Buy Yourself a Latte • Hacker News Board

Re: Buy Yourself a Latte

#11

Post by jfk13 » Fri, Apr 05, 2019, 3:55 PM UTC

MuffinFlavored wrote: post #5

krisrm wrote: post #2

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.

https://en.wikipedia.org/wiki/S%26P_500_Index#Annual_returns > Total Annual Return Including Dividends 10.53% > 25 Year Annualized Return 11.93%

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.

Re: Buy Yourself a Latte

#12

Post by larrik » Fri, Apr 05, 2019, 3:55 PM UTC

gringoDan wrote: post #10

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 entrepreneur…

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).

Re: Buy Yourself a Latte

#13

Post by Insanity » Fri, Apr 05, 2019, 3:57 PM UTC

My argument would be that you might as well enjoy the money that you earned. You can't take it with you when you die, so make the most of it here.

Not saying you shouldn't save money, but if the 5$ cup makes you happy, just go for it.

Edit: typos!

Re: Buy Yourself a Latte

#14

Post by CompelTechnic » Fri, Apr 05, 2019, 3:57 PM UTC

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.

Savings Calculation: https://imgur.com/a/Au00aeJ

Re: Buy Yourself a Latte

#15

Post by lostmsu » Fri, Apr 05, 2019, 3:57 PM UTC

esotericn wrote: post #6

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 $10…

$5 coffee for 300 days is $1500/y, which, IMO, is not insignificant even compared to $50K

Re: Buy Yourself a Latte

#16

Post by [deleted] » Fri, Apr 05, 2019, 3:58 PM UTC

gringoDan wrote: post #10

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 entrepreneur…

[deleted]

Re: Buy Yourself a Latte

#17

Post by esotericn » Fri, Apr 05, 2019, 3:59 PM UTC

CompelTechnic wrote: post #14

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 l…

In year 40 a coffee is no longer $5.

Re: Buy Yourself a Latte

#18

Post by [deleted] » Fri, Apr 05, 2019, 3:59 PM UTC

CompelTechnic wrote: post #14

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 l…

[deleted]

Re: Buy Yourself a Latte

#19

Post by esotericn » Fri, Apr 05, 2019, 3:59 PM UTC

lostmsu wrote: post #15

esotericn wrote: post #6

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 $10…

$5 coffee for 300 days is $1500/y, which, IMO, is not insignificant even compared to $50K

I don't drink fancy takeaway coffee, so I'd agree with you there.

I do have a daily entertainment budget which is more than $5, though, so I've just shuffled that into other things.

Re: Buy Yourself a Latte

#20

Post by tcfunk » Fri, Apr 05, 2019, 4:01 PM UTC

mjamesaustin wrote: post #7

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.

> The latte scare is a great way to make sure people who are apprehensive about investing never even consider it.

It's like fad dieting, but for your wallet.