depends how you define "rich" these days, but the data in that book seems to indicate that most US dollar millionaire households are dual middle income workers who live below their means for decades and actively save and invest the difference.
From what I have read, most rich people are business people. They got there by growing a thing of value. They own the local gas station or, these days, they got into YC and got VC money plus assistance figuring out how to grow a business. There is also the standard trope of "He got rich the old fashioned way: He inherited it."
As a teen, I expected to be part of a two-career couple. I didn't know I had an undiagnosed genetic disorder. I didn't expect to have two special-needs children. I didn't expect my husband's career to be antithetical to me developing a career of my own.
An awful lot of things have to go right for two people to both work consistently for decades while living below their means, including marrying someone who is on the same page with you in that regard. My ex and I not being on the same page about money was a major bone of contention in the marriage.
Money is usually one of the top two issues in bad marriages. Then divorce tends to do an excellent job of seriously damaging one's finances, even if they were in good shape beforehand.
I have two adult sons that still live with me. I keep saying "If we each earned X amount per month, our financial problems would be solved! We could sock away money like crazy, buy a house, etc!"
So far, we haven't figured out how to get all three of us working full time and hitting X amount per month.
Not everyone is able bodied. Not everyone has marketable skills. Sexism, racism and so forth are alive and well and have very real impacts on the lives of a lot of poor people. Etc.
It's really rather insulting to probably most of the world to act like all you have to do is marry the right person and both of you have long and successful careers and both of you be on the same page about money and live below your means. It's not that hard!
While the divorce rate in the US hovers around 50 percent.
Historically, yes, if you got a job and kept your nose clean and yadda, your job provided you with retirement and medical coverage, etc. A lot of people these days are working for the gig economy with no benefits and making pathetic amounts of money.
I'm always interested in learning what actually works and how things actually get done. But most of the arguments here amount to victim blaming, and don't confuse me with the facts.
So it might be time for me step away from this discussion. I'm really finding the subtext of a lot of it quite infuriating.
This is why we have expressions like "The 99 Percent" -- because a stable, secure middle class lifestyle that you can reliably build a secure future upon has largely gone extinct.
If we are going to find a way out of this mess, it won't be by acting like "The 99 Percent" need to stop being undisciplined slobs pissing away potential trust funds for their children because they spend too much on coffee.
When millionaire rock stars end up in rehab for the umpteenth time, we don't try to insist they don't deserve to be wealthy. They just need to make the right noises about how drugs are bad and they are working on it, but, wow, it is hard to beat an addiction.
When poor (say, homeless) people have an addiction, the narrative is always that their poverty is due to moral failing and they just need to try a little harder, have some self discipline and quit the drugs.
Even when the drug is just overpriced caffeine.
"It’s not like the sacrifice will result in improved circumstances; the thing holding me back isn’t that I blow five bucks at Wendy’s. It’s that now that I have proven that I am a Poor Person that is all that I am or ever will be. It is not worth it to me to live a bleak life devoid of small pleasures so that one day I can make a single large purchase. I will never have large pleasures to hold on to."
(I really recommend reading the whole thing, for those that have never lived that situation long-term.)
There's additionally a more recent study on the cognitive effects of long-term poverty [2], which essentially finds that poverty skews prioritization in financial decision-making and produces long-term decision-making stress which amounts to a massive ongoing cognitive load.
Attitudes like ~ineedasername's are just fucking infuriating, especially when posted in response to an article in which the entire point was that saving money on coffee is not a habit which in isolation will make a huge difference in anyone's financial future.
It's only about one step removed from victim blaming. Impoverished people aren't poor because they occasionally buy coffee. They're poor because there's an economic system currently in place which is slurping as much wealth away from as many people as possible to feed it to just a few.
[1]: https://www.theatlantic.com/business/archive/2013/11/your-br...
[2]: http://review.chicagobooth.edu/behavioral-science/2018/artic...
But it amounts to left-handedly saying "The big problems in your life/ the world that make your $5 coffee An Issue for your budget? Yeah, honey, you can give up on solving those. Justice just ain't a thing."
As ineedausername said. It isn't meant literally, its about a mindset.
Its about pointing out that mindlessly spending $5 everyday adds up to $xxx,xxx. If its still worth it for you then great, but make that decision consciously.
I'm not even sure the advice is aimed at poor people, rather middle income people that spend their entire wage (plus) each month.
Now, to blame it on the economic system is going too far IMO. Can you point to an economic system in practice with lower poverty rates than capitalism? Also, a well balanced capitalist system doesn't "slurp" wealth away, it increases it. Someone invents an axe, gets massively rich, and wealth inequality grows a bit. However, everyone who bought that axe is now better off for it. The total amount of wealth has increased in a non-zero-sum fashion.
It’s not all or nothing, and all or nothing thinking by fanatics of “Jesus” and Capitalism has destroyed America.
If you're on a wage where you're not sure if you'll ever be able to afford your own home, that $5 does add up.
It was around 1% of my income recently. I want a house yesterday.
I think the best solution to all this is what I ended up doing: buy a cheap but good espresso machine and enjoy delicious cheap coffee.
If someone spends all their money on rent because powerful interests are blocking new property development or because they're forced into rooming houses by a lack of rental history, then seeing them as a victim might be useful. If someone spends all their money on iphones and playstations and dinners and lattes and will stop doing it if they get negative peer feedback, then blaming them might be useful. If someone spends all their money on building a new house after a fire, then maybe neither is as helpful as integrating opt-out disaster insurance into land tax.
Taking a hard line against any particular lever is almost always going to make you wrong some of the time, which means that some people are going to stay poor when they don't have to, which sucks for them.
Impoverished people might be poor because they take everything literally and can't see the big picture though. Yes, frivolous spending absolutely has something to do with poverty. It's so clear and obvious and when I look at every example of a person that I know that could be called poor vs someone that is rich there is the same pattern: The poor ones HATE doing what's necessary, work, personal grooming, cleaning, eating healthy, working out whatever but they LOVE spending money they don't have on things they don't need and that will not make them happy. If you try to stop them from spending, they suffer. But if they spend it's the hedonistic treadmill: increase amount and GOTO 10.
Rich people I know LOVE to work. They would work for free. They get up and go work and if you stop them they suffer. The rich people I know HATE spending money. It causes them physical discomfort. IF they spend, they consider it for quite some time, look for deals or wait for special offers. Subsequently they are very happy with their purchases and keep them maintained and in good order.
> They're poor because there's an economic system currently in place which is slurping as much wealth away from as many people as possible to feed it to just a few.
None of this is true. We are getting wealthier and wealthier from this magnificent system that lifted BILLIONS out of poverty the last 50 years.
> small pleasures
This is a perfect example of the poverty mindset: consume to be happy. There is enough pleasure to be had without spending a single dime, in fact, the most fulfilling activities will net you money directly or indirectly. It's possible to be content without spending money all the time. If you think that the happiness in your life comes down to small or large purchases you are already on the wrong path. Just turn back.
And by the way, the story of lotto winners is instructive: you simply can't spend your way out of the poverty mindset.
Would they work fast food for as many hours? How about in a call center where half the customers are angry and taking it out on you? How about if they couldn't afford the basics in life from the job? How about if they couldn't afford health care or food, so when working they are always tired?
The rich people you know don't have to deal with the crap poor folks do. They are more likely to be able to take vacations, spend money on things that make them happy (maybe it is their company/job, but it is still spending). They aren't worried that being late to pick up the kids will cost enough to make you have to eat less for the rest of the month, nor that a flat tire means you have to go without electricity.
IF they spend, they consider it for quite some time, look for deals or wait for special offers. Subsequently they are very happy with their purchases and keep them maintained and in good order.
Poor people don't have this luxury. Everyone would rather have comfortable shoes, but if you only have $15 for shoes and can't save up for 6 months for something better, you have to buy the $15 shoes. Even with good maintenance, $15 shoes aren't going to last like $100 shoes.
And by the way, the story of lotto winners is instructive: you simply can't spend your way out of the poverty mindset.
This doesn't prove anything. It proves that poverty deprives you of chances to practice long-term financial planning and unsurprisingly, when impovershed people suddenly get a lump sum of money, they fare poorly with the long-term planning. In contrast, rich folks have regular income. Even if you mess up one month, you have some income the next month. I'm going to guess if lotteries paid out monthly for as many years as jobs do, things would look different. Especially if it had an amount of upfront windfall followed by the monthly salary.
You don't fully understand how these "next door millionaire" types operate. They don't look at something and say "that's fast food work". They work at what is necessary for however long it takes. My girlfriend is building her two businesses, she spends nights in the basement sewing piece after piece by the dozens and the days churning out t-shirt design after t-shirt design. If you break down her "working conditions" and "hourly wage" I am pretty sure a fast food job would look better on paper. But she is on a growth path while the average worker (it's not like this is foreign to me) is just looking to get off of work and get spending which is is a path to nothing.
