It’s Not About the Coffee

Photo: Dojo Blog

Alright, let’s talk about the “latte factor.”  You know, the one that berates people for their morning coffee routine.  Just in case you’re one of today’s lucky 10,000, the latte factor suggests that if instead of spending $5 every weekday in the drive-through, you saved that money in an investment account earning an average 8% interest over 40 years, you’d have an extra $300,000 at retirement.  That’s certainly nothing to ignore, and when you look at it on paper (after you’ve had your coffee, of course), giving up something so small for a gain of over a quarter million dollars sounds like a no-brainer.  Because the scenario fits nearly everyone’s situation, and can be easily adapted for those that it doesn’t apply directly to, the so-called latte factor of retirement savings has been touted by countless bloggers, newspapers, books, and listicles as the reason we millennials aren’t going to be able to retire.  Apparently, we don’t care.  Stories from Bloomberg, Vice, and the Washington Post report that we’re not only not cutting back on our coffee shop visits, we’re drinking more than anyone ever has.  And we’re almost militant about it.  Several bloggers have struck back, saying that coffee isn’t going to be the reason they retire with less than they need, so let us enjoy the small things.  They shift the blame to underemployment, crushing student loans, underperforming markets, failing government programs such as Social Security, etc. So, who’s right?  Are we drinking ourselves to poverty?  Or can we continue our record-breaking obsession with those fragrant magic beans guilt-free?

Missing The Forest For The Trees

The answer is yes, because the argument isn’t about coffee.  The assertion, and quite probably the reason for all the consternation, is that our lack of self-control and willingness to change our behavior is what’s driving our inability to save.  I have a feeling that (some of) the bloggers violently defending their right to a tall half-caff soy latte at 120 degrees every morning are doing so because they don’t like anyone telling them what to do, especially someone who’s telling them that they won’t reap the rewards of skipping that drink for another 40 years.  All they see is someone telling them they can’t have coffee and that they should reduce their quality of life “because,” and they miss the more important message: if you don’t include saving in your daily financial behavior, you won’t have any savings.  The truth is, if we’re not at least willing to hear the latte factor argument out, it doesn’t matter what our “coffee” is.  It could be always having a car payment, or continuing to throw money at credit card interest, or having someone else cook for you every night of the week at all the best restaurants.  Those are things our culture tells us we need to do, and we often have no problem listening to it, because those things make us feel good now.  I was that person for several years.  My thought was that as long as I could afford the whatever-it-was, or at least the payment that month for it, I was fine.  I didn’t want anyone telling me that I didn’t make enough to have everything I wanted, especially if my bank account that minute said otherwise.  I didn’t want anyone telling me that my decisions now would have an impact later in life.  Unfortunately, I think that resistance to advice is a hallmark of our generation.  Nobody wants financial advice because we have it figured out.  Nobody wants relationship advice because our significant other should just accept us for who we are.  Nobody wants parenting advice because we know our child best.  What I want us all to realize is that beneath these specific little nuggets of advice lies an undercurrent of experience and wisdom that we could all benefit from immensely if we’d just swallow our pride (and coffee) long enough to listen.

Habits, Not Beans

David Bach, the guy that coined the term “Latte Factor,” does not have a vendetta against Big Coffee.  What he wants to do is get us to realize that our everyday behaviors have long-term impact.  I have a feeling he chose coffee to illustrate his point precisely because he knew it would hit us in the feels.  He wants us to look at our behavior and think “oh, wow, this thing I love doing is potentially robbing Future Me of bigger, better things?”  He wants us to be more mindful, more intentional in how we live.  I don’t think he’s suggesting that we whip out a retirement calculator every time we want a cheeseburger to calculate what the impact of adding bacon would be.  I do think that maybe if we as a generation would look at how much we’re spending on all the little upgrades, extras, and accessories that we buy for everything, we’d be surprised at how much we spend, with maybe not as much of a quality-of-life boost as we thought.  As with any long-term goal, retirement is something that takes consistent effort.  Either we’re making progress toward it or we’re not.  There’s no in-between.  Every dollar we spend now is a dollar we won’t have in the future.  That dollar may be worth spending now, or it may not.  There’s no right answer, but we should at least keep that in mind and build habits around what we want our future to look like versus just what we want in the present.

I don’t care if you drink coffee.  R and I have become pretty picky coffee drinkers in the past year, and we definitely don’t just buy the cheapest stuff we can find anymore.  We enjoy ourselves in the now.  What matters is that we consciously, continuously work towards our goals rather than expecting them to just achieve themselves.  To do that, we’ve had to make some sacrifices.  We eat at home rather than hitting up new restaurants for every meal like we used to.  We make do with the library and other forms of free or cheap entertainment instead of going to the movie theaters every Friday.  Our cars are the exact opposite of flashy.  The bottom line is that we’ve realized we don’t “deserve” anything, and we absolutely should not be spending money as though we deserve everything.  Our savings in retirement isn’t going to be there later if we don’t create it now, and we have to be willing to delay gratification and make lifestyle adjustments that allow us to save to make that happen.  You know, like skipping a latte here and there.

What about you?  Does the “latte factor” sound like reasonable advice or the condescension of someone who just doesn’t get it?  What sacrifices are you making to work toward your retirement?

