Most times, it is not lattes that are the problem!

[Wino]

I can refute the basic argument with an old adage:

Take care of the pennies, and the pounds (dollars, for us Yanks) will take care of themselves.

It is the Lattes. And the designer Nike shoes. And the iPhone4s. And the lunch out every day at work. And the weekend ski trips. And the microbrewery beer.

[Like2Plan]

Ask those people to pay $1000 up front for a coffee card which is good for a coffee a day, and you'll get a totally different reaction.

I don't buy a card annually, but I do buy one monthly and link it to my iPhone. It makes it easy to keep track of my balance (and progress towards free drinks). Makes it easy-peasy to buy a latte (using my iphone) each day.

[sblatner]

The "latte factor" is a symptom...not the problem. As others have said, the "latte factor" along with other expenses can add up to big problems.

[dontgopoor]

DisneySteve's and other's comments about how the little costs add up to a large chunk of annual expenses are exactly correct. Yet, so many people feel as if they can treat themselves to the small expenses because, well, they're small. This is exactly what the marketing for those products wants you to believe.

It seems that Lattes are allegorical to McMansions, luxury cars, lots of eating out, financed vacatins, etc. - same type of marketing techniques and advertising that appeal to consumer emotions, leading consumers to "buy" happiness. The same folks who blow $2k a year on lattes will buy a $500k house instead of a what they can reasonably afford - many times because they don't know how to deal with the manipulation of their emotions. These uninformed consumers are being SOLD.

Morgan Housel, a writer for Motley Fool, wrote an article that appeared yesterday about the middle class and their perceptions of what they have and don't have. I'm sure readers could use Google to find the article. The article made good observations about how consumers "feel" they should have "more" because they see others having "more". Robert Frank of Cornell wrote a book on the same phenomena called "Falling Behind". In short, the observations fall along the lines of "Keeping up with the Joneses," but stated in an academic way.

[dczech09]

"Even a small leak can sink a large shink." It is all about habits. Good habits can create money, and bad habits can cost money.

Going for a latte everyday, a bottle of pop, a pack of smokes, a burger, or eating out at a fancy bistro everyday can add up. Quickly!

I try to teach my peers to save for retirement in their 20's and a lot of them say that they cannot afford it. Yet they spend, $5 per day at least on the "latte factor."

$5 per day, 5 days per week, is $25 per week
This is about $100 per month.

At 8% average annual return, and 40 years of investing, that $100 per month can turn into $349,100.78!

So forget about the latte factor costing $1,000 to $2,000 per year. Let's think about that opportunity cost!

[disneysteve]

I try to teach my peers to save for retirement in their 20's and a lot of them say that they cannot afford it. Yet they spend, $5 per day at least on the "latte factor."

$5 per day, 5 days per week, is $25 per week
This is about $100 per month.

My wife used to work with a bunch of people like this. On payday, they would rush out at noon to run to the bank to cash their checks so that they could afford to go out and get lunch that day. My wife had direct deposit and didn't even know when payday was.

They would buy sodas out of the vending machine in the break room for 75 cents each.
My wife would bring a store brand can of soda from home for 10 cents each.

They would eat out at a fast food place every day.
My wife would brown bag her lunch.

They were always complaining about being broke.
My wife was putting a chunk of her income into the company retirement plan as well as funding an IRA.

The latte factor absolutely matters.

[Like2Plan]

"Even a small leak can sink a large shink." It is all about habits. Good habits can create money, and bad habits can cost money.

Going for a latte everyday, a bottle of pop, a pack of smokes, a burger, or eating out at a fancy bistro everyday can add up. Quickly!

I try to teach my peers to save for retirement in their 20's and a lot of them say that they cannot afford it. Yet they spend, $5 per day at least on the "latte factor."

$5 per day, 5 days per week, is $25 per week
This is about $100 per month.

At 8% average annual return, and 40 years of investing, that $100 per month can turn into $349,100.78!

So forget about the latte factor costing $1,000 to $2,000 per year. Let's think about that opportunity cost!

You could look at every luxury purchase the same way up to and including taking a vacation.
But if you have accounted for all your needs plus met your savings goals, I do not see any reason not to enjoy yourself a little bit. Some people enjoy recreational gambling. Some folks enjoy a social gathering for a drink. I see nothing wrong with it, if you have accounted for it in your budget.

