This has bugging me for awhile and what better place than The Pit. I actually think this may be my first.
I’ve been reading a lot of financial advice/budget planning books lately because I need to save for a car. Working in a library I naturally turned to the wealth of information right at my fingertips. Oh how wrong I was.
First, nearly all of these books are built off of the premise that you’re trying to reduce debt. Saving for the future when you don’t have any debt is like a foreign concept to most of these authors.
Second, they’re all so smug. “If you’re reading this book you’re obviously deep in debt. I can help. I’m not deep in debt, I have a considerable nest egg of stocks, bonds and savings accounts. You can too. I won’t tell you which ones exactly as that could devalue my holdings. Consult a financial professional in your area for more detailed information. But watch out, that can get expensive. Another thing…” If I could afford a financial professional, I wouldn’t be reading your book How To Save All The Money You’ll Ever Need Without a Financial Professional*
Third, nearly every financial plan revolves around cutting back on things you don’t need first. A very solid financial strategy actually. But what is always first on the list? Daily lattes at Starbucks! Daily! “If you just forgo that daily latte you’ll save $4 [$5] a day and $20 [$25] a week. After a year you’ll have $1040 [1300] more dollars than you thought you would.” I don’t drink a latte a day. I don’t think anyone that’s in debt (remember the premise of every financial book) does. And making this the crux of a budget plan really pisses me off. None of them can decide if a latte is $4 or $5 either, but that’s a rant for another time.
Finally I just said fuck it and I put my weekly savings in a PayPal Money Market account. It seems to be working well.
You’d be amazed at the people who are up to their eyebrows in credit card debt and do drink a pile of lattes or whatever.
I was quite impressed with The Automatic Millionaire (I work at a library too and everybody had it on hold, so I read it.) It does talk about the “latte factor”, but only as a “people say they can’t afford to save anything, but look - I bet you spend money every day or week or whatever on something you could afford to cut.” It’s not at all about budgeting - admits that budgeting dosen’t work for most people, and that to succeed you have to have everything automated so you don’t even think about it.
But yeah, I don’t drink daily lattes either and I wish they wouldn’t always use that one. What I could cut out is bought lunches.
I think you’d be surprised at how many people, in debt or not, who bitch about not having any money to do x or y necessary thing spend money on lattes or equally overprices consumables. I used to work with a woman who would regularly talk about having $5 to last her till payday (which was a week away) or not be able to put gas in her car, who somehow had the money to get her nails done every other week. She had a pretty sizable bar/club habit, too.
And yes, most people in this country who are worried about money are in debt, so that’s who the authors tailor their books to. The strategies are still sound, though, once you cut through the surface crap about latte and whatnot. Most of them advocate being mindful of where your money is going and making sound decisions on what you need now and what you want long-term, rather than what sounds like it might be fun right this very second.
I think you’d be surprised at just how many people with crushing credit card debts do, indeed, fritter away money on that kind of nonsense. Often, of course, that’s exactly how they got themselves so deeply into hock in the first place, and old habits die hard.
I recall seeing some family on TV, maybe Dr. Phil, discussing their debt problems. Of course, they simply can’t give up life’s necessities, like digital cable TV with all of the premium packages. Like the exotic pets that require expensive diets (live stuff, of course), controlled environments, and big vet bills. Like the leased luxury cars. Like the $200 per month long distance phone bills. When someone explains to them that they’re deep in debt, and that these things are not “necessities,” their eyes glaze over - they genuinely don’t seem to understand.
If you can afford it, and you like Starbucks lattes, by all means, treat yourself. But if money’s tight, you’re an idiot if you spend $4 on something you could make at home for pennies. And there are a lot of idiots out there. As the Scots say, “many a mickle maks a muckle” (i.e., watch out for the pennies, and the dollars will take care of themselves).
Heck, sometimes it’s not even a $5 latte. (On preview, what Early Out says.) My dad was a bankruptcy agent for quite a while, and while some people have incredibly lousy luck to be talking to him, some really bring it on themselves.
One of my favourites was a guy with a fair amount of debt, a low paying job, but a $30,000+ car. He apparently said that he could easily handle the car payments every month, it was just everything else that was a problem. :smack:
Do you pay for cable tv? High-speed internet? How many cell phones do you have? Do you drink in bars? How many times do you eat out every week? Do you park illegally and end up with parking tickets? Return your movies late and pay late fees? Do you live in an insanely expensive part of the country?
The point is, there are lots of ways that people spend their money stupidly out there, and telling yourself “but everybody does that” is not going to get you out of your financial hole.
The $4 latte is a symbol. Don’t take it personally. Look at the stupid things you spend money on, and knock it off.
They aim more at the masses. Starbucks is a phenomenon and so they use it as an example. Look for something else that you could do without. Or simple put all your change in a bucket and at the end of the month put that into some kind of investment.
8 Steps to 7 Figures makes the point that you must invest each month, even if only a little.
I forget where I read this*, but the crux of the quote was that it’s pretty simple to figure out people’s true priorities: look where they spend their money. That sounds kind of cynical but actually it’s quite sensible. And revealing. Money, in the final analysis, is a tool so the uses it’s put toward can tell a lot.
