If part of your audience consists of people living without much a safety net, that $5 a day adds up. Also, the author's point that saving that much isn't going to be $1 million, but "only" as much as $500,000 then that point rather falls flat. Sure, inflation may decrease the utility of that amount of money, but it will also increase the cost of that latte, so you'll be saving more than just the $5 over time. Finally, this piece ignores the entire mindset of the "avoid the latte" point, which is that it's intended as much literally as metaphorically: don't waste money on the little stuff. $5 for coffee, another $100/month subscribing to every video streaming service and gold-plated cable package, etc.
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.
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.
"The article isn't advocating that you buy a coffee every single day."
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!!!!"
> It's arguing against the people saying "Your daily coffee habit is costing you a million dollars!" It's saying that is nonsense.
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.
The better way of looking at it is that a coffee will cost about $5/per (I dunno, I don't drink coffee) and the median male full time weekly earnings are somewhere around $900/wk in America.
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.
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.
Fair enough. It looks like Suze really believes a latte will add up to $1M. She's a blowhard, and wrong -- although I think it's fair to say it'll cost well over $100k over that period, which is not insignificant.
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.
This article is terribly misleading and, honestly, makes me wonder if it's just some BS starbucks guerilla marketing. I agree that having an occasional treat is great - the latte a day habit is an addiction it stops being a treat.
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.
I estimate the chance infinitesimal that it's marketing, Barry is a well-known financial planner/wealth manager and doesn't need a small cheque from Starbucks.
Thank you! It is poor use of time to argue about such a terribly writen article. If the OP author genuinely wants people to know it is OK drinking $5 lattes daily, they need to stop qualifying the consumption as occasional. The article has so many other problems, but the real premise of the article encouraging people to understand variable small expenses vs fixed large expenses and flat wages is critical. The comments here demonstrate how impossible conversations are when discussing the inarticulate.
On the point of the beater vs the new car... I find the best is often a middle ground. The new car is not worth the debt and the depreciation... assuming it's even an option.
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.
I don’t think any one answer is optimal. I got a nice new car and kept it 12+ years. The advantage to this is minimizing transaction costs while getting exactly the car I wanted. I also drive far less than most people keeping the car in great shape.
If I put a lot more miles in it then I would be more concerned with break downs as it aged.
There was an illustrative article on this topic a few years ago [1]:
"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.
I imagine a lot of people saying "Just give up your $5 coffee and you, too, can be a millionaire someday!" are trying to be realistic without being wrist-slashingly depressing about life.
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."
Blame and justice-seeking are just two levers to fix different kinds of poverty. They're not even the only levers.
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.
"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"
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.
It's infuriating in the same way that "move more, eat less" is infuriating to obese people. It's infuriating because it doesn't pan out in practice for a lot of people trying. However, the advice is still sound to some degree, because it does work for the people who are actually able to follow it.
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.
> Impoverished people aren't poor because they occasionally buy coffee
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.
"Rich people I know LOVE to work. They would work for free."
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.
> 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?
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 not saying there aren't situations where these aren't viable options. I'm personally an immigrant and would be happy with about any sort of job. I'd be fooling myself thinking said job makes me rich, and I don't have to work two of these jobs to make it. I also don't have to support a family. Luckily, I don't really have to work either, it merely affords us a different lifestyle. Lots of folks are motivated to work such jobs, and make the best of them. However, none of them are rich nor do they have the options and luxuries of the rich.
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.
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.
"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."
This woman seems to have magically exhibited every moral failing and self inflicted difficulty that the American right wing ever made up. You should probably step back and realize that it sounds totally unbelievable - for instance, you can’t cause an entire years developmental delay in an otherwise healthy three year old simply by not playing with them enough.
It's not made up. You misunderstood about the developmental delays: she gave birth to her son, refused to nurse him, refused to even have him close to her. She did not go outside with him or interact with him in any way beyond what's necessary to sustain life. She was living in a 11 squaremeter apartment with him and did not let him explore, did not take him to the play ground, did not take him to child groups. For a young child this situation basically amounts to sensory deprivation and it's absolutely enough to stunt growth and development.
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.
No, they don't. And social workers and welfare officials that I know do tell stories like this - about the parents of children now in state care. Infants don't get left with mothers who refuse to nurse or hold them. Children who are found to be suffering from such severe neglect that they are developmentally delayed don't get left with those parents. I have no doubt you believe what you're saying, and I have no doubt that you are misinformed.
Yes, they absolutely do. How is this even a question? You don't cure a drug habit by giving the person more money cause they'll just buy more drugs. You don't cure a reckless driver by given them a faster car. You don't cure a reckless spender by letting them spend more. It's not even a question you would contest if there was something on the line for you except defending your ideology
> 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.
Fun fact: one of the single most effective interventions for homeless people who take drugs is to give them a place to live. It's an amazing example of how giving people resources helps them stop relying on unhealthy coping mechanisms.
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.
> single most effective interventions for homeless people who take drugs is to give them a place to live
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.
> 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 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.
“The law, in its majestic equality, forbids rich and poor alike to buy $5 lattes unless they have already socked away 15% of their income into a retirement account, have at least 6 months of salary in a savings safety fund, and generally live about 10% below their means or can manage to articulately justify it to internet strangers as somehow having gotten a lot out of it while homeless.”
― 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.
>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.
Most poor people are poor because they have special needs and/or are responsible for others with such. They can't reliably work a full time job or doing so comes at a real cost and they are constantly working at just being able to show up at all.
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.
It's not victim blaming to say saving money on discretionary purchases might improve your financial status and therefore quality of life. This is true regardless of disability status, life situation, etc. If you don't think that's the case, and the discretionary purchase is worth the cost to you, then the advice doesn't apply and you can ignore it.
I hear you, but I think the $5 latte advice is aimed at the two middle income earning households, who have stable jobs but still think they are poor because they have poor impulse control when it comes to spending. I don't think that advice is generally meant for the actually poor.