[disneysteve]

if you have accounted for all your needs plus met your savings goals, I do not see any reason not to enjoy yourself a little bit. Some people enjoy recreational gambling. Some folks enjoy a social gathering for a drink. I see nothing wrong with it, if you have accounted for it in your budget.

Absolutely. I don't think any of us is saying there is anything wrong with having luxuries and extras and nice stuff. We go out to dinner regularly and just got back from an 11-day trip to Florida and a 3-day trip to Maryland. And yes, I've posted many times that my wife and I frequent the casinos. We also both have iPhones. My wife even visits Starbucks from time to time.

The difference is that we save at least 25% of our gross annual income. We pay our bills in full every month, have no credit card balances, have a small balance remaining on our mortgage, have a nice college fund for our daughter and overall live well within our means.

[Nika]

Yes, the article on perception and happiness makes some valid points.

Disneysteve, you mentioned before that you live in a very poor area. And obviously, being a Dr. you are one of the richer people in the area, which probably contributes to that general feeling of content.

BTW, I was kind of hoping for a comment from you on my last post that got moved to "everything else" (regarding the 90 day health challenge). Does 90 day period sound about right?

[Like2Plan]

Absolutely. I don't think any of us is saying there is anything wrong with having luxuries and extras and nice stuff. We go out to dinner regularly and just got back from an 11-day trip to Florida and a 3-day trip to Maryland. And yes, I've posted many times that my wife and I frequent the casinos. We also both have iPhones. My wife even visits Starbucks from time to time.

The difference is that we save at least 25% of our gross annual income. We pay our bills in full every month, have no credit card balances, have a small balance remaining on our mortgage, have a nice college fund for our daughter and overall live well within our means.

I agree, I think it is about getting your overall fundamentals in line first.
When DH and I were starting out, we didn't take any vacations--first saving for a DP on our house and then saving for DS's college. We decided to buy a house that we could afford on one salary even though we both worked. We maxed out our retirement savings and so on. After we met those funding levels, we relaxed a bit. We saved for an entire year for our first trip to WDW over 21 years ago. I put off getting an iPhone for over a year even though I dearly wanted one because of the cost and I was afraid it would derail my retirement plan somewhat (you know, higher overhead in retirement. )
Now, our mortgage is paid off, DS is graduated from college (100% paid for with no loans) and I am retired. I'll admit I probably wouldn't have gone to Starbucks everyday in the earlier years because the $$ was already allocated, but I think it is all about having an overall plan and goals to meet the plan.

[disneysteve]

Disneysteve, you mentioned before that you live in a very poor area. And obviously, being a Dr. you are one of the richer people in the area, which probably contributes to that general feeling of content.

I don't live in a poor area. I live in a pretty good area. Median household income in 2010 was $88,000.

I work in a very poor area.

[JoeP]

"Even a small leak can sink a large shink." It is all about habits. Good habits can create money, and bad habits can cost money.

Going for a latte everyday, a bottle of pop, a pack of smokes, a burger, or eating out at a fancy bistro everyday can add up. Quickly!

I bring my lunch to work quite literally 99% of the time. When I have to go into the cafeteria to use the microwave or get ice, I see a lot of the "usual suspects" at the same tables eating food they bought there. For the maybe 5 times I've bought food there in the past 2 years, I spent in the neighborhood of $7, and it wasn't anything extravagant: usually a sandwich, small salad, yogurt, drink.

We switched from land line to netTalk and save $1 a day. Doesn't sound like much, but it is more than chump change over a year, and we have some feel-good factor from that decision. When I think of people dropping $7 or more every work day, for a year...

[Nika]

I don't live in a poor area. I live in a pretty good area. Median household income in 2010 was $88,000.

Apologies.

[riverwed070707]

I can refute the basic argument with an old adage:

Take care of the pennies, and the pounds (dollars, for us Yanks) will take care of themselves.

It is the Lattes. And the designer Nike shoes. And the iPhone4s. And the lunch out every day at work. And the weekend ski trips. And the microbrewery beer.

But the microbrews are SO.MUCH.BETTER than the cheap stuff! I remember the days when coors light was an upgrade...now its a dreaded settle when the budget is tight and I would gladly sacrifice a night out/movie/date night for yummy beer