> you know don't have to deal with the crap poor folks do.
The infuriating part about it is exactly that a lot of the "crap" that happens to them is self-inflicted. I know this "poor" woman who had a child in order to get a guy who wasn't even the father into a relationship with her (yes, you read that right), then while pregnant smoked and ate only garbage. Now the child has birth defects, likely from the smoking, and at three is already one year developmentally delayed because even though she is on the generous German welfare she didn't see fit to spend any time playing or going outside with him. She has a car that she "needs" because she is so skinny fat that she literally can't walk to the next bus stop. So what does she do when she get's any kind of money? Spends it on new rims, trims and whatever crap people put on their cars to "soup" them up. All of the ideas she has about life are false and destructive and everything she does is wrong. There is no helping her. We really tried but she is literally too dumb to make connections between actions and consequences. Instead all of here brain power seems to go to thinking up stories to feel better about herself. It's impossible. She is a bottomless pit and resources keep pouring into it. She had years on welfare even though she could work. She got gifted three cars by friends. She get's "free" healthcare that will sort out the consequences of her very bad habits. Now the state is paying extra for a special needs kindergarden for her son. It's never enough, it can't ever be enough. What she needs are some of the existential problems you mentioned so that she has to get her shit together.
> Poor people don't have this luxury. Everyone would rather have comfortable shoes, but if you only have $15 for shoes and can't save up for 6 months for something better, you have to buy the $15 shoes. Even with good maintenance, $15 shoes aren't going to last like $100 shoes.
To the larger point : this is the Sam Vimes theory of social economic justice and yeah, it's truly hard to break a vicious cycle. That's why it's absolutely imperative to start a virtuous cycle no matter how tiny because it can make a huge difference over time. Start making your own coffee, save $5 here and there now you have $50. Oh what's that, a WIDGETGARGBLASTER at half price? Well, I'm pretty sure my car will need one soon, I am going to use my nest egg to buy that for cheap. Thank god I had this WIDGETGAGBLASTER because wouldn't you know it, my car broke down just as I was about to go for my job interview. I mean it's contrived sure but in three steps saving $5 a day already could've made a difference in 10000s of dollars in lifetime earnings.
To the concrete example: under capitalism what's actually true is that you can get garbage for tiny prices, very decent quality at low prices, super value at medium prices and luxury for high prices. The kind of poverty where hard-working people want for basic material things is abolished and it's really weird that people keep arguing as if it still existed. What's a lot closer reality is that the next door millionaire type has $50 leather shoes from ten years ago while the 'poor' person has a $500 dollar sneaker 'collection' financed by credit card debt.
> poverty deprives you of chances to practice long-term financial planning
Clearly this is putting the cart before the horse.
> I'm going to guess if lotteries paid out monthly for as many years as jobs do, things would look different
No, it would be worse. You have a steady, guaranteed income like that you can borrow against it and the instant gratification crowd is going to do just that.
Here is some food for though about the scope of poverty: http://www.aei.org/wp-content/uploads/2019/03/MiddleClass_20...
And the causes of poverty: https://thefederalist.com/2018/05/24/study-no-1-reason-ameri...
"Americans who graduate high school, work full time (even at minimum wage), and marry before having kids are essentially guaranteed to not live in poverty. These are all choices, not happenstance."
Oh it's real, I haven't even told you half of her insanity.
Like the time my girlfriend who is her friend tried to help her quit by listening to Alen Carr which had helped us a lot in quitting smoking. Quote verbatim: 'this is brain washing'.
Like the time my step son who would rather bite his arm of then confront someone told her straight up that smoking while pregnant is a shitty thing to do to the baby. She just shrugges, smiles and say I know I know.
Like when she told her baby father to move 700km so he can take their son on the weekends (she was always trying to pawn him off to someone) and then half a year later moved up 500km the same direction to her new boyfriend and now has the state pay for her legal bills from the resulting custody dispute.
It's all real. You can, of course think, that it's all invented by the american right wing to make poor people look bad but if you listen you will hear the same kind of stories from social workers and welfare officials from all over. You might not want to believe this because it points to a fundamental problem of welfare: bad attitudes, tendencies and habits get worse with more resources and not better.
> state care
Of course child welfare services (Jugendamt) is on the case. They gave her a case worker that used to stop by to make sure it didn't get too bad. Of course she thought the job of that person was to Nany her son so she went through about three case workers in as many years. Btw, she picks fights with everyone. But the state of Germany is (rightfully) very reluctant to take kids away. Even with this amount of neglect it's hard to be sure that fostering the kid would produce better results plus we have double sordid history with this kind of thing. [1] [2]
Doctors tell her in no uncertain terms what she needs to do but wouldn't you know it, she always reacts exasperated "how dare he say it's not normal that a child doesn't call for his mommy at 2 years old, I DID EVERYTHING RIGHT.". She feels like she is a perpetual victim of all these people who are really trying to help her.
> I have no doubt that you are misinformed.
I am perfectly informed as I get near daily updates on this case. I am going to be honest, knowing this person has absolutely shifted my view from a systemic one to a personal one. You can't make a welfare system that can fix this. It's literally better to have none at all because any welfare system is just paying people like her to become ever more useless and degenerate.
[1] https://en.wikipedia.org/wiki/Lebensborn [2] https://www.theguardian.com/world/2010/aug/22/germany-cold-w...
What you describe is quite literally a textbook cause for removing the child from the mother in German law - an immediate risk to their opportunity to develop cognitively or emotionally. You may well be describing an amazing case where some half dozen welfare professionals have all seen a case that clearly evaluates to 'this child needs to be removed' and all done nothing, but ... the odds are low. And the idea that you can't be misinformed because of the frequency of updates? Oh dear.
I am sorry that hearing about this woman has impaired your ability to think about welfare as a system. Perhaps you should avoid the topic until you recover your ability to think beyond her.
Have a fun citation for me on that? Is it effective in absolute terms or just "most effective"?
> unhealthy coping mechanisms
It's very telling that when you can't get past indivual behaviour anymore you still find a way to put it on the environment. I wonder why there is one group of people, let's call them "victims" where everything they do is readily excused and dismissed, like turning west coast cities into open air toilets. It's like they have no agency at all. It's almost as if the left habitually dehumanizes the subjects of their 'empathy' in the process of advocating their policies.
> an immediate risk to their opportunity to develop cognitively or emotionally.
No, children are not just taken away in Germany. Period. As long as the child is fed, clothed and free from overt signs of physical abuse it's a process and she is in it.
The most charitable thing to say is that you are halucinating some deep knowledge about child wellfare practices in Germany in order to prop up your ideology which can't deal with the existance of this one women, let alone the fact that she is a representative of a large class of people on similar paths.
> Perhaps you should avoid the topic until you recover your ability to think beyond her.
I think you should avoid any topic as long as you mistake your ideology for actual knowledge of the real world and the real people in it.
Not to speak for Americans but this is the classic immigrant story in America. I, personally, know many people who've done this.
It isn't about "this type of work" or "people taking it out on me". The world is a place. It is a certain way. I have an objective. To have my family better off. So if someone is going to yell, they're going to yell. It's just the constraint. I'm going to adapt to it.
I'm saying no one would do these jobs for "love of working" if they are rich enough to avoid such labour. For example: You might open a restaurant, but you'd not likely be a cashier at McDonalds with no health insurance, vacation, nor agency over one's life. You might own a hobby farm, but it is highly unlikely you'd be a migrant farm worker if you are already rich. And so on.
In my case, that generally means respiratory issues and allergies.
People who drink a lot of coffee are probably self-medicating for something or other, possibly without realizing it. My coffee consumption always goes up when I'm exposed to more allergens. When it goes down, it's because I'm feeling better, not because I have self discipline.
That is EXACTLY what the article is advocating, very explicitly.
Your case sounds very different than the "$5 latte a day habit", which is probably just someone standing in line in the morning, grabbing their coffee and absent-mindedly sipping it as they walk to the office.
You got an hour of shelter and a comfortable place to sit in a nice environment, plus power and wifi, in addition to the caffeine and enjoyment of a nice beverage. It sounds like you made an efficient use of the limited resources you had available to you.
And I think the $5 latte is meant to be a symbol of how to get your expenses under control, not a complete retirement plan. Add to cutting out the lattes cooking more meals at home, cutting your cable bill to the most basic Internet only plan, looking for a cheaper cell phone bill, buy a beater instead of a new car next time you need to purchase one...
Once you have your emergency fund, most debts payed off, and are starting to save a reasonable amount for retirement, then the $5 lattes maybe aren't going to kill you, as long as you keep your overall spending within your means.
Let’s consider five reasons why you should occasionally treat yourself to a cup of Joe.
It's arguing against the people saying "Your daily coffee habit is costing you a million dollars!" It's saying that is nonsense.