20 thoughts on “It’s Not About the Coffee

  1. I realized how much damage caffeinated beverages were doing to my paycheck a few years ago. The journey has been interesting. I wasn’t even going to coffee shops and was still spending over $700 a year. Not good for someone who makes $10 an hour. It took about a year but I finally managed to cut my caffeine costs down to about $20 a month.

    1. It’s crazy, isn’t it?? I was a little more than miffed when I was first confronted with the idea that I wasn’t as responsible with my money as I thought I was… until I actually looked. I’m still far from perfect, but being able to accept advice will help me grow a lot more than just trying to go through life on my own.

  2. “Every dollar we spend now is a dollar we won’t have in the future.” I wish this sign was posted in every high school and college on the planet. Well written piece (as always!).

    1. Thank you! I definitely agree that there should be more emphasis on this stuff in education, but I don’t know that you want me leading the charge, haha! I appreciate the compliment, though 😊

  3. Love this. I consider myself fairly frugal. When I talk to a fellow college student about budgeting, I almost always hear what they spend on coffee. I don’t know what it is, but coffee is the one thing they justify over just about anything. They’ll seriously consider taking on another job before thinking of coffee. Every expense is a sacrifice. Some could rack up a couple months rent and some groceries by kicking expensive coffee every day.

    1. Exactly! And the thing is, we all have our “coffee,” even if it’s not coffee. Even before I started drinking coffee regularly, I was buying video games, or food, or any number of other things that I was “doing fine” with, but was sacrificing my future security for.

  4. “I deserve it” was always my excuse for pulling into the Starbucks drive-thru each morning on a $10 an hour salary! I knew how much I was spending but didn’t care to be lectured. Once I began to realize the impact that my decisions were going to have on my future I bought myself a Mr. Coffee.

    1. I was the same way! Fast food for lunch and dinner every day? Yeah, it’s expensive, but life’s expensive, so I don’t need to change. If only I could go back in time and slap younger me…

  5. Years ago I thought the little money I’m spending here and there is not such a big deal. I was always trying to make it paycheck to paycheck and couldn’t understand what’s wrong with my finances. Then I started tracking my expenses for a month. I was shocked. So yes, the latte is expensive on the long run. Not to mention you ca easily make some pretty decent lattes at home for a fraction of the price. Same with cooking, I’ve been cooking meals from scratch for a while and they’re healthier, tastier and not as expensive as restaurant meals are.

  6. Retirement is indeed a big goal and I recently realized it myself.
    I live in Italy and an espresso here costs €1 (about $1). That’s about $25 a month (assuming you skip it on most weekends), so around $300 a year. It may not seem like a lot, but adding other extra costs for other small expenses makes it close to impossible to save enough for retirement.

    1. Those “little” purchases that don’t really matter certainly do add up to an amount that matters an awful lot! You need to be willing to look at the big picture and decide if the little purchase now is worth the little sacrifice later. And sometimes, it is! But you’re right, once you start combining this little purchase with that one night out and those couldn’t-pass-up-the-deals, that’s when we start to get into “where did my money go?” territory.

      That’s so cool that you’re reading all the way from Italy! Thank you so much for stopping by 🙂

  7. I can’t believe how expensive coffees are in the US comparative to the hourly rate!

    I think the latte factor is a great way to start people thinking, but it definitely shouldn’t be considered an all-out rule. I have a cash ‘allowance’ each week, and if spending some of that on coffee runs on the days I’m stuck in an office is what makes the working day bearable, I’m ok with that. That being said, most of my offices offer a discount, so I can take my office mug or keep-cup in and get a coffee for between $2-2.80. Much less of a weekly burden! I don’t think I would ever willingly part with enough of my cash to afford a daily American-priced coffee – I wouldn’t have any money left for a weekend brunch after four days of that, and a girl has to have priorities.

    My newish obsession to recommend to people is micro-saving apps like Acorns. Sure, you’re dropping $5 on a coffee, but at least the app will silently round that up and make sure you’re saving an extra $1 as well.

    1. I completely agree with you about the “allowance.” My wife and I have the same sort of thing built into our budget where we get a set amount that’s ours to spend on whatever we want, no questions and no judgment. I just see a few responses to the “latte factor” in general that run along the lines of “I should be able to have whatever I want, whenever I want it with no consequences later in life,” and that’s just simply not true. I think that’s what the heart of David Bach’s argument was; not that we can’t have coffee, but that we need to balance every purchase we make, regardless of how small, with the reality that we’re only going to get a finite amount of money in our lifetime. Is spending $3 today worth missing out on $10 after interest and growth down the road? Only you can make that decision, but you should at least be aware that you’re making it. And the micro-saving apps definitely have a place in our culture! The more good decisions we can automate for ourselves, the better.

      Thanks for reading, Abbie! I LOVE your blog’s name, even though I have no idea what it means 🙂

      1. I completely agree, I think more than anything the ‘latte factor’ refers to mindless, habitual spending and that’s the true enemy when it comes to trying to build savings. Thank you! I don’t think it even has a meaning, it’s the name of an eatery in town that my friends started using as a faux-curse word and it tickles my fancy 😄

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