I was fairly broke–finally out of college and struggling–so the idea of saving seemed pretty laughable. Since I couldn’t afford much else for entertainment I logged my spending for several weeks. Whoa. Big suprise. Turned out I was spending a disproportionate amount eating out. Nothing splashy, just too many meals out and they added up to a daunting amount. I’d struggled along for so damned long, making healthful inexpensive food for myself, that I seized on the convenience and novelty of having it done for me. The costs seemed so invisible they just crept up. Needless to say, I opted to start back in a modified pattern of making do for myself. It didn’t take that much time and suddenly I had cash to spare.
Being severely broke at least once in your life can be a huge benefit. It surely can teach wants vs. needs, so the inane ‘latte a day’ thing holds a germ of truth. The trick is sorting out the quirky things necessary to the inner person as well as daily survival.
I’m another librarian, btw, so you’d think I’d remember the source of the quote. At least the profession allowed me respite from my ravenous personal quirk: I can’t live without books and sooner go without food than reading.
My wife and I recently hired a financial advisor. We wanted to make sure we were on track saving for retirement and Fang’s and HC2’s college.
He was shocked to find out our only debt was my car payment, and that I was doubling up on payments. He asked about credit cards, and (again) was shocked that we pay it off monthly. We use it as a convenient way to pay for things, and the itemized statement makes budgeting easy. The other thing we did that amazed him was put my salary (less the car payments) into savings.
I wasn’t always like this until I married a very smart, budget conscious woman.
The only real advice he had for us was to move our savings into IRAs to take advantage of better rates of return.
Starbucks are expensive, true, but pennies? Look, you need at least a decent espresso machine (about 200), preferably a grinder (there’s another 100 or so, low estimate), good coffee (not always cheap). And if you insist it be Latte, milk as well.
It’s matter of priorities though. I have all of the above bar the grinder (which I’m saving for) but no microwave, dishwasher or television. I think I would sell many more things before the espresso maker went. I also wouldn’t be able to think about finances without a good strong double espresso first.
I see where you’re coming from. I’m debt-free (as of yet), and any financial advice I want to get has to be deeper than “cut out unneeded expenses” and “save some money”. Because, frankly, I could have figured that out on my own.
I used to work with someone just like this. We both were getting married at the same time, and we were both looking into buying houses. She made more than me, but she bitched and moaned about not having enough money to put towards a down payment. She couldn’t figure out how I was able to save more, but:
she somehow was able to walk into work every morning with breakfast from McDonald’s,
she ate lunch out every single day,
she got weekly manicures,
she and her fiance and/or friends went “out” clubbing 3 or 4 nights a week, and
she and her fiance had a very extragavant wedding and a 2-week honeymoon in England and Paris.
I ate breakfast at home, brown-bagged my lunch every day, never got manicures, we had a very simple wedding, and took a 4-day trip to Cape May (in the off-season) for our honeymoon.
We were able to save our money and bought a house right after we got married.
This is an excellent point. Although it was a while ago, I learned very quickly, after being unemployed for almost a year, that I can live off $900 a month, including rent, insurance, food and utilities. I was also more effective at getting rid of all my credit card debt than I ever have been while employed, simply because I had to watch every cent I spent.
I also learned that the library is an excellent resource for entertainment - you can check out not only books, but movies and CDs for free. And having friends over for a home-cooked dinner is often much more fun than going out because you actually get to talk to them. (Plus, I’m not a big fan of bars & clubs, so that helps.)
I second that the latte thing is symbolic. It’s kind of an annoying symbol, but it does show that certain things are completely unnecessary and you can save a lot of money by either finding a less expensive way to get them (a good stovetop espresso maker is $30, and a pound of espresso is $10-$15, so once you’ve invested in an espresso maker, you can have your espresso every single day for a fraction of a dollar) or by eliminating the things that are unnecessary.
I have to admit, I’m not completely debt free as I have a very sizable student loan. But between the reasonable repayment plan and the $20 or so extra I throw in every month, it’s coming down nicely.
So I just wanted to say thanks to everyone for trading savings stories.
Aside from my F-bomb in the OP, this isn’t a very good pitting is it? :smack:
$100 for a grinder? I’ve never spent more than $20 on that. And the initially expensive outlay for the espresso machine doesn’t invalidate the proposition that it can be much cheaper to have espresso or lattes at home. Some luxuries that you enjoy at home, like DSL (not a luxury for some), and cable or satellite TV do help you reduce your overall spending, by giving you more options for entertainment at home.
I think it’s more a question of reflecting carefully on what’s important to you personally. If you’ve absolutely got to have a latte at Threebucks every day, then you can find something else to cut back on. If you’d rather have DSL, for example, then you can do that and cut back on the lattes. It might be more helpful if the financial advice writers would emphasize this aspect of the matter; instead, it seems that they generally just tell you to live like a monk.
I think mortgages are considered “good debt.” Although they’re still debt, you actually get something out of them, other than more debt, like you get when you use credit cards. You get equity, which increases your total worth. And thank God for that, otherwise I’d be worthless.
Paypal might not be the best place to keep your long-term savings. They aren’t really regulated like a bank… a lot of people have had problems with them. (Just do a Google for Paypal sucks.) I’ve used it with no problems for several years, but I always withdraw anything over $50 as soon as I have it in my account.
I’ve had an account with ingdirect.com, and it pays a pretty good interest rate. YMMV and all that.