That isn't the same thing as issuing the opposite edict that you, yes you, need to rush out and drink coffee every. single. day.
Defending your right to make such purchases as you see fit isn't actually the same thing as insisting you spend $5 a day on coffee.
But I imagine this comment will fall on deaf ears. Like the time someone asked how to foster independence in their toddler and I told the story about locking up the breakables when my toddler began hurling his dishes into the kitchen sink like it was a basketball hoop so as to let him do his thing without it going bad places.
The eager young parent replied "I like that! I'm going to promptly start making my toddler put their dishes in the sink!!!!"
(facepalm)
Hopefully nobody is saying that. A $5 daily habit costs $20-30k per decade, after you factor in reasonably anticipated investment gains. No more no less. Viewpoints about what an ideal world would look like, or one's right to make such purchases, or whatever else, have zero impact on the cost. It is what it is. Each person has to make their own judgment about whether that cost makes sense for them.
It’s a cliché that refuses to die: personal finance guru Suzy Orman warned investors last week that if you “waste money on coffee, it’s like ‘peeing $1 million down the drain.’”
That's apparently the reason the article was written -- to rebut that claim in specific.
Most people who say to skip the $5 a day latte understand that that alone isn't going to make you rich. Instead, the point is to engage in good spending habits, the sum of which will make you at least substantially wealthier than you would be otherwise. The fact that Suze took it literally does not mean the advice needs dismantling. Quite the opposite.
That being said, I do think it's kind of interesting that this guy is writing about don't buy a latte. Buy as many lattes as you want, as long as you don't hire his firm. They'll hit you up for 1% of your AUM under $2M, which is going to hurt a lot more than lattes for anybody who still gives any thought to the price of one.
So 5 coffees a week is ~2.7% of a full time wage. That is huge, anyone arguing otherwise isn't all over how percentages work. Only something like 10-15% of your average weekly wage needs to be saved to have a comfortable retirement. Reducing consumption is a double-whammy, you spend less on lifestyle so you need to save less to maintain that lifestyle. $5/day is a huge expense from that perspective.
I don't know how prevalent stupid decisions like a daily coffee are for poor people, but the costs are so high I expect not many of them do it. Having a stranger prepare your food and drink is a luxury for the wealthy.
The article fails because it uses terminology to positively frame it as a treat while using terminology to include the negative framing when describing what you can do... it is terribly written.
The beater is often just as poor an investment due to the money you'll have to throw into it like a black hole whenever it fails. There's also the stress and instability it creates knowing it may not start the next morning.
If I put a lot more miles in it then I would be more concerned with break downs as it aged.
Huh? That's exactly what keeps people that are on a cusp of climing out of the hole in a hole.
It is too bad fatwallet.com is dead. It has very long threads ( years long ) of people describing the tiny improvements that they made and how over years it significantly affected their life in a way they could not imagine when they made that silly "I won't buy $5 late and instead add that $5 to my credit card payment" change.
I agree that some level of indulgence is okay, obviously this is a balance. Everyone has to figure out what they're comfortable with here, but some people we know may have become way too comfortable and complacent yet still want to complain about their financial situation. These are the people who need to figure out why and how to adjust their behavior.
But no one tells well-off people to cut back on buying $5 cups of coffee by the dozen. No one suggests that if they saved that money, they could have two or three million more and, clearly, that's the morally correct thing to do.
No one is saying coffee consumption is the root cause of terrorist attacks and calling for coffee abolition. No one is saying coffee is generally some kind of moral failing.
It's apparently just a moral failing if you are struggling financially. And then you really need to quit it, you bad person you.
This whole "Your coffee is the problem!" narrative is just judgy, moralizing nonsense. Why is it focused on expensive coffee in specific? Why not candy bars on your work break? Or the high cost of participating in the annual insanity we call Christmas?
Because expensive coffee bought and consumed publicly is conspicuous consumption, something that is a pecking order signal of being one of The Haves. So The Haves are offended by The Have Nots participating.
That's part of what this article is criticizing.
Let The Have Nots have a small luxury here and there and quit picking on them over it. Geez.
Personally, I mostly stopped doing Christmas (and Halloween) years ago. It's not obvious because I'm so fucking poor that no one expects me to buy them presents.
But if you want to start a campaign to tell America that our modern Christmas habits are one of the roots of all financial evil in the world, I will happily promote your campaign. I'm sure you will be pelted with rotten tomatoes, because now you are also being judgy of the spending habits of The Haves, but I will support your right to subject yourself to that.
What I find the most distasful is when people make it to the top of the pyramid, look down, and scream advice at those below.
Some do it to assuage their guilt, some to raise themselves further above the rabble, and others - whom I despise the most - decide to profit from their status by selling their "wisdom".
For the first five years of my adult life I wouldn't have even considered spending $5 on a coffee, or a take out sandwich, or whatever. It felt like a ridiculous sum of money. When I visit parts of the UK that aren't awash with wealth, it still does.
I genuinely did think of it through the lens of - not doing that meant that I could quite rapidly save a month's rent, then a few months' rent, and so on.
Would it make me a millionaire? No. Certainly not in isolation. But it would break my fall if I were to become unemployed, temporarily ill, etc.
And that initial spark of starting to save, having a buffer, not going homeless if I lost my job for a month or two or six, was an essential ingredient in me becoming what you seem to call 'The Haves'.
$5 a day for 5 years is over $9K. Non-inflation adjusted. You could stick it under a mattress and that's still six months rent here in London or a _year_ if you share a flat. It's genuinely a large amount of money.
If I'd spent my whole life chucking money at everything that came my way I'd still be poor because I would never have been able to risk switching jobs, moving, I very well could have ended up homeless in periods when I left work for a while, etc. Living paycheck to paycheck is basically suicide. You have to make hay whilst the sun shines.
Until I had a decent amount saved I essentially did not have discretionary income. I felt it was frivolous. That has worked out for me and I see no reason why it wouldn't work out for others; as such I believe expressing my opinion to be useful advice, and it is rather odd to have that lived experience be painted as "moralizing".
Although, when I look back, it would have been smarter not to have done that. I did manage to save $600 when receiving $30 a week though.
Yes but is spending money on little things you don't need really taking care of yourself? I don't like the mindset that the only way to treat yourself or take care of yourself is to buy things.
$1800 a year.
In ten years a family of two has $36000. This is downpayment for a house.
Rent? Enjoy annual increases that eclipse your wage growth.
Bought a home with rented money? You still have to pay the mortgage even if you get laid off. You still owe the same amount even if property values tank. If you deplete your savings you might face foreclosure, which, compounded with a down market could wipe out your equity. Most home"owners" don't understand these risks.
Major illness or emergency? Your insurance plan is tied to your job. A full time job in a competitive field at a generous company will get you decent, affordable coverage. A full time job at a company that's circling the drain or is focused on shareholder value will get you expensive coverage that doesn't cover much. A part-time job means you get to look for health insurance on your own, a process that confounds even healthcare economists, and the quality of your options varies greatly from state to state. This is where you'll eventually end up anyway, since you'll be too sick to work. Your company will find a way to fire you. Once you deplete your savings, you might qualify for aid, but not much.
Your parent/uncle/niece/unmarried SO needs money to treat a chronic illness? Government assistance won't cover everything. Neither will crowd-begging or their savings. Or yours.
Have young kids? Daycare costs $15k-30k per year. Kindergarten is only 4-5 hours a day, elementary school is 6-7 hours. One parent can only work part time--very, very close to home, or drops out of the workforce for 10+ years. This destroys their career and lifetime earnings.
Kids want to go to college? Financial aid is "need based". Live on the coast where your salary is high but so is the rent on your modest home? Too bad, need is not regionally adjusted. Are you poor and broke? OK, you have a need. Decades ago your child would receive grants, now they'll receive grants and loans. Hopefully you planned and parented well so they go to an in-state state school, otherwise they end up shackled to a mountain of debt.
Frugality won't save you. Don't be stupid and live way beyond your means, but a latte a day doesn't matter. The most important thing is to get in the top 20% on one salary and hope you stay there.
The point being made is that if all that is stopping you from financial ruin is a $5 coffee a few times a week, you're pretty much already in financial ruin. The coffee really isn't and shouldn't be the thing making the difference.
This was originally in Bloomberg, and what's really going on there is an implicit critique of everything Bloomberg stands for. Bloomberg's target market does not include that significant minority for whom $5 a day is a big deal. Bloomberg tends to advocate policies that make life easier for its target market, and if it acknowledges that significant minority at all, it's with a tacit assumption that those policies will somehow trickle down money on them.
The lesson is really "You have plenty of money. Spend it, and while you're at it, think about what we can do for those for whom $5 a day is a big deal." He's challenging the assumption that everybody is so poor that we need to scrimp every dollar and maximize our retirement funds. Maybe we should be more generous, starting with ourselves, including enjoying a latte now rather than decades from now.