We have more income inequality here lately than in The Gilded Age. Lots of middle earners are being squeezed by a combo of high medical costs, high housing costs and high transportation costs because it's nigh impossible to live without a car for many Americans.
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.
Having two middle incomes in a household is a luxury that many households don't have. By definition, half of people have incomes below the median. Assuming random pairing of couples, 25% would have both people making below median incomes, but in reality people tend to pair up with people with similar incomes, so in practice it is even higher than that.
He's also hooking into a larger narrative battle, where lattes and avocado toasts are stand-ins for social-darwinist poverty-victim-blaming. "You're not poor because we've screwed up the economy, you're poor because of your character flaws."
I think the point is not "never ever buy a coffee again until the day you die (or retire)". The point is "examine your routine spending and see if you can cut off anything and use it as a source of money for savings". If you did that and consciously prefer saving a little bit less and indulge now and then, these recommendations are not for you, you're already past that stage. A lot of people didn't even get to "consider your spending, make a budget and evaluate your expenses and decide which ones you can do without". They don't even think in terms of considering whether it's worth it or not. I think getting people to think about that is the point of it.
It's saying focus on issues mostly out of your control (inflation). I'd prefer to focus on the things that are in my control.
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.
When I was homeless and going to Starbucks, I used to watch people get $60 worth of takeout coffee on a Saturday morning. Family was coming over. Everyone needed a cup.
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.
This all seems very hyperbolic to me. You're painting it as being a matter of judging rather than useful, lived advice.
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".
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".
> 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.
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.
Coffee (caffeine) is a stimulant. It's helpful for a lot of things that are routinely treated with stimulants.
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.
>Sometimes, taking care of yourself in some way is the best investment you can make.
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.
You got a lot for your $5. At the other end of the spectrum are chronically bankrupt people maxed out on credit card debt who buy a takeout $6 giant candy coffee whenever they go anywhere and don't even bother to finish drinking it before they have to throw it away because they are walking into a restaurant. This story is based on true events.
Sounds like that person has fewer risks of losing all their savings in a freak accident, and lives with more luxuries. Is that not .. an understandable way to live?
I read this very differently -- if $5/day makes up a significant portion of your safety net spending, then you have much larger problems than the $5 delta your latte is causing. It's not that $5/day doesn't matter to anyone, it's that the people for whom it matters are facing much larger systemic issues that we're ignoring while shaming people for the smallest of luxuries.
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."
Okay, I can appreciate that observation. But I don't think that the advice to individuals to stop worrying about luxury daily coffee spending follows from that.
However bad the system is, frivolous spending will not help things. However good the system is, it could never bear everyone spending frivolously forever.
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.
If you are 20 years old and you start putting away $5/day and have 500k in the bank at 60. Who can argue with that. In fact they should pass a law to make this mandatory on everyone. It would greatly improve the lives of literally everyone.
Sure, but if you had affordable education and housing and healthcare, and real wage growth that kept up with productivity increases, you'd have millions in the bank AND you'd have a latte every day.
what would it take to make that happen? what would it take to make this happen? it's funny people are happy to let creditors tax everyone at 20% (like a shitty credit card with a 2k limit is what's used to buy lattes), but bring up generating real wealth for a huge percentage of the population that has nothing, and oh noes this is against everything we stand for. this is why we can't have nice things. minimum income, yes, forced savings, no. yes i would like 2k per month for free, but no i don't want to save 2k per year so i can have 500k when i am 60.
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.
> Dismantling the capitalist system and giving workers control of the means of production?
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?
An insurance program for which you pay premiums while you're working, and which may later pay you a monthly amount based on your income while working, your age when you start receiving it, and a few other things.
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?
It's perfectly sustainable and returns are not guaranteed. You may get 1000x what you put in by living to 130, or you may get nothing by living to 60. But at least you're entitled to some safety net in your old age.
And so what? That's 1800 tax on you per year. Say it was charged as something like a tax. Nothing that most people in the Western world would be effected significantly by.
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.
Okay. Your argument only becomes valid after the fact that all that money that would have been spent on things like coffee is retained. In most cases people would simply not have that money. Not to mention that if you have some guaranteed amount of money coming to you at some point it should be possible to get a loan using that as collateral. And I would like to see examples of forced savings where any of the supposed issues actually manifest compared to what we have now where we literally have millions of people with no savings and retirement ages that keep increasing.
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.
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
In fact I could see something like this really putting a dent on all the privilege in America where African Americans and other minorities basically have no savings... and no potential for ever accumulating any real wealth. When grandma or grandpa can send their grandson to college or put a down payment on their house or give them a business loan, that's an actual difference in people's lives.
Even in the "capitalist hellhole" that is the US, you can get a lifesaving operation even if it bankrupts you, and then you still get social security payments after. and you can borrow money from your 401k.
It is an interesting phenomena, because it's a relatively expensive product for what it is, but it's also an experience.
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.
I did a similar switch and made a spreadsheet to model it all out. I lost money in the first year, and ended up saving roughly $500/year every subsequent year.
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.
Same for me: spending time in a coffee shop is part of the value proposition, not wasted time! Buying a latte provides the excuse to hang out there for an hour or so.
That's why the quote is there up front: "If spending $5 a day on fancy coffee puts your retirement at risk, you’ve got bigger problems." If you don't have a safety net, then indeed that $5 adds up. But if that $5 is critical to your safety net, then you're still not saving for retirement; you're saving up for the inevitable crises.
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.
The point is to focus on the big wins. Save $1000 next time your buy a car and that covers almost a year of $5 lattes every weekday morning.
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.
Why not do both? Save $1000 in coffee and another $2000 in car purchases.
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.
You are getting caught in the specific, and losing perspective on the argument. It's not that coffee is specifically valuable. It's that large fixed costs are more important than small, frequent discretionary spending.
