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Buy Yourself a Latte

ritholtz.com

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Re: Buy Yourself a Latte

#31

Post by [deleted] »

nytesky wrote: post #9
ChrisRR wrote: post #3

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).

[deleted]

Re: Buy Yourself a Latte

#32

Post by ebg13 »

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.

Re: Buy Yourself a Latte

#33

Post by plorkyeran »

larrik wrote: post #12
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).

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.

Re: Buy Yourself a Latte

#34

Post by gringoDan »

lostmsu wrote: post #21
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 don't think time and mental energy effort is comparable here. To decide not to drink expensive coffee for a year is a 5 min effort tops.

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.

Re: Buy Yourself a Latte

#35

Post by DrSayre »

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!

Re: Buy Yourself a Latte

#36

Post by threwawasy1228 »

AdmiralAsshat wrote: post #27

Counterpoint: 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 ho…

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.

Re: Buy Yourself a Latte

#37

Post by huffmsa »

esotericn wrote: post #24
huffmsa wrote: post #22

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. So maybe consider buying a latte machine instead.

I always find these articles kind of amusing. In the UK we have Pret. 99p ($1.30) for a coffee. I'd get it in the middle of a day if I were far from home. Buying fancy coffee in the morning for breakfast strikes me as an extremely odd use of money. You've just left your house?

For a lot of Americans, the first stop they make on the way to work is Starbucks, Dunkin Donuts or McDonald's for coffee.

It's bizarre.

Re: Buy Yourself a Latte

#38

Post by [deleted] »

AdmiralAsshat wrote: post #27

Counterpoint: 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 ho…

[deleted]

Re: Buy Yourself a Latte

#39

Post by dspillett »

Insanity wrote: post #13

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!

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...

Re: Buy Yourself a Latte

#40

Post by esotericn »

ebg13 wrote: post #32

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.

As an individual, this is almost a philosophical statement, though.

I can actually choose not to spend $5 (just as I can attempt to enter a certain career path).

I can't change the median wage significantly.

It's not actionable.

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