Wait, so you are saying people who can least afford to spend on daily luxury to spend more money? That is basically like a secret business plan of financial and credit companies, who basically get majority of their profit from overdraft, interest charges and fees.
That is a very important point I missed the first time through.
The author was only looking at the decreased utility of the saved and earned dollars, but not the increasing prices of the consumed good over time.
If you are in your early 20s than yes every penny invested counts more given a 40 year plan to invest for retirement as the interest compounded adds up.
However, those at the end of their retirement investment plan say in the last ten years its a different story where $5 a day will not matter much in terms of increasing investment funds for retirement.
It's really simple. If you don't spend $5 now and you even get close to matching inflation that's a few dollars you will have in retirement.
Most people seem to miss the point entirely on this and go off on some sort of weird tangent into calculation of exponential returns or whatever.
The simple fact is that when you no longer have a job, having money is useful.
The main thing I learned over 42 years of going back and forth is that a warm place to sleep, good health, good food (and coffee) and nice, caring people are priceless.
Money is the ultimate drug, yet piling it up and walking over dead bodies to get ever more is seen as successful and worthy of admiration. I know a junkie when I see one, the fact that the drug is legal changes nothing.
Dropping $5 you don't have on overpriced coffee is proving that it has no power over you.
Posting this here is likely karma suicide, but here we go; this is my perspective, and it's as valid as any other.
Surely it depends on motivation?
I wouldn't say money has power over me, but I want to be a responsible member of society, pay my own way etc, so I make sure I have money to buy coffee now and in the future. Whereas if you're buying overprice coffee with money you don't have, just to impress your mates, that think you're rich and successful, and you want to impress them...
Further, if you're spending $5 you don't have (assuming it isn't stolen), its borrowed, which means someone else has power over you.
If I couldn't care less, how can someone have power over me?
It's not really who controls who here, it's about knowing you're secure about the future while still enjoying the moment, even a latte. Maybe we're saying the same thing but in a different way.
You are not your bank account.
A bank account isn’t your self worth, but it is an extension of your reach. Sometimes that reach is necessary, crucial even.
Freedom is a mindset, not 500 TV channels; it's a lack of lack, not more crap.
Mindset isn’t a silver bullet (although it’s helpful and will keep you sane). Sometimes you’re going to need dig deep for that grit and find those dollars you need.
There are people who devote themselves to living in the moment, push all their money into the now and whatever instant gratification they can get. In no specific case can you prove that's a terrible idea without knowledge of the future, but I think we can all say that quitting your job to shoot up heroin is a choice that deprives you of many of the joys of life.
AND YET, while I stand by everything above, buying into a system that deprives you of your life in the hope that you might be able to scratch out a living in your sunset years is awful and modern societies push toward "Be prudent toward your retirement" is one we need to balance with the joy of letting ourselves step out of the rat-race on occasion to enjoy stuff.
Either way, I think the OP is demonstrating the worst choice of both worlds, no where in his statement is it implied he's actually buying a coffee to gain enjoyment, just to reject the necessity of money - that's just a terrible reason... enjoy things, treat yourself, be conservative with constant spending and live life.
And lastly, coffee is complicated. The article and OP might be referring to the occasional splurge on a nice latte to relax with, but it could easily be read as the activity that turns into a fixed cost - buying coffee because your daily life has sapped you of everything you are to the point where Caffeine is the only place you think you can find the energy to carry on. I have OSA (sleep apnea) and feel into this sort of trap for a little while before I got a CPAP, it was dark depressing time that I wish on no one.
Surely spending money you don't have on overpriced things you don't need is _precisely_ the sort of consumerism that proves you're fully bought into the rat race?
Met him in 2014, and in 2017 he had a panic when he was kicked out of his house. He came over for a moment and asked for any spare change, gave him ~5-10$.
I was eating raw ramen and protein shakes, always cooked at home. Saved like crazy(and worked). No college debt. Graduated, life is good.
5$/day is enough to pay for many months of rent.
>pretending that saving $5 could make any kind of difference.
This is the difference between the wealthy and poor. The poor can't visualize that 5$/day-> thousands of dollars.
In modern society, money has power over us no matter how we act. That is, we're forced to make money to sustain a satisfactory quality of life. Wasting $5 on a coffee will actually increase the power money has over you because you will be forced to make more money down the road.
It seems like you're wasting money as either 1) a training mechanism to prevent yourself from developing an attachment to money, or 2) an expressive mechanism to express to yourself/others how much you hate the fact that you have to make money.
I'd suggest finding a healthier mechanism for expression/change than wasting money. Lots of people learn to value things in life other than money without digging themselves into a financial hole.
The real problem I have with the author's mentality is that in real life it seems like the coffee is the symptom, not the disease. It's an easily identifiable marker that there are probably a lot of other things you are wasting money on. Sure the coffee only adds up to a couple years worth of income at the end of your life as the article points out, but everything else adds up quick, and you wonder how you aren't really ever earning enough to start saving at all.
For the author, who presumably makes millions a year, and his clients who do the same, it's good to not get tripped up on the small stuff to focus properly on the bigger picture. Doesn't mean that advice applies the same to the rest of us.
I can help spending money on what I don't need, but I just don't care most of the time.
If I don't get coffee, that's also not a major problem.
I think the point is that no one ever got rich by saving $5 a day, never happened and probably never will.
To me those types of things would be the motivator for most middle class folks to avoid Starbucks every day.
Not all perspectives are equally valid.
> Money is the ultimate drug, yet piling it up and walking over dead bodies to get ever more is seen as successful and worthy of admiration. I know a junkie when I see one, the fact that the drug is legal changes nothing.
Saying that friends and family are more important than money is a truism. Most people prioritize "things that matter" (including friends and family) over pursuit of money. People who pursue money to the detriment of everything else are rare.
Listing your "born poor credentials" is irritating. Boasting about how you lost your savings, which means you care about things that matter, which makes you virtuous (because you are poor again) is irritating. It's a transparent and silly perspective.
Pretending that the only two choices are virtuous poverty and sinful solvency is also silly. There are people who do not irrationally pursue money to the detriment of their personal lives and yet manage to avoid poverty.
I know it's discomforting to admit that there are people who have made better choices and live happier lives than you along every dimension. But it's true.
But its not my fault, you got yourself into this shit and you get to crawl out.
Everything is forgiven and released, always.
Buying overpriced stuff you don't really need with money you don't have has to be somewhere in the definition of "money has power over me". For me, to be truly independent means to not need money a) because you have enough and b) because you don't need to compulsively spend it. b) leads to a) btw.
The debate is framed as "$5 a day is a waste--put it into your piggy bank every day and drink office sludge instead".
I instead say that yes, the office coffee still tastes like fertilizer, but I still think $5 a day for a latte is waste because I can make some excellent coffee at my desk for about a dollar a day using an inexpensive French Press, a hand-grinder (or grinding the beans that morning at home), and some whole beans from your favorite hipster coffee shop. And the 5 minutes it takes start-to-finish (1 minute for prep, 4 minutes for steeping) is probably less time than it will take to slip by the coffee shop, stand in line, and get your order.
But that's just me. If they're one of those people who uses the coffee/espresso/latte as a caffeine-delivery mechanism and rely on being a frozen whipped-cream confection with chocolate and a little coffee in it to make it palatable, then my self-brew method won't help them.
Also, I recommend 5 minutes steeping, personally. ;)
The time component of having to go somewhere + get your order + get back is mysteriously ignored all. the. time. Not just with coffee, but with making your own food. Like, you don't want to meal prep it takes too much time--but then you probably spend more time overall getting lunch every day instead! Especially if you have the luxury 'need' for variety every. single. meal.
It drives me a little bit crazy.
Sure, but it's on your own time, not your employer's time (at least, that's how I read "I have it at my desk").
That said, I will solidly defend the notion that not spending a solid N hours at your desk is a good thing. Stepping away from your desk on your lunch hour, whether it's to purchase a latte, a lunch, or to eat a homemade meal in a nearby park, is a good thing.
I disagree. The average tech professional is salaried, not billing hourly. It takes about the same amount of time to fill and plug in the percolator or operate a kurig as it does to stand in line and get coffee made for you. Likewise the opportunity cost is nearly $0 There is no economic rationalization for the overwhelming majority of prepared coffee bought by white collar professionals. It is a pure luxury expense.
> It is a pure luxury expense.
Practically speaking, purchasing coffee at all is a luxury line item. There's no actual need for it for anything other than the caffeine hit and flavor. At least with a Latte, there's the protein, calcium and calories from the milk.
True, but that's a very deep rabbit hole. We could sit here all day debating what's luxury and what's not.
My counterargument would be that if with automation the way it is, if a regular person can't afford a self-made cup of coffee (or an equivalently cheap luxury) for the flavor alone, then what's the point? Should we all be eating vegan bean paste and popping B12 supplements and caffeine pills instead of consuming nutrients through regular food?