The point applies to expenses other than coffee. You don't need most of the things you buy.
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.
$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.
If someone has that marginal an income, they will never even begin to start a savings plan, nor will that money survive to retirement. It will be gobbled up by the first medical or vehicular emergency that comes up.
He/she is talking about the UK, where the burden of healthcare costs are shared by all taxpayers and there are no nasty surprises after a visit to the emergency room.
Whereas I live in the US, where it is common to have to do a back of the envelope calculation whether to drive or take an ambulance. Pro tip: if you are conscious, you'll never take the ambulance.
Minimum wage in the UK seems to be around 1260 GBP/month, that is 60 GBP a day for an 8 h workday.
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)?
In London (admittedly a more expensive part of the country) renting a 1 bedroom flat will cost you approximately 1000pm.
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.
I agree wholeheartedly. I expect much of her audience is carrying credit card debt at 25% -- if you can change your subconscious habits to save $1000/year you stand a much better chance of getting back above water.
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 someone already took out student loans, car loans, credit card debt, etc, then cutting out the latte (or cable or nail salon or whatever) is something that’s totally in their control and allows them to stop the compound interest on their debt.
Of course they should try to find a better paying job, of course it sucks that it’s hard to get a better job, but latte is something you can do TODAY and doesn’t require a lot of effort.
The author's point is that decades of wage stagnation combined with tremendous inflation in big ticket items (housing, healthcare, education) have made it impossible for the bottom 80% to save. That cohort will be perpetually broke because of housing, healthcare, and education. The other 20% won't notice the difference.
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 entire point is that spending $5 on a beverage should not financially break you. That, if not buying a $5 latte is the difference between financial success and financial ruins, something is very wrong. That, people are much better off focusing on large fixed costs. I agree with the post wholeheartedly... And I bet most of us could afford both the coffee and the $5/day investment, so the point shouldn't be lost on us.
OK, so that's your preference; yes, it'll cost you. (Personally, I wouldn't want to live in London even if it were cheaper than my current small-town location.) But please don't presume to speak for the UK in general just because you've picked a particularly expensive market.
It's a bit more complicated than that, no? I mean... if someone is a Londoner born and raised but has to leave in order to buy a home is a bit more complicated of a situation than "they picked a particularly expensive market" to live in.
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.
> 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.
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.
it all depends on timing, ie the investment phase...
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.
I grew up in a poor family, could never afford anything unless miracles happened, never went on any trips etc. I later scaled all the way up to much more than I needed as a software developer and lately I'm pretty much down to nothing.
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.
> Dropping $5 you don't have on overpriced coffee is proving that it has no power over you.
Surely spending money you don't have on overpriced things you don't need is _precisely_ the sort of consumerism that proves you're fully bought into the rat race?
Had a 'poor' friend I'd hang with at the University Library. He somehow would get fast food or restaurant food, he worked at a car wash and his uncles cleaning company.
Met him in 2014, and in 2017 he had a panic when he was kicked out of his house. He came over for a moment and asked for any spare change, gave him ~5-10$.
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.
Your post was great until you started framing that spending money you don't have was evidence of freedom. Whether you like it or not, when you do that you are giving money power over you that it shouldn't have. If you make almost no money, but can be content with the basics you mentioned and spend less than you earn, then yes you are more free than someone with millions who is obsessed with getting more. But if you can't help but spend money you don't have on things you don't need, money will continue to be a problem for you and something already has power over you. Maybe you don't have a money problem, maybe you have a money problem and a coffee problem.
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.
> Posting this here is likely karma suicide, but here we go; this is my perspective, and it's as valid as any other.
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.
Same for me, but on the flipside I would say that learning to be fastidious with disposable income and growing my wealth was something I had to learn about the hard way, since I never had any exposure to this type of planning when growing up.
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.
Options like quitting a job you don’t enjoy, supporting your parent because the ACA doesn’t cover enough of their healthcare costs, or paying for IVF so your partner could have a child they otherwise couldn’t are not distractions. We’re not talking cable TV, smart phones, or fancy coffee.
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.
Life can throw you a turn and you might be hit by a car tomorrow but... chances are that won't happen.
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.
>> A warm place to sleep, good health, good food (and coffee) and nice, caring people are priceless. Dropping $5 you don't have on overpriced coffee is proving that it has no power over you.
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.
Having grown up in similar circumstances I've turned out to be a big saver. Not in hopes of a lavish retirement but to not think twice when one of our cars needs new tires or one of my kids needs braces.
To me those types of things would be the motivator for most middle class folks to avoid Starbucks every day.
"Dropping $5 you don't have on overpriced coffee is proving that it has no power over you"
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.
I think there might be a cultural difference here. In the USA coffee is not a status symbol (as far as I have experienced), I've heard that it is elsewhere. In the US it's more like just a regular addiction. Coffee drinkers need to drink coffee or they feel miserable. They can make it themselves cheap, or get a nice cup at a store.
> Dropping $5 you don't have on overpriced coffee is proving that it has no power over you.
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.
You're exchanging time for money. It's a highly common tradeoff. Prep, brewing, and cleanup amounts can work up to around $3-4 of opportunity cost for a tech professional. Not to mention, french press coffee is not quite equivalent to a latte.
Also, I recommend 5 minutes steeping, personally. ;)
>Prep, brewing, and cleanup amounts can work up to around $3-4 of opportunity cost for a tech professional.
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.
Salaried vs hourly doesn't matter that much when looking at opportunity costs. Most salaried folks stick to a fixed set of working hours.
> 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.
>Most salaried folks stick to a fixed set of working hours.
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.
If we stick with our "tech worker", in that month they have likely earned in excess of $12,000. Even at $200, that's around 2% of the exemplar employee's earnings.
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.
Lol, not every tech worker works in SF/NYC. I work in Toronto, make more than what an average family in Canada makes, and still am no where close to $12,000/month before tax, forget about after tax.
