It adds up faster than you would think: ditching your daily $3 latte saves $91.25 dollars a month. Investing that into a S&P index fund that traditionally has an average 7% annual return and 1.12% variance for over 50 years compounds into... $446,368.
Forgoing a latte a day over 50 years means I essentially have to make 18250 decisions in order to save this money. But, on the other hand, let's say I decide to forgo, say, a $60k car and instead get a still very nice $45k car. If I invest that $15k in your hypothetical S&P index fund, and deposit no new additional money, after 50 years I'll have... $441,855.
So basically with just one, single decision I get the same benefit as someone that had to make 18250 decisions.
The small shit really doesn't matter very much. If you simply focus your frugality on a few simple things (namely housing, auto, and education) you will always be light years ahead of someone who is constantly worrying about their lattes or avocado toasts or whatever small daily bringers-of-joy.
I don't think so. When I quit smoking, I had to consciously make the decision not to buy cigarettes every time I was at the checkout in a super market. That went away after about two weeks. For a few months that followed, I'd stand there thinking "and buy some cigarettes" and then I'd realize I didn't smoke anymore.
I doubt that getting off of the latte-habit takes longer than getting off of cigarettes.
Another question is whether small sugary treats are a good thing in general. Again the cigarettes as a comparison: cigarettes are the best when you haven't smoked for a day. But that's because you're suffering withdrawal, not because they're that great.
That joy is mostly relative, the joy you feel drinking a latte is not greater than the joy a poor tribesman feel eating a piece of fruit. You will almost always feel it just for different things.
A good example is sweetness, if you quit eating candy you will find that much food is very sweet, and if you stop eating industry created food you will find that many vegetables and other things are actually quite sweet. So you don't lose the joy of eating sweet things, just that what you consider sweet changed.
But more importantly, I'd much rather spend small amounts on simple daily pleasures that I enjoy. The lattes definitely bring me joy, and it's not like they are somehow taking the place of quality time with my loved ones or bringing joy to other people.
Then we want the same thing. Genuine happiness. But try to see it our way: that coffee money could go to working 5 hours less a week in a decade. That could be quality time with your family. One the other hand, two years into that latte — you're hitting withdrawal by 3:00pm. So maybe your just as happy overall as when you started.
Does anyone else have difficulty understanding why anyone would pay this much for a car? $45k is an order of magnitude more than I've ever paid for a car. Granted, I don't even like cars or driving, but the cars I've owned have been perfectly functional and any mechanical problems they've had still didn't add up to more than $10k.
Let's list some of the features that modern cars have which significantly improve the utility of them to most drivers, and which are considered (by the market) to be worth 45k+
Blind spot monitors, rear/side cross traffic alert, auto-dimming mirrors, digital mirrors (for when you have tons of cargo blocking mirrors), Backup/360 Panoramic Cameras, Parking Sensors, heads up display (massive safety benefit), Satellite Radio, lane keep assist, radar cruise control, pre-collision and collision mitigation systems (active breaking), improved design / additional weight for safety in collisions, more and better airbags. Better seats, better audio system, Nicer infotainment systems with Carplay/Andriod Auto, Hybrid/PHEV/EV powertrain, better reliability (if you pay Toyota/Lexus/Honda/Acura tax), semi-autonomous driving (Tesla)
I'm forgetting a bunch of stuff, but having recently purchased a 42K car with nearly all of these features and upgrading from a life of being driven in shitty base model kias, I find the utility gained from purchasing an expensive car to be MASSIVE. Driving went from being a frustrating chore to a pleasurable experience.
The risk of death dropping by an order of magnitude is alone worth the money, let alone the massive comfort improvements.
Don’t you feel like you answered your own question there?
It’s like asking why anyone would spend money on tasty food when some cheap foods are all you need to survive.
Not really. I mean I've never spent that much on a car and I'm not sure I ever will, but I did spent $5000 on a computer one time. That's an order of magnitude more than most people pay for computers, and while nice, it sure isn't 10x better than a $500 computer would have been. But I spent the $5k, because a) I had the money and b) I really really realllly wanted that computer.
EDIT: In case anyone is curious about the $5000 computer, it was this one back in 1999, and no, it was absolutely not worth it in the end: https://everymac.com/systems/apple/powerbook_g3/specs/powerb...
For instance, if you buy a 3090 Nvidia GPU with 24 gigs of VRAM, you are capable of training AI models that are eminently more capable of getting publications accepted than an owner of a 3080 would. (Yes, distributed training is possible, no it is not always an option). Sure, it's nowhere near 10X in gaming or flop improvement, but the relative capabilities offered by a top of the line computer can become exponentially more useful compared to a significantly cheaper computer.
How fast a car can go is one, how many people it can transport is another, how few emissions it creates is another.
Someone might be willing to drop big bucks on a Tesla Model X to haul their family around rather than a used Dodge Caravan ... not because it'll get them between Point A and Point B more quickly or because it can carry more people, but because it doesn't emit CO2.
Point being that we don't all value the same things, and while I wouldn't make the same decisions as other people much the time, I can certainly understand how people come to (sometime vastly) different decisions than me.
EDIT: I have an uncle who is an emergency room doctor, and I guess after seeing all of those car crash victims, his car-buying decisions have always been based entirely on safety. So he's driven an otherwise unlikely progression of cars, some luxury, some not, based on whatever seemed to be the safest new car available.
Not saying it’s rational but like you said, there’s a lot of different dimensions to utility
https://everymac.com/systems/apple/powermac_g4/specs/powerma...
- because they were gorgeous!
So, where can I get that crystal ball that lets you know the impact of any action? That'd make a fortune and infinite boredom all a possibility.
The one good thing in the article is that it shows the power of saving more as a burst. It actually limits many types of risk, but then you can only actually do that if you have a rich job... (It does not address existential risks enough. There are a few important ones it should as they're related to investments and reasonable saving rates.)
The advice to save on latte presumes you can actually afford it in the first place. Otherwise you're not saving, you're just not overspending.
I liken it to the advice that you should buy stuff used to save money, when you need it. There are many caveats to that.
I don't disagree that sitting down and having a latte with someone (or even by yourself) is sometimes social/a break/a chance to work with some WiFi/etc. But for a lot of people it's just part of a morning ritual.
Also, you cant invest your saved 90$ to investment fund. Those require higher initial capital.
Or maybe none of this happens, and annual 3% inflation cut the real value by roughly 75%, and you had to pay 20% taxes on top of that. You're left with around 90k of value, of which ~36k is your investment return. In the meantime, you gave up 18,250 lattes.
Over time you'll build up tolerance and that cup of coffee isn't worth the same for you. Now you're burning cash for energy that would have been there without caffeine. And to think you could have paid for your kids college instead.
But even if you are correct, that person ditching the latte isn't going to be spending that 446,368 in old age either because it isn't "frugal". If they have a decent income they just end up dying with 446,378 in the bank.
Can you spend ~$1100 in one instance, at the end of every year, that produces the same total utility of pleasure you would have experienced from a daily latte? I'd probably drop the latte but, everyone is different. I would still argue that there are plenty of times when splurging is worth it in the long run.
I never got into the habit of buying Starbucks coffee so lucky for me I guess?