Is that the endgame for peak civilization?
We also browse internet, spend ungodly amount of time on fb/insta/whatsapp/HN/reddit while at work. Taking out 5 mins to make a coffee isn't that significant.
No, it's not. Just as spending $5 on a latte every day isn't that significant either (for the assumed "average tech worker").
If $200 is a significant amount that you don't want to spend, that's completely fine. But it's also not that much when you look at it, even as a leisure purchase.
On the other hand, I much prefer a latte to any pour-over or french press coffee, maybe it's the steamed milk, I'm not sure. I don't mess with latte's at home anymore. I've had two <$200 machines wear out on me and it's too much work for something not nearly as good as a local shop.
Of course, if you don't have a handy grounds disposal spot, there will be some additional issues.
Not that I think it has anything to do with the point of the article.
Then again I see the mentality in some tech professionals wanting to eliminate every little "inefficient" use of time including food prep so they can park their ass longer. I guess it's individual.
For myself it's a mental health cost. We have a shared office but only go 2-3 times a week. The coffee shop allows me to be in a social environment away from home.
Going for a coffee or going out to lunch aren't just about labor, it's about a bunch of things. It's getting out of the office, even if it's just down to a storefront on the first floor. It's five minutes when the odds of someone bugging you are much lower. It's a ritual, and maybe a little exercise. It's not about a purchase. That's just the cost of the experience, and it's worth $5 to people.
I often wonder how much the incidence of smoking was influenced by this. I worked at a place where there was a lot of pressure from the bosses for ass-in-seat time and they'd make petty little comments about people going for a walk or getting coffee or Heaven forbid, leaving at 5 pm! But we had 2 or 3 smokers and they never once complained about them going outside for a cigarette. Which took just as long as getting a coffee. And because nobody wanted to stand in a cloud of smoke it was even more effective as a break than going for coffee, where you might run into a coworker or worse, a customer.
I have never gotten fast coffee and thought- Driving/walking here, waiting in line, paying, and waiting for my order is faster than homemade Drip Coffee.
Also, on the broader point - savings do matter. It's like trying to lose weight. You can't lose weight by simply working out and not making any changes to the diet. However, having to control all these impulses and every little temptation, is taxing on the brain. I can only speak for myself here, it affects my cognition. I can splurge a bit and free up my mind to focus on the things that matter more. It's taxing to always stay in control and trying to optimize every single thing.
The speed and price is a boon for me, but also how compact the dose becomes. I can take it anywhere whenever I need it with just my palm; no need to plan for a coffee break. If coworkers are going out after work, I'll take one at 5, then stick a couple in my back pocket to keep the night fueled 4 hours at a time. When I wake up early for a morning run, I'll take one and hit snooze and fall back asleep, then by the time the alarm finishes snoozing I awake already caffeinated and eager to run at the crack of dawn. In college I would take one in the middle of lecture if I started to nod off. Really changed my life.
https://www.sciencedirect.com/science/article/pii/S019745801...
And for food and drinks, no less.
In my opinion, a lot of Americans and people around the first world live paycheck-to-paycheck because they adjust their consumption to match their income. There are people that live paycheck-to-paycheck at all levels of the income distribution. The power of saving adds up more than people think. The author of the article may very well be rich and successful because his $5 daily coffee frees up his mental bandwidth enough to concentrate on his billion-dollar daily problems. However, many poorer folks need to learn self-control and the power of saving. His advice is not actionable.
To use the featured quote against him: >If spending $5 a day on fancy coffee puts your retirement at risk, you’ve got bigger problems.
Yes. The bigger problem is that many grown adults are financially ignorant. Spending $5/day on a pure luxury despite being flat broke is a symptom of this ignorance, but analysis of this symptom can lead to self-reflection and better behavior.
Savings Calculation: https://imgur.com/a/Au00aeJ
I make no claim as to whether the price of coffee will grow faster than the consumer price index, or slower, so I assume it matches it.
I find it difficult that you can safely earn 0.5% every month over inflation.
Using HP12C, a -100 PMT, 0.5i (0,5% over inflation), 480n (40 years * 12) gives me a 199.149,07 future value (FV).
>One of the major problems for an investor looking at that 10% average return figure and mistakenly expecting to realize a nice yearly profit from investing in the S&P 500 is inflation. Adjusted for inflation, the historical average annual return is only around 7%
Here is the structure of the spreadsheet (had to rebuild it real quick, didn't save the original): https://imgur.com/a/jOaHUoT
Due to volatility, it is unsafe to retire on a planned drawdown rate of 7% (4% is a good rule), but it isn't unrealistic to expect 7% growth.
What? Heresy? No I don't mean by stock picking. I mean by investing in yourself. Imagine if you save up enough money that you avoid having to take out a payday loan. Or imagine if you have sufficient money that you aren't in chronic stress mode, and can think about your long term future instead of worrying about the next meal. Or being able the upfront cost of bulk buying. Or maybe you can buy high quality tools and gear that allow you to do your job more efficiently.
If you can start a virtuous cycle in your personal finances that can create huge excess returns.
Counterpoint: the many ways that our economic system can wipe out whatever savings you might have (medical costs, unemployment, legal costs that fall heaviest upon the poor) make spending money on pure luxury - or even the lottery for that matter - a perfectly rational action.
If you don't believe your savings will be there tomorrow, why not spend it today?
It's not a mindset problem.
You can't go hiking when you are 75. You'll probably be sitting on a chair. You can't also go drinking and dancing in some cities around the world and coming back to your hotel room with a date. That can't happen at 75 unless you are paying for it. I also don't think you'll enjoy it as if you were 22.
The truth is: You should save/spend and optimize for your perceived livelihood. Unless you have an agenda of passing your wealth to your children. I'd rather cease my existence at 75 or 80 than struggle with illness and pass my wealth to pharmaceuticals and doctors.
But back to the issue. $5 coffee? Yes but only because I can sit at Starbucks for 2/3 hours. They give you electricity, WIFI and some starbucks do have rather, very nice, views. Buying a take-away starbucks everyday because you are too lazy to make coffee is stupid, however. (or rich enough)
On the broader point that you're making, balance is key. There are times when you're young that it's definitely necessary to let go and spend, because you know the experiences may not come again. But in terms of daily expenses, I know guys who earn over $10k/month and cry poor because their daily expenditures are insane. Unless you're very rich, daily expenditures do add up.
Those $5 coffees not only have helped me relax, recharge my gadgets and use their wifi, but also to get my work done. Not working at all vs paying for a coffee to earn some money is an easy decision to make.
On hindsight, though, money I've spent on cloths and jewelery, or super fine wine and alcohol, or high end restaurants feel like a massive waste of money.
You can get designer brand clothes from department stores like TGMaxx pretty cheap. And if you look around enough you can find new stuff that fits you very well. Super fine wine and alcohol is pretty much the same as cheap wine and alcohol. High end restaurants are a connection mechanism for rich people. So unless you are networking there, there is no reason to go to one.
Watching senior citizens shuffle around the casino spending their wealth they saved over their lifetimes because there was nothing else they could do that could give them a comparable thrill at their age, really makes you see what still having youth is worth.
If you're inflation adjusting, then you're not socking $100 a month away, because towards the end of that 40 years coffee will cost way more than that.
As others have said though, it's not really about the $5 coffee. It's about whether you save or not.
If you have $50K a year after expenses, then yeah, a $5 coffee probably is irrelevant.
If you have $5K or $10K, then a significant percentage of your discretionary expenditure has gone on a hot liquid.
Ultimately though this just comes down to saving enough, which I think is intuitively obvious to anyone who sits down and thinks about it without invoking some sort of "magic beans" lens.
If you have a 40 year working life, and 20 years in retirement, saving 33% of your income and investing it in something that tracks inflation should be enough for you to maintain your average standard of living.
I don't think that 33% is a hard bar to hit for most people that aren't on minimum wage. I also don't think most people actually consider it that way, they think of pensions or other schemes as wizardry that will return them vastly in excess of inflation.
I do have a daily entertainment budget which is more than $5, though, so I've just shuffled that into other things.
But if there are things aside from investments that you do want to spend your money on while you have such a significant (compared to the rest of the world) amount of disposable income, why deprive yourself just so you can retire with 25% more money? Your life would not be much different retiring with $2mm vs. $2.5mm, or really any two numbers over $1mm or so.
Choosing to intentionally limit your expenditure to 66% is different.
In the limiting case it simply means living like you earn minimum wage whilst earning more than it.
Of course, if you are at the absolute bottom of the income spectrum and have no means to change that, you are buggered. We should probably fix that.
The article is a bit rant-y for my taste, but I do agree people need to consider more the big expenses: if you live in New York/San Francisco, saving just $200 on rent seems pretty negligible when rent is like 1.5k-3.5k, but it's way more of an important decision than a half price toothpaste or something. I have a friend I went on vacation with recently. She has an amazing apartment which she barely ever lives in due to being a consultant, yet she was worried about saving a few bucks on her flight. Our brains tend to focus on relative rather than absolute values.