> 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.
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?
The argument is not that luxuries shouldn't be purchased (they should). In the parent's comment, they put down a latte as a luxury item while upholding their brewed coffee as a better purchase. This was simply an effort to rebut that statement.
I think it’s the delivery method and cost that makes it a luxury, not necessarily the product. A fish bought at the grocery store for $5, cooked at home and served in your kitchen is just food. That exact same fish served in a sit-down restaurant for $35 is a luxury.
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.
Not sure how much time you save. Standing on line and waiting for that latte would take a comparable amount of time to what it takes me to make my own cup at work.
Ok, but even then, surely it takes about as much time?
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.
> Ok, but even then, surely it takes about as much time?
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.
Eh, often hard pressed to make an argument for time considering the detour to pick up the coffee, waiting in line. Brewing at home takes mere minutes. Convenience, sure. You just pay, then drink.
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.
I prefer a clever dripper to a french press. Much less cleanup... toss filter and grounds in the trash in one fell swoop, rinse once or twice under some water in the sink, done.
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.
Having used both, cleaning the french press is not a lot more work than a pourover device. Swirl some water, throw out on a patch of grass or flower bed, rinse, done.
Of course, if you don't have a handy grounds disposal spot, there will be some additional issues.
Doesn't work in an apartment, have to either scoop out the solids into a trash can or fill with some water and pour out into the toilet bowl and flush. It can get messy.
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.
I don't know about you, but it usually takes me less time overall to make coffee at home than to get it at a coffee shop or gas station once I factor in travel time.
I think you are reading too much into what is supposed to be an intrinsically silly example. For instance, I pay $1.25 for a large coffee nearly every day from my favorite hipster coffee place for a good organic coffee every lunch. Yet I still am barely scraping by with a very high salary for the area that I live in, and I'm still barely able to actually save. If I didn't buy the coffee at all or if I liked sugary confection-coffees that cost $10 a day, it makes literally no significant difference in my coming any closer to owning a home.
I have an aeropress and use a grinder and buy "hipster" coffee shop beans. I use a french press to make the froth. I love the latte I make. However, I still spend an awful lot on lattes. 1) I like variety 2) It's not practical to this at the office kitchen and office coffee sucks. 3) I like getting out of the office and for some reason "getting coffee" is an easy way for me to that.
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.
And you can cut the fat out of your caffeine consumption too, both in time and money. I take caffeine pills now over coffee (mostly to combat coffee breath and the guaranteed poop 20 minutes after drinking). 200mg, equal to a grande I figure, 5 cents a pill, and maybe 20 seconds to plop one into my hand then my mouth.
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.
Maybe for some, but French press != espresso drinks;
a really well-made cappuccino or latte is something that requires equipment and attention to detail that isn't practical for small office use.
To give this conversation a more concrete example, here is (linked below) a calculation of saving $5 a day over 40 years, in real (inflation adjusted) dollars, assuming returns on invested assets are 7% per year. This is a realistic number based on >100 years of U.S. real (inflation adjusted) stock performance. You end up with $377k after 40 years.
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.
7% real return is a relatively high assumption. In the article Ritholtz assumes 8% nominal returns and 2-3% inflation, so 5-6% real returns. Even assuming 5% real returns is somewhat optimistic. Developed countries in the last 100 years or so have achieved that, but most places in most time periods have not.
It is true that the U.S. over the last ~150 years has outperformed a lot of the world, but it maintained 7% real over that period of time. Ritholtz was all over the damn place in his article, and attacks the strawman of 12% growth. In comparison 7% has some backing.
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.
I'd argue that you can beat the market. And poor people especially.
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.
Yes, this. Plus the people spending $5/day on coffee are potentially also spending $10-40/day on eating out, taking on too much in car payments, spending too much on clothes, spending $100/week at bars, etc. It's not the coffee in isolation that's the problem, it's the sum of your financial decisions that is, and a daily $5 latte is just one not-insignificant factor.
> However, many poorer folks need to learn self-control and the power of saving.
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?
I know this is well studied and has to do with the poverty mindset, but that doesn't mean it's mathematically rational. Sure, if you live paycheck to paycheck and somehow this week have an extra $5 leftover, you might as well spend it. But if you have $80 left over, after a year of saving you could have a reasonable emergency fund.
I think this has far more to do with the fact that poverty, especially in the US, means frequently going into debt or bankruptcy even just to survive. If you're working for minimum wage, your landlord raises your rent, and you get an unexpected medical expense at the same time, no amount of disciplined saving in $5 increments is going to save you.
>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
Sure. How about saving up that $5 coffee until you die. Then you can enjoy your millions in your grave-yard. I'm close to turning 30 and one thing I learned: There are certain experiences you only enjoy when you are at a particular age.
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)
This point was really driven home to me when I lived in Las Vegas for a stretch.
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.
This is what I've said for a long time - people complain that Starbucks is expensive, and I totally agree if it's takeaway. But if you go there, sit down and enjoy the coffee in a pleasant environment, it's actually great value (especially in the city)
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.
I'm a full-time freelancer, and I spend quite a lot on traveling now that I can work from anywhere. It certainly costs a lot of money, but for the past 8 years I've been doing this, I never felt it as a waste of money.
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.
> 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.
The article seems a bit all over the place WRT inflation.
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.
Personally I think if you have $50k/y discretionary spending it's not unreasonable to spend $10k-20k of that on things you enjoy. Personally I save more, because most of the things I enjoy are free and I want to take advantage of compound interest while I'm young, but that's a personal choice.
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.
If you take the average person, the situation they find themselves in at the present time, including locked in expenditure such as lease agreements/mortgages/car loans, I agree. They have already committed to spending more than 66%.
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.