Whether that $100 comes from lattes or apps/micro-purchases or junk food or brand labels or holding on to your car 2 more years before you replace it or cutting the cord on cable TV or more frugal vacations -- is all up to the individual.
Sorry but if you've literally got a billion dollars, you might be able to advise on growing your money, but you are (almost certainly) not able to advise on frugality. It's almost as if the argument is that if you spend $5 on lattes, you'll mysteriously be a much richer person who no longer has problems saving for retirement. That must be one damn good latte.
It's also "100%" paid out if you wait until 67, or 75% at 62. Also, I note you said "employers must pay"; we pay social security as a deduction from our paychecks in the form of a 6.2% tax. Employers also match that.
> Total Annual Return Including Dividends
10.53%
> 25 Year Annualized Return
11.93%
http://archive.nytimes.com/www.nytimes.com/interactive/2011/... (archive.nytimes.com: In Investing, It’s When You Start And When You Finish)
"Investors often have expectations of real annual returns greater than 7 percent — the areas in green. But over 20 years or longer, rates that high are rare."
"After accounting for dividends, inflation, taxes and fees, $10,000 invested at the end of 1961 would have shrunk to $6,600 by 1981. From the end of 1979 to 1999, $10,000 would have grown to $48,000."
“Market returns are more volatile than most people realize,” Mr. Easterling said, “even over periods as long as 20 years.”
Overall, the long-term trend may be pretty reliably positive. But that's little comfort to an individual who may not have the luxury of waiting out a poorly-timed, lengthy downturn.
It's the petrol in your car when you could've walked, it's the extra bar of chocolate that you add to your lunch, it's the daily newspaper you buy. Everything adds up very quickly and the coffee is just one example
Here in London, at least at the low end, it is extremely easy to spend more on entertainment than it is on basic living costs.
That goes double if you're sharing a flat rather than renting alone.
A room might be 600pm.
Spending 20 quid a day just means a coffee, lunch, dinner out or takeaway. You can double your expenditure by just not preparing your own food.
Saving on housing is hard, and saving on medical and education is more or less impossible. If you have, say, a $3000/month income, resulting in a $2000/month budget and you need $1000/month expense just to survive, that's $1000/month expendable. A $5/day latte ends up as 15% of that budget, that it is 5% of your income is irrelevant because you don't have access to these $2000.
7 of these "small" expenses and you are left with nothing. No extra money for a nice car, a more comfortable home, holiday trips, etc...
Housing -- do more with less. How many people buy houses (or cars) beyond their means or bigger in size than needed?
Health -- daily movement is a life long commitment (as is finding time for sleep) and has outsized long term health benefits. No this doesn't address the "hit by a bus" scenario, but in terms of some of the most prevalent chronic health conditions it's amazing ROI.
Education -- while there is an undeniable tyranny of geographical circumstances, being able to evaluate using community colleges for prereqs, considering alternatives like trade schools, and taking into account expected lifetime earnings for career path all can play into this fixed expense.
All of these latte and avocado toast articles are a failure to acknowledge this fact and blame the economic victims.
Exactly. It's kind of painful to see that the author of the article is simply not mentally equipped to have this conversation yet they have a blog and enough pull (in whatever form) to get this on the HN front page.
Not saying you shouldn't save money, but if the 5$ cup makes you happy, just go for it.
Edit: typos!
If every day $5 means you start your day with something you really enjoy, maybe even brightens your whole day or someone else's day ....... do it.
If you want to save $5, find a place to do it where you might find a better outcome.
Even "saving" that $5... someone might spend it elsewhere anyhow and that's the real issue.
Of course, you need to find a balance. You have to have enough good productive time to be able to afford the idle time that you need/want...
At the end of the day you have X expenses and Y income, with some unknowns and variations thrown in the mix. There’s no reason it has to be a mystery. You can actually make an informed choice about that latte, and balance it with your desire to save for the future, live a little now, etc.
But they've all missed what I think is the true takeaway:
> Please excuse my lack of enthusiasm for discussing 4-dollar lattes while we ignore 30-plus years of zero real wage gains.
I can actually choose not to spend $5 (just as I can attempt to enter a certain career path).
I can't change the median wage significantly.
It's not actionable.
As an individual, actually saving that money or driving a higher income for myself is a far more effective use of time.
It also has the side-effect of increasing the median wage, because my negotiation provides upward pressure.
Manual ceramic grinder between 30 - 45 euro's Aeropress about 35 euro.
Both of them last at least 5 years.
That is quite a bit less than the 5 dollars. Yes it takes you about 5 min to brew a cup. But from having worked in a espresso bar for many years, during morning rush hour, you would be happy to get your coffee in less than that.
I think the article is interesting, because it deals with culture. First is the, go buy a cup of coffee at starbucks culture, and pay premium for the coffee. What I've noticed from working it's that people have their rituals when it comes to coffee. It's about getting fuel to get to work. It's about taking a break from the environment they were in 5 min before. It's about comfort.
That is what you get for the 5 dollars in the article. It's not only about the coffee, it's about taking a break, rewarding yourself.
If you can find a way to get the above pleasures from home-brewed coffee, or stop drinking take-out coffee. Great! But I agree that only seeing it "5 dollars not used for your retirement" is really short-sighted. There is a deeper problem if that is the difference between you able to retire when you're 65.
...why not both? :-)
But seriously, coffee is a drop in the bucket. Most of us spend 30% of our income on housing alone. And you have to eat. And coffee makes us happy and productive. The cost of not having that coffee - being unproductive and unhappy - is much greater.
And of course, what's the end goal? Have the most money at the end of your life? What do you win for that? Nothing. Your goal should be to spend all of your money living the best life you can, with enough money to retire on and enjoy the lifestyle you want (with a rainy day fund, of course). Teach your children what they need to know to succeed, so none will need to depend on any inheritance, and leave them whatever property or money is leftover.
The end goal for any conscious saver is not "the most money at the end of your life" but almost certainly something more meaningful and useful. Retirement when and how you want! Having retirement accumulate faster such that you have enough to retire when you're 55 instead of 65 means 10 years of meaningful autonomy over your life. Of course that probably isn't possible if $5 coffees interrupt your retirement plans entirely. There's a spectrum of incomes, cost of living and what your optional spending looks like.
Should you ONLY skip daily lattes but living beyond your means otherwise? Of course not! But it's just one of many places to start making changes in your life towards the things that really matter to you.
That being said, the type of people who have the luxury to focus on those types of things are in the minority. For those who aren't entrepreneurial, don't work in tech, etc. sticking to a strict budget can be the difference between having money for retirement and not having it.
There are, of course, industries that are different (Walmart seems to make way more via cost savings than by sales incentives, for example).
That's not how money works though if you pay income taxes. An extra dollar saved is worth more than an extra dollar earned because you pay new taxes on new income. At the high end in the US, saving $5000 offsets earning $7500. "Every dollar that you don't have to spend is a dollar.fifty that you don't have to worry about earning."
TV packages get you up to $60 per month, or $2 per day. Wow, so wasteful, almost the price of a one-way commute and all you get in return is broad and unlimited 24/7 entertainment.
So we're up to $20 per day: $8 for food delivered to your house (which shouldn't even count because you need to eat anyway), $10 for two nice coffees, and $2 for television. Tell me about all the other outrageous luxury spending that gets us up to $50 per day.
$50/day is $1500/month. nobody spends that much on little luxuries. 46% of Americans can't afford to spend that much on rent.
Also, the numbers jump by multiples if you have kids and include them in the little luxury buys. Again, my point isn’t to deprive yourself unnecessarily of joy. It’s just to be conscious of purchases which do add up and yet don’t actually make you much happier.
I have no idea where you're getting $60 for cable, that may be the promotional cost but where I am, it's $75 for the cable, $11 for the cable box, and about $25 in other non-optional fees too, bringing it to $110 for the base package, and using that price is still a straw man: My comment specifically referenced the high-end even more expensive packages that can top $200 per month. Add in internet to that cable bill with upgraded data speeds and that can easily be another $100/month. Then Add in another $30 per month for a few streaming services, maybe another $30 for content rentals/purchases, $20 to see a movie in theaters once a month
Then there are costs the significantly pad essential things like housing and auto costs:
Plenty of people lease a new car every 3 years instead of buying one and keeping for a long time, and at the same time spend more than necessary, getting a top model when a base model for $10k less will work just as well.
Plenty of people buy much larger houses/apartments than necessary, opting for more rooms or more square footage than is needed, fancy appliances, counter tops, etc.
It's possible to do all of the above in single-person household. Now consider a married couple, or a couple with kids.
None of the above is all that abnormal. It's also a straw man to say people can't afford this: You attribute to me an argument I never made. I never claimed every person could or did spend this much money or luxuries. Nor was I referring just to luxury items. I was referring to non-essential expenses in general, with some reference to luxury. And it is absolutely true that lots of people spend $18,000/year in non-essential expenses, while at the same time they have little savings, retirement, etc.
What I'm interested in is where the promoters of "save for 40 years" are getting a guarantee that they'll be alive in 40 years, and in good enough health to do the things they planned to do when they started investing. Especially if you live in a third-world country like the US, where mass shootings happen nearly every week, and regular medical expenses can bankrupt even the most thrifty saver, I think there's something to be said for enjoying life right now. I'm very thankful for the trips I've spent money on instead of saving it, because exposure to different cultures changed me as a person, and now I have the rest of my life to live differently with new ideas and values.
If you like coffee, $4 or $5 can get you literally the best coffee beans in the world, prepared by a master barista. It's not like wine or whiskey where you need to spend hundreds of dollars to get a taste of the high-end stuff. I still make my coffee at home 6 days a week because it's cheap and I like the process, but getting an espresso once a week is one of those little joys that make life worth living for me.
Unless you're willing to live in poverty, or be a burden on your children, saving enough for your old age is your only option.
That doesn't mean you shouldn't splurge on the fantastic lattes of your master barista.
Go ahead - add up all your costs for eating out - I’ll bet you that latte that it’s more than you think...probably a lot more.
Discipline over little expenses is tough, but crucial. The financial advising industry even has an ugly name for these people - “credit card millionaires”. They look rich, but really spend too much on all sorts of things, from lunches, to lattes to cable tv, and end up blowing most of their income.
#SmallDiscretionaryExpensesMATTER !
The latte scare is a great way to make sure people who are apprehensive about investing never even consider it. Starting incrementally is way better than criticizing people for just trying to live their lives.
It's like fad dieting, but for your wallet.
While I do not believe that this is a big retirement issue, I do think many of the people I've been acquainted with who have habits in this ballpark would be quite well-served by getting the $1-dollar-any-size regular coffees at McDonald's instead, which would amount to increased savings of about ~$1500/year.
Why? I think this is, for many, more an issue of having a solid emergency fund or paying down moderate credit card debt, than making or breaking retirement savings (which would, in any case, generally come after debt/emergency funds). (Though it's still probably not make or break for most people.)
The above said, which I'm kind of meh about, what I find really jaw dropping is estimating the amount that many people in all income groups spend on alcohol. I don't know how people have the money.
the reason has little to do with whether one can afford the $5 latte or not.
the $5 latte/day or multiple lattes as most of my Starbucks card toting colleagues go for even when we have gourmet free coffee in the office is a symptom of something else.
usually, it is a classic symptom of consumerism - and not having one’s overall finances in order. of not having a plan in place to save first and spend later.
when one drops $5/day on a latte when a 50c coffee at would do, one drops similar amounts on most everything else - an expensive shampoo instead of a basic one, branded shoes and clothes, ... and so on
at least that is where I find myself today - my habits have changed over the past two decades - from being able to find happiness in simplicity to getting addicted to consumerism.
While a great coffee can be a pleasurable experience that can actually make you more productive and happy in the short-run with possible positive long-term flow-trough effects (e.g., on life satisfaction), there are likely going to be more impactful uses of that money. As the most obvious examples, for instance, saving childrens lifes in Africa [givewell.org], improving the messy factory farming situation [gfi.org], etc. So wouldn’t you have the moral imperative to spend that money in a way that it’s impact is higher or at least comparable than those possible alternatives?
I would argue that in many cases this is actually possible when you are buying a coffee but not regularly, though... then you could likely find more effective alternatives, thus, the habbit would be obviously harder to justify for the vast majority of people.
My major quip with all of this is that our institutions could be designed in a way that would help us to make smart decisions (for us and others) but at the moment it is computationally really expensive to find a good path that balances all interests in way that leads to a great life for all.
I always hate how people always jump to "but inflation..." or "12% is not realistic...". Ok, maybe 12% isn't reasonable and $1M won't be as much decades from now. But having $500k or $750k or however much you end up saving by saving a few bucks each day could still be a pretty good chunk of change when you are ready to retire! That's much more than $0! The earlier you start, let's say when you're 18 buying a $5 cup of coffee and not really thinking about retirement, gives you more time to build wealth when you're ready to retire.
As more people start to reach retirement age, there's going to be a lot of people surprised to realize they can't afford to retire. With few companies offering pensions and some uncertainty about social security with Baby Boomers reaching retirement age, millennials better start thinking about how they can retire as soon as possible. Saving a few bucks each day (whether it is by giving up fancy coffee or something else) can be a great way to get started!
Most millennials have been blackpilled to the point of just accepting that the way things are currently going means we'll never be able to afford to retire.
And, you know what? I was right. I have a good job and drink a latte a day now. It brings me immense pleasure every single time. Even after years of doing it, my daily latte remains a source of joy. I will probably do it the rest of my life, circumstances willing.
None of this is the point though! The point is that economic growth has stagnated while fixed costs have risen. Quibbling over this is ridiculous. The author is absolutely right. In the big picture, $5/day is not what should matter. If income equality was not so absurd and fixed costs not so out of control, everyone would be able to afford it.
Until those systemic injustices are resolved, we are just fighting over crumbs here. It's time for major tax reform. Or revolution. That's what we should be focusing on, not critisizing people for taking care of themselves in our nightmare of a society.
My next job there was no comparable coffee shop and I was driving to work. So I reconstructed by experimenting with spices until I exactly duplicated the original. Then I made the base in batches and would have some all week long, a week's worth was $3 in fairly pricey spices in bulk and $3 in soy, so $1.20 a day.
I later dropped soy from my diet and got more interested in espresso, cappuccino and cafe au lait with various non-dairy non-soy whiteners. By this time I had a $30 espresso machine and a grinder. I've replaced both a couple times. Sometimes I try a commercial coffee, but my own is better. And I'm OK with one big coffee a day, more than that I get too wired and can't think as well. Cost now is around 50 cents a day including everything such as prorated equipment costs.
$5 lattes from a store every day is fine if you can afford it. But it does add up. And some folks that buy such things also treat themselves to lots of other things that they don't prepare themselves, whether avocado toast, movies, cable TV, delivered water, on demand fashion, always having the very latest iPhone, car leasing, or whatever.
Being aware of these costs and keeping track of them can help. If one is not investing well for retirement then they should start looking at all these little expenses, not just the big expenses.
I'm very well off now and can afford to buy all the $5 lattes I want but I don't buy any lattes at all these days. When I was poor I bought a lot of them. There's not really a connection between the two but there could be for some.
total coffee cost: 84k
total investment: 220k
assumes 5% investment return, 2.5% inflation, and 20 coffees/month
spreadsheet here: https://docs.google.com/spreadsheets/d/1_-5SuX3mn_3GBQEOMoIs...
As for whether you should buy yourself a latte daily or not, do whatever makes you happy. Personally I think 220k in 40 years will make me happier, but I can also see a life-long morning ritual going to a coffee shop and reading the paper while being served a latte appealing.
https://www.investopedia.com/ask/answers/042415/what-average...
The real thing the article misses, though, is the mindset that giving up a latte is meant to symbolise. That's best expressed in this article:
https://jamesclear.com/marginal-gains
The point isn't to just drop the latte and see a massive gain. It's to understand that a set of marginal gains made across your life can, together, have a huge cumulative effect.
That article is nothing more than a spineless Straw Man fallacy.
At the same time, I deprived myself of many experiences, which had a cost, in happiness, connections, and knowledge.
Nowadays I make and spend order of magnitude more. I would never have gotten to the point I am, though, if I had stuck to spending $10k a year. Even if you're crassly trying to maximize wealth-at-the-time-of-retirement, extreme frugality is a suboptimal strategy.
Set a budget. Don't waste money stupidly. But spend it, and spend it on meaningful experiences that provide you value.
Finances are a hard thing to recommend to anyone else, as there are so many variables in personal finance. But very generally, it's worth considering where the largest single expenditures (or categories) are, and looking at how to lower those numbers first.
It's like Ahmdal's law for finance: Don't sweat the small stuff until you have optimized the big stuff, and even then, the work to fix the small stuff might not be worth it.
I agree it's more efficient to start with the big expenses and work your way down, but it's sometimes easier, especially if you're just starting to turn your finances around, to start with the little stuff and build your way up.
Once you get into the habit of getting a coffee from an artisan coffee shop everyday, the value of that great cup of coffee diminishes, and you start to spend money out of habit, not because it adds any more joy, pleasure, or value to you. This is the same as eating out everyday for lunch.
And if mindless consumption seeps into every other aspect of your life, then that's going to cost you dearly.
Substitute the "latte" for any consumable which costs $3-10 a day. These costs really do add up.