I think the "don't buy the daily latte" advice maybe is not meant to be taken literally but is instead meant as a way to demonstrate the affect of compound interest and encourage people to start saving. We have the realize the audience is usually people who have no idea whatsoever about saving or investing. We're trying to encourage them to get in the mindset; if they cut back the latte, what else can they cut back on?
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.
Yes - its really meant as a symbol for recurring monthly subscriptions such as full Comcast triple play at $200 + $10 for Netflix + $10 for Hulu + $10 for Disney+ + $10 for Amazon Prime + $20 for Apple News/TV+ + $10 for NYTimes + $15 for Costco as well as luxury car payments instead of a basic car payment, etc.
With many people saving approximately nothing for retirement and hitting 65 with roughly $0 to show for it, even his modified example of having $300-400k after 40 years is... a pretty damn good argument for saving $100/month.
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.
Does the US not have a compulsory savings scheme? In Australia, we have superannuation which employers must pay and it goes into a fund that is invested. My scheme gives me approximately 17% and after around 12 years of my working life, I have a couple hundred thousand dollars in my account. By the time I retire, it's likely to be worth around 1.5 million in today's dollars. I also invest some of my own money.
We do. It's called social security. Technically, it should be enough to pay the bare minimum of your needs upon retirement, if you're in a low cost-of-living area. It does not ensure a comfortable retirement, and we have enough problems in our government to erode our trust in getting the full payout from the system.
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.
I just researched social security, it appears more like a pension plan. Our superannuation is entirely our money. When I reach retirement age then every cent I've paid (plus interest) is returned to me. If I run out of money I'm still eligible for the pension. I'm not entirely sure but I think my superannuation is more similar to a compulsory 401k.
Great article. I never understand why "financial advisors", when making pitches for consumer frugality, invent a wildly optimistic interest rate (12%?!) and say things like "you could have had $X million dollars, IF ONLY. Well, sure... you could have. Or you could have had no dollars, and also no coffee, since return rates from the type of investments that have any chance of making 12% are anything but guaranteed.
"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.”
Sure, that's nice. (Although it seems to have been heading somewhat lower for the past decade.) But if you'd started investing in 1998, say, and then in 2008 something happened such that you unexpectedly needed access to your 10 years' worth of accumulated resources, things wouldn't have looked so rosy.
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.
I think this article misses the point. The daily coffee isn't the only problem with people's spending, but is representative of all the small daily spends that add up without people realising.
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
That’s the authors point. Unless you are an extreme outlier and buying a LOT of small purchase (like to the point you don’t have time to work), they really are meaningless. The big fixed items in your budget really drive everything, housing, medical, education, which have all far outstripped inflation. And the income has remained flat for most people (save tech workers who get great coffee for free).
Sure, the big fixed items drive everything, but they are the baseline.
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...
Not sure savings on those fixed costs are as impossible as you make them out to be, rather they may take substantially more effort than the "skip a coffee" line.
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.
That's literally the point of the article -- the prices on the things we want are going down, while the prices of the things we need keep climbing. That $5 coffee will still be $5 in 10 years, but housing, healthcare, insurance, etc will all have gone up dramatically.
All of these latte and avocado toast articles are a failure to acknowledge this fact and blame the economic victims.
I've recently stopped buying takeaway coffee. This led me also to think about non-essential Amazon/eBay purchases, how frequently I pop to the shops without planning etc. I also refreshed my monthly budget spreadsheet and cut some other expenses I didn't need.
> Everything adds up very quickly and the coffee is just one example
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.
The same arguement is valid for time that could have been spent more productively. Time that you have enjoyed wasting is not really wasted time. In fact a bit of fun or idle time can have a significant mental health benefit.
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...
We started budgeting, finally, around the time we had kids. We got tired of doing it all based on feeling, and wanted to actually know where our money was going, so we could make more accurate plans. A lot of people look at budgeting as a chore, but I’ve found it to be liberating. When you sock away some money for “personal spending”, you can get a coffee and not think twice about it. You’re not wondering whether your rent or mortgage is funded. You can start funding future costs (like an annual car registration renewal) instead of being surprised by them. And if it seems like a ton of effort, it’s pretty nice when tax season comes around and all your expenses are already categorized.
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.
So far people in the thread seem to be focusing on whether the use of inflation is appropriate and whether coffee is specific or merely representative or whether small costs add up.
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.
You can't change wages directly on your own, no. But the systems that set the wages are not immune to public opinion. (Whether you consider wages to be set by companies, government, or other forces, this holds true.)
That's like saying, "Pardon my lack of enthusiasm about self-driving cars while we ignore an industry that continues to pollute the environment." Pardon me while I have one conversation at a time...
Yes, maybe he will admit that Globalization which caused income stagnation in much of the western world is a big problem. Simultaneously it is also the thing that made big money for him and his wealthy clients.
Just to get my 5 cents in (as an ex-barista), you can get the best (single origin) coffee's in the world for between 8-12 euro's for 250 grams.(there are more expensive Geisha coffee's, but that's really hi-end) Lets assume you use 18 grams of coffee for a cup. That yields you at least 13 cups of coffee (from the 250 grams. Raw resources would cost you between 0.62 to 0.92 euro a cup.
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.
I agree entirely. I've changed my routine to avoid coffee shops in the morning, and make coffee at home with nice beans. I've come to enjoy the quiet process each morning, reading news while waiting for the water to boil, and it has definitely been saving me a significant amount of money each month.
> “Let’s say you spend around $100 on coffee each month. If you were to put that $100 into a Roth IRA instead, after 40 years the money would have grown to around $1 million with a 12 percent rate of return.”
...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.
Both should be "coffee" and "saving" - not $5 coffee and maybe saving. In other words, if you figure out how much you need to retire at the lifestyle you want, in the time frame you want, and put the money into your investments (retirement, brokerage, etc) and then pay all your bills and then you have $5/day to spend on coffee, go to town. If, instead, you spend $5/day on coffee, pay your bills, and don't have any money left over each month, so you skimp on your retirement contributions, you've lost control of when and how you retire.
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.
The math seemed pretty compelling. Even $100/month invested in index funds returns several hundred thousand after a few decades (or the typical working career.)
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.
If you're entrepreneurial, I fully believe it's a better use of your time and mental energy to make an additional $5k/yr than to scrimp to save an extra $5k/yr. For the HN crowd, this could mean building a side project that generates income, negotiating a higher salary, etc.
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.
I call this the "sales mindset" vs the "accounting mindset". In my opinion, once you see the accounting mindset take hold of the leadership of a company, it's prospects are dead. It's not growing any more. Granted, a company can make a ton of money during its slow decline.
There are, of course, industries that are different (Walmart seems to make way more via cost savings than by sales incentives, for example).
Walmart shows how the accounting mindset can work for a company: the more you drive down costs, the more markets you can make a profit in. They cut costs for the sake of being able to expand into places that they otherwise wouldn't be able to, rather than to boost profit from stagnant sales.
> I fully believe it's a better use of your time and mental energy to make an additional $5k/yr than to scrimp to save an extra $5k/yr.
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 $7500. "Every dollar that you don't have to spend is a dollar.fifty that you don't have to worry about earning."
If you're the type of person who can make a decision and not be tempted by other options after the fact, sure. But for many people it can create decision fatigue when you pass the coffeeshop on the way to work every day, when your coworkers invite you out for a coffee, when you're running late at the airport and Starbucks is right there...you have to constantly reaffirm your decision over and over again.
I think the author misses a point here. The issue isn’t that 5$ cup of coffee alone but rather a mindset of all these little purchases which can add up to say $50 a day which is both real money and don’t actually bring joy/value to your life. If the coffee actually makes you happy go for it. But if it’s just inertia/laziness then it is money flushed down a drain which yes adds up over the long term.
Although you are right that the broad mindset is what matters, that isn't the example he is refuting. He is refuting (or at least attempting to refute), a specific Suze Orman claim.
Plenty of people by 2, or 3. Then think of streaming services and other subscription services, gold-plated cable TV packages, etc. That meal box kit that costs you $240/month. It's pretty easy to get non-essential luxury spending up in to a few hundreds of dollars a month. Not to say you ditch it all, but judicious pruning of it down to the essentials/most used/biggest time savers etc isn't impractical. Obviously if you're already socking away savings and retirement, living 10% below your means etc., this may not apply. In my case though, the spouse & I have do the math in war-gaming things like one of us losing their job, having to take a pay cut, etc., and we could cut $1000/month in "extra" expenses with a bit of pain, and twice that if we really had to. Once you start looking for these small non-essential purchases it's not hard to find them, and triage what's more/less necessary.
None of those things get you even close to $50/day. The "meal box kit"s are hundreds of dollars a month, yeah, but they also come with hundreds of dollars worth of food. Blue Apron comes out to about $10 per meal and they're considered the expensive choice.
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.
I don’t think you live in NYC hannasarion. A cab here and there instead of the subway etc...
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.
Meal boxes are more than twice as much/meal than buying your own ingredients. I calculate the average cost per serving when I duplicated Hello Fresh recipes at roughly $3/serving. Add in a few hundred dollars a month for eating out as well, the occasional dinner, lots of lunches, all a luxury compared to cooking/preparing your own.
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 $18,000/year in non-essential expenses, while at the same time they have little savings, retirement, etc.
At the same time, I feel like we are talking in a bubble here about a lot of unreal examples. When people make these coffee arguments it is often to people like several of my friends who are making a low income to begin with. Where are they supposed to get this 'saving 10%' when they don't actually have any luxuries beyond their 5$ of coffee a day? Where are they supposed to take that from if they are already barely making ends meet? And then older generations tell them to take their coffee away.
Make your own coffee. Its a strawman to suggest anybody needs a $5 latte else they got nothing. Its just self-indulgence, and nobody 'needs' that. Its a first-world notion.
A lot of comments here are debating whether a 12% interest rate is reasonable or not - I don't know enough to comment on that since stocks and investing is one of those things I try to know as little about as possible.
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.
It's very simple. Despite the weekly mass shootings in your neighborhood, the life expectancy of an American is still 79 years. And if you're commenting on Hacker News, chances are that yours will be higher. And the majority of American don't get bankrupt on medical expenses.
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.
I like Barry (and love his podcast), but #4 is crap. The number of people who are high income earners (say the equivalent of $150,000+ in Houston) who waste enormous amounts of money on eating out is staggering.
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.
When I met with a financial planner, he stressed the importance of setting aside enough money to spend on myself every month that I would feel confident to start investing.
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.
So... my personal experience is that many people who make less than median household income do buy $5 lattes or similar drinks/beverages multiple times a week.
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.
as an immigrant who came to the US with nothing and having held high paying software jobs for the past 20 years, I still find it unacceptable to drop $5 on lattes.
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.
To me the article is somewhat missing the most interesting point of the whole discussion and that’s the impact that the money is having when it is spend. Let me be a little provocative :)
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 wonder if the author would be ok if people spend $1 on a coffee a day from McDonalds or a gas station and save the other $4?
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!
>millennials better start thinking about how they can retire as soon as possible
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.
yep, I agree with that. Which is why Im not crazy about people (like this author) who is discouraging millennials from even getting started. If you're in college, or just out of college, you have decades to figure out how to be able to retire. There's no need to just accept whatever happens, or to just assume people will figure out how to fund Social Security between now and then.
I love fancy coffee, lattes especially. When I was younger, an explicit goal of mine was to become financially secure enough that I could afford a latte a day without sweating it. I used it as a yardstick for success and also knew that it would make me happy.
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.