I still hit up Starbucks or my local coffee shop about once a week for the experience, since I work from home it's nice to get out.
My coffee from how on my $99 Delongi espresso machine tastes as good as the machines at the shop.
If you have that bent of mind, as so many of the people here do, you always think of money as an investment. You can rationalize a $5 latte purchase if it means you are more productive at work.
But the average guy working a regular job on a fixed income doesn't and shouldn't see money the same way, especially if there is no corporate ladder to climb anymore. What's a $5 cup of coffee do for a line cook at McDonald's except give him a momentary dopamine kick?
General question: what recourse does someone have that retires with no savings now, in the US?
Some ideas...
1. Gov: Social Security (Income)
2. Gov: Medicare (Healthcare)
3. Gov: Various assistance programs (Food, utilities, etc)
4. Social: Add roommate(s) to split cost of living expenses
5. Lifestyle: Downsize
Follow-up question: if the majority of people do not save sufficiently for retirement, then what might the recourse options be 20, 30, 40 years from now?
The author starts out saying you clearly shouldn't listen to the financial advice, because it is inaccurate. He then goes on to tell you that, adjusted for inflation, you will save up $90k over 40 years.
$90,000 just for not buying a coffee every day. That is amazing. Even more amazing if you're not a highly paid white-collar worker. $90k buys a lot of prescription pills, or pays for an expensive operation, or an upgraded old folks home. You will need every penny you can get when you're old.
And then there's the slippery slope. If you keep spending willy-nilly, with $2.50 here and $9 there, whenever you feel like it, it really starts to add up. $90k on take-out, $90k on movies, ubers, etc. If we keep buying trifles we could (even adjusted for inflation) actually be wasting a million over our lifetimes.
A smarter way to manage your money is to still have a latte every day, but compress the expense. Save up for 2 months and buy a Nespresso latte machine with reusable pods. Save a few more months and buy one for work! Then have a latte any time you want, for pennies on the dollar.
Financial insecurity is often a lifestyle problem, but it more often revolves around excessive debt than a few frivolous habits.
By the way I have quit drinking coffee (only decaf) and juices, but it was more of a health-choice than a financial one. But of course everyone decides what to do with their £€$ 5-per-day :)
[1]: https://www.financialindependenceretireearly.com/
[2]: https://www.investopedia.com/terms/f/financial-independence-...
Edit: also.. converting that 5-per-day to 650k in ten years, can make life SO MUCH easier when your kids will have to go to University.
No amount of decreased latte consumption will make up for the underlying problems people face - stagnant wadges, increased prices on fixes costs, student debt.
It's the same shaming related to obesity. Has obesity risen because people are now more lazy than in the past, or is because we live in a culture saturated with the marketing and availability of energy-dense, nutrient-poor foods?
1 ambulance ride = 2 years of daily coffee. 1 minor knee surgery = 5 years of daily coffee. 1 major knee surgery = 10 years of daily coffee. 1 diabetes diagnosis = 3 cups of coffee/day, lifetime. 1 cancer diagnosis = 1 daily coffee for every one of your children, and their children.
It really is insulting.
Also, no one is claiming that coffee specifically is the key to financial health. But it's the most popular example of frivolous habit-spending that doesn't actually make people happier, a category which makes a up an increasingly large part of Americans' spending.
The coffee stands for any and all small, regular and avoidable expenses, where minor lifestyle adjustments add up to major savings.
Using a family plan on subscriptions and phone plans, cooking your own meals, weighing the actual cost of owning a certain car / carpooling...... All of these are things are very small, yet regular expenses in a person's life. These things add up.
The lack of mindfulness of such expenses leads to fast and untracked lifestyle creep. The proven also warns against that.
My peers living expenses went up 5 fold, and each of them claims that nothing has changed.
The fact that I can _read this very article_ is why I can trivially afford a $5 coffee. Maybe if we focussed on education instead of $5 coffees, we could get to the point where we could justifiably ignore the coffees.
Also if this formulation is true:
If you can't afford a coffee you've got bigger problems.
..then this is also true:
If you've got bigger problems, you can't afford a coffee.
Bigger problems might include having an 18% interest credit card. That needs to be treated as an emergency, as someone said, probably Mr. Money Mustache.
I think it's important to enjoy the here and now, but also plan for a future. You never know what could happen. I think it's silly not to just enjoy the moment while you have it. Yes, be fiscally responsible but don't forget the purpose of money is to barter for things you enjoy.
false. Because the coffee cost also "inflation adjusts", and would probably put the target closer to the $1mm that Orman originally claimed.
> If you earn only the median income of 61,372 – and never receive a raise for 40 years – that adds up to $2,454,880
Only if you're committing massive tax fraud. Last I checked, the gov lightens your load by about 37% each year.
She's not perfect, but if she gets a large amount of people out of financially clueless to financially "aware and avoidant of obvious mistakes", she's doing a lot of people a great favor.
The budgeting habit stayed with me. I do like to buy my coffee out regularly enough but I'm conscious of what I spend.
It's not always about fighting financial difficulties though. I know some very well-off people who wouldn't spend on anything other than instant coffee at home. Choose your vice/luxury, basically.
Both their raw espresso and the filtered coffee taste like absolute dogshit to me. (I can stomach the milk based drinks as it masks the actual coffee though.)
I'm not a coffee elitist either, I can drink Canadian swill (timmies) and just about any corner store brew, instant packets... Whatever. Just not Starbucks.
The absolute best I've found at a chain by a mile is McCafe but I've never heard an American mention it. Is McDonald's trash in the states? Is Canadian Starbucks different?
You can spoil yourself and spend money on yourself but do it for things that will actually last and be of use to you. You shouldn't be buying $5 coffees twice a day if you are sleeping on an old mattress, wear old boots, etc.
Do buy yourself expensive coffees, cupcakes or quality aged beer and wine... but make it a special occasion. You will enjoy it more that way anyway.
Paying a little extra for 2 hotel rooms, versus squeezing youe in laws, 2 kids and yourself and spouse in 1 room...
Well, I learn to make coffee. In 2 weeks it cost ~$15 (5$ for a 250g ground coffee, 3$ for 2-3 liters of milk for 2 weeks, $5 for a fancy chocolate power, exclude things like electricity to boil water)
Saved $3160 a year while enjoying 2 coffee a day
It's not just about saving money, it's about optimising for happiness.
- Budget to be able to buy lattes. The inflation and results from $100 a month may be better spent frivolously than conserved. In other words, budget for frivolous expenses. - Don't spend money on this stuff if you've got bigger problems.
My opinion:
I mean... It's a drink. I'd recommend Tim's instead of Starbucks if money is tight. As a person who spent two years homeless, this stuff is helpful for mental health. Being able to have less worries than more worries is important.
Don't forget the old 50/30/20 rule. 50% on needs, 30% on wants, 20% on savings. Recalculate that not to your needs or wants, but how often your unemployed and if that number is more than 20% a year you should increase savings to cover that as well. Then recalculate needs, review on current bills, and rebalance and so on.
Also keep a month or two of cash reserves for emergencies.
Now go buy a mocha, they're better.
Come on, it has happened for several years now (well, more or less) but everybody knows it will not last. And, in any case, it has never happened before for 40 years...
So it's not huge but it's not trivial at all.
Especially considering I live in one of those western cities with stagnating wages and absurd property costs.
Say your rent is 1000$ a month. That works out to 33$ a day. So if you spend $5 a day on coffee you’re spending 15% the amount of your rent in coffee.
so puhlease.
Your reuccuring daily spending is the innermost loop in your retirement saving program. That’s where you’ll get the most bang for your buck.
You can just have your latte and decide it is worth it.
How many people in this country spend $3k/year in lattes but don't invest $3k/year for their retirement. Wasn't there an app that did just that - rounded up your spending to put the remainder in an investment account?
(of course there are frequently good reasons to buy things, particularly when there's a social component -- e.g. as a byproduct of spending time with people, as an informal break with coworkers)
3.2% on bean water.
But who with a latte addiction just buys the latte? Kick in one of AOCs $7 croissants a day (extreme for the sake of example) and you're up to $12/day => $4380 a year, or 7.8% of your annual income on one meal a day.
So maybe consider buying a latte machine instead.
In the UK we have Pret. 99p ($1.30) for a coffee. I'd get it in the middle of a day if I were far from home.
Buying fancy coffee in the morning for breakfast strikes me as an extremely odd use of money. You've just left your house?
It's bizarre.
I changed careers and my workplace went from big corporate office to small company small office.
I was surprised by how much I spend on coffee now that it isn't free at the office. Bought myself a keurig... not happy about the kcup waste, but way cheaper.
Unless you're into the flavored stuff. It's no help for that. Maybe look into cold brew? Cheap, low-equipment, tastes great with a splash of milk. Or keep Keuriging if it's making you happy, obviously. I'm just some asshole with an opinion, on the Internet.