When I was younger I walked to work in the big city and there was a great coffee shop on the way and every single day I bought a $4 extra large soy chai latte. It was fantastic and an exclusive secret recipe to that non-chain shop. Back then a normal coffee cost $1, so this was a splurge. Inflation adjusted that would be $6-7 these days. I regret nothing, though I did feel uncomfortable sometimes spending so much.
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.
If you're going to add inflation, add inflation to _all_ your numbers. i.e: the cup of coffee will be subject to inflation, and what you save will also increase with inflation. If you run the numbers propagating inflation everywhere instead of cherry-picking, over 40 years you get:
total coffee cost: 84k
total investment: 220k
assumes 5% investment return, 2.5% inflation, and 20 coffees/month
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.
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.
I have never seen anyone saying that $5 a day of anything is ruining someone's retirement plans. But yes, spending $5 on a latte, $5 on a croissant, another $5 on candies and a tenner on Uber, ..., and the daily wasted money will eventually add up.
That article is nothing more than a spineless Straw Man fallacy.
I remember when I had my first real salaried job out of college. I had a salary of around $40k, and I was extremely strict about how I spent my money. I managed to limit myself to $10k/year in the inner Bay Area. This was in 2010. And, yes, I accumulated some savings.
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.
This is closely related to the idea of being "penny wise and pound foolish." For instance, you are actively depriving yourself a $5 coffee per day (or substitute your vice of choice) but you're leasing a new car every 2 years. In this case, you are not only cutting the wrong indulgences in the name of savings, you are giving yourself a false sense of accomplishment when there are much more beneficial steps that could be taken.
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.
I assume that the Suze Ormans of the world would tell you to be not just pennywise but poundwise as well. The $5 latte is emblematic: once you start thinking about that $100 monthly expense, you sit and look at your $90 cable bill or your $200 car lease and think whether there are ways to cut back on that as well. The value of cutting out lattes is that it's easy to ask, on a regular basis, "is this making me $5 worth of happy?", whereas a big car payment you can more easily justify as "I need it to get where I'm going", even though a cheaper vehicle could do just as well.
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.
Getting your car and house right makes up for many, many latte-level mistakes. And this is what Suze Orman misses.
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 think the point of the Latte factor, isn't that you shouldn't buy expensive coffee drink. The bigger problem is mindless spending racks up the expense column without adding much value.
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.
I disagree. My goal is to retire early so every time I actively choose not to buy that coffee and instead save is days off my retirement ETA. If you learn to act frugal during you income generating years you will more easily live with less when you are feeding off your savings.
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.
I find that the author seems to speak far too much from his own entrepreneurial perspective.
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?
A lot of this discussion centers around retirement and how many will end up with little-to-no savings to live on when they exit the workforce.
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?
Amazing. This article is an argument for the thing it rails against.
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.
Giving up Lattes and Avocado toast is classic penny wise, pound foolish logic. If $5 / day is going to break the bank you have bigger problems. If $5 / day isn't going to break the bank, you almost certainly have larger expenses that could be trimmed to much larger effect.
Financial insecurity is often a lifestyle problem, but it more often revolves around excessive debt than a few frivolous habits.
Author is trying to advocate that people think of themselves as victims in the world, where things simply happen to them. Wages are stagnant, inflation happens, etc. Some of this may be true. But regardless, I'll attempt to save money as I can, rather than throw my hands up and say none of this matters and piss it all away on coffee.
"Buying yourself nice things" and "saving enough for retirement" aren't mutually exclusive for a lot of people. IMO, the way to go is to start off by figuring out how much you need to save, setting up your accounts to save that automatically, and then spending the rest guilt-free on whatever you want.
It has to do with the intention. If someone is planning to redirect these £€$ 5 per day (150 per month, 1825 per year) on something else, e.g. algo forex trading with a safe 0.20% profit per day, then those 5-per-day will become 650k in 10 years. I like my coffee just as the next guy, but if 'depriving myself' from the daily coffee will help me get to my F.I.R.E. [1,2] ten years sooner, then I am dropping it.
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 :)
I think part of the problem is how real estate costs and huge franchise a la Starbucks are configured. When you travel in Mediterranean countries independent coffee shops 'bars' are the norm, and a good Italian espresso costs 0.80 euros. Part of it comes from the fact that bars sell a big assortment of alcoholics(and yes Europeans don't seem to have mental association between selling alcohol and getting wasted, so most bars are family friendly), sodas and indigenous sandwiches. That makes selling coffe not a central part of the business hence the reasonable cost, which won't dent your retirement plan nor make you feel miserable. What happened in the Anglosphere (and not only) is fundamentally a habit appropriation without the surrounding conditions to support it and this drives the prices to stupid levels.
This article is pointing out the problem with individualizing environmental or social problems. "The reason people are so broke is because they don't have the moral fiber to not buy that $5 latte. If they were smart and frugal, their problems with money would be solved."
No amount of decreased latte consumption will make up for the underlying problems people face - stagnant wadges, increased prices on fixes costs, student debt.
It's the same shaming related to obesity. Has obesity risen because people are now more lazy than in the past, or is because we live in a culture saturated with the marketing and availability of energy-dense, nutrient-poor foods?
1 ambulance ride = 2 years of daily coffee.
1 minor knee surgery = 5 years of daily coffee.
1 major knee surgery = 10 years of daily coffee.
1 diabetes diagnosis = 3 cups of coffee/day, lifetime.
1 cancer diagnosis = 1 daily coffee for every one of your children, and their children.
1800$ per year will adds up to a lot for anyone still working. if you earn 20K after taxes then that's 9% of your income! If you earn 140K before taxes, 100K after taxes that's still almost 2%! that's almost enough to pay rent for a whole month in many parts of the country!
Almost enough? In many parts of the country? You can rent a small studio apartment, or a room in a luxury apartment in New York for significantly less than $1800/mo -- in the second or third most expensive rental market in the country.
I think most of this argument is based on a false dichotomy "Saving on coffee is bad advice because there are other things wrong with our finances that have a much bigger impact". The author is also not making a clear distinction between "things that are wrong with our financial/economic system" and "things one has direct and immediate control over", like the money they spend on coffee every day.
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 article misses the point of the proverb competely. It erects a strawman by taking the advice at face value.
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.
Something this article really brought home for me was just how f*^king privileged I am. Not because I can trivially afford a $5 coffee each day. But because of all the linked terms in that article like "Stanford Marshmallow Experiment", "Fixed Costs", "Finite Willpower", "Delayed Gratification" and so forth that I implicitly understand and gloss over.
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.
While I agree that there's a macroeconomic component to everything and it's a bit disingenuous to Ayn-Rand-blame people 100% for their own economic situation, I also don't think you have to be a new genetic race of super-human to be able to focus on the big things AND the little things? Maybe in that order? The oppositional stance is just theater.
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.
A coffee is my excuse to go for a walk and fresh air when I'm bored and not being effective. When I get back in way more likely to get stuff done. As a freelancer that's a money-maker I'll happily invest $5 in.
I prefer $0.50 lattes that I make at home with my Rancilio Silvia that I bought nearly 5 years ago. At 4 double shot lattes/americanos between myself and my wife, the machine has paid for itself many, many times over. We use $4.99 medium roast beans from Trader Joe's and regular non-organic milk or half&half. Best of all, over the first month or so I dialed in my grind and brewing technique so well, that it's better than what you'd get at a normal coffee shop. I pity the fool who pays $5 for essentially a glass of hot water.
I have thought about this quite a lot. I read a lot on FIRE and on personal finance. I think the thing no one mentions in this thread is the possibility of you not making it to 25 years? What if you get a disease or a car accident? You saved all that money for nothing.
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.
I can remember a time not long ago when refraining from frequent coffee purchases definitely helped, but mostly for opportune leisure spending in other instances. That's when I was barely breaking even as a student.
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.
Can someone explain this Starbucks obsession to me?
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?
It's not about not buying things for yourself. It's about not paying $5 for something that is the equivalent of $1 of coffee and $0.50 of milk.
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.
There's other factors at play as well. If I had the coffee beans and milk, I may not necessarily be motivated to make myself a cup. I also probably wouldn't have an espresso machine or know how to make the coffee taste like I want.
I know latte is the common reference but I'm shifting my mindset lately, especially having a family. I brew my own coffee at home and pretty frugal. But now if things cost a but more and is convenient, I'll pay for it. For example, parking at the venue vs free street parking. Having two kids in tow is pretty difficult to get them orderly in the car.
Paying a little extra for 2 hotel rooms, versus squeezing youe in laws, 2 kids and yourself and spouse in 1 room...
Really glad i invested in a grain coffee machine. Get 1kg of "fair-trade" grain for 15 euros, does this make 200 lattes ? ok, so that 0.075 euro per latte. So yeah, paying $5 for a latte does not seem like a good deal from my point of view. Of course you have to buy the machine, you could probably get a second hand one for 200$, or even a broken one for 100$ and fix it.
I usually have 2 coffee a day, or 3 some other days. Let say $5 a cup, it will cost $3560 a year.
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)
I feel articles like this should recommend an annual income threshold, if you are buying these lattes with a credit card while your checking account is over-drafted then it is going to indirectly affect your retirement. But I do acknowledge that most people reading this are probably not in an over-drafted position.
What this article ignores is hedonistic adaptation. Only having a fancy latte every week or two will make it far more enjoyable. Having it every day will make you by and large indifferent.
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.
Time value of money discussions never take into the fact that 1) tomorrow is never guaranteed and 2) there are certain things or experiences you can buy that are more enjoyable when you’re young than when you’re old.
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...
or you could blow your ten year latte budge on a bigger fancier car. but nobody talks about having to drive a budget compact vehicle to become a millionaire.
One of his points is "Focus on large fixed costs, not small discretionary ones", so while that isn't a small amount, that might be half how much your mortgage costs a MONTH. Until you optimize the mortgage, the coffee is less of a concern.
$5 latte + $6 + 1 hour ($50 in opportunity cost?) for a round trip. It adds up if you do the latte thing every day.
How many people in this country spend $3k/year in lattes but don't invest $3k/year for their retirement. Wasn't there an app that did just that - rounded up your spending to put the remainder in an investment account?
I guess at least by the "it costs you 1 million dollars" logic, you could afford a latte per day if you can also afford to save 10$ a day. Then by the same calculation, you would accumulate 2 Million $ for retirement.
tldr; inflation-adjusted, a $5 daily latte might put about $80-$100k dent in your retirement coffer. An opinion is presented that this is a good tradeoff if you like latte.
What I don't see mentioned in the article or comments is the fact that the latte isn't the only $5 decision we make every day. We can choose not to buy the latte, and to pack our own lunch, and to choose cheaper veg instead of meats at the grocery store, and on and on. Frequently it's multiple smaller choices that add up to noticeable benefit, even when a single latte or lunch out won't break the bank.
(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)
Say you make the US average $56k, you're spending 3.2% of your income on coffee.
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.
As an American it does seem normalized. I found it less expensive to buy a good espresso machine for home and just make my coffee before I start my day. It paid off doubly when I started working remotely.
>So maybe consider buying a latte machine instead.
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.
I've found the cheapest possible automatic drip machine (small, the only interface is an "on" switch, probably one at your local Goodwill right now for like $5) with middling grounds (something available at Costco, not your fancy local roaster at 3-∞x that price per ounce) produces significantly better coffee than Keurig. Used grounds can go in the garden, and the filter's paper. Less counter space than a Keurig. Can smash one on the ground in a fit of rage every couple months, replace it, and not notice it in your bank account. Bag of coffee and box of filters take up less space than enough kcups to make the same amount of coffee.
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.
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.