Updated: Jun 1
"Are you really wasting money when you go out and buy coffee? Are some of the benefits overlooked when we critique discretionary spending, I think so!"
By: Allan R Kirby
The Coffee Dilemma
I will agree that when comes to your financial priorities, why spend money on coffee when you can make it significantly cheaper at home? It makes sense and many financial professionals have also highlighted this spending wastage such as the one found on CNBC. In fact, these articles not only highlighting the benefits of making your own coffee but also show you the accumulative savings you could obtain by making this change. Crazy as it may seem, the numbers floating around can be as high as a million dollars!, this is almost laughable and I firmly believe this is simply not the case. Clearly, experts do stretch the numbers, however, the question still stands, can you save significantly by not buying coffee? Is it worth cutting back on coffee and investing the money you save?
“When it comes to financial priorities, there will be times when its important to spend a little on ourselves and enjoy life.”
To understand more I recently decided to ask a few people their views on buying coffee, tea, muffins, etc... the question was simple, would it not be better to just make your own and skip buying coffee at places such as Starbucks? When I asked the question, I figured it was a no-brainer, cut back, save money and improve your finances; You would think everyone would agree but this was simply not the case and in fact, I learned a lot from others.
Three points I found that proves it's not bad at all buying coffee
#1 Social Factors
In retrospect, it's obvious but one that is missed by financial experts is that social factors do affect consumer behavior, in the case of coffee, people buy coffee in order to meet up with others to socialize. Think of it as experiential, a way to get out and be with people.
Is coffee a need or want? Some experts think its a want but its a need for some because buying coffee is a way to keep connected and socialize.
Unfortunately, socializing has become incredibly difficult due to Covid-19 so when the pandemic is behind us, going out for a coffee is going to become even more important for mental health. People are clearly tired of using zoom and texting and really want human contact. As one person explained, it's a way to engage and discuss current events in a relaxing environment and allows them to de-stress. So one should be able to buy a cup of coffee without feeling miserable and guilty. It's true you could save money, but it's money well spent if it improves your mental health.
#2 Saves Money
Another factor that many proponents against buying coffee to save money, which is, spending money on coffee are much cheaper than going out to a restaurant. As one person I talked to explained, "yes it does cost money to buy coffee and muffins, but it's significantly cheaper than buying a meal at a restaurant; its a way to stretch my money further"
For some, there is more value in buying coffee a couple of times a week than going to a restaurant once a week. So point taken, some find this is a way to get out socialize, have a simple luxury without spending a lot of money. In the end, it's smarter to spend $1,000 a year on coffee rather than spending significantly more ordering in or going to a restaurant. I know a few people who easily spend well over $100 on food in just one night.
People who buy coffee a few times a week and skip the restaurants can actually save money and stretch their dollar futher.
#3 You need some luxuries in life
Perhaps some boomer-aged financial experts such Suze Orman believe cutting coffee purchases will save you $1 Million but that highly unlikely for most. Additionally, it's very important for us to find some luxuries in life and health, which can have a positive impact on our mental and physical health over the longer term. Unfortunately, I have seen this on several occasions, people stressing out so much to save and forgetting that it's ok to buy a few luxuries. When financial experts are critical of spending on small items can in fact be counterproductive and ensure failure, why you might ask? It's simple, making people so miserable will ensure failure before success. I have always found moderation is key to helping people succeed in personal finance.
Will buying coffee every day keep you from getting rich? Some experts say yes, but I believe it is highly unlikely.
Is buying coffee a waste of money?
What I found is that cutting simple luxuries such as coffee might not be for everyone, which is clearly the case when I talked to others about it. Buying coffee can be a means to socialize with others, save money, while also allowing people to have at least one simple luxury in life. Clearly, some money experts miss this and assume, like Suze Orman, cutting coffee will make you a millionaire, which I do not believe will happen for most. Secondly, everyone can be relatively successful with their personal finances so long as they do it in a healthy way. Pushing yourself too hard could make you miserable which might come at a cost that affects other aspects of your life such as mental health.
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Do what you want to do
Forget the experts, they are not always right when it comes to personal finance. As I have found personal finance is not always simple, it can be a difficult process. In fact, I believe we really need to rethink personal finance and start looking at the mental and health costs of trying to force people to make changes to their lives, which could end up causing more problems than helping them. So long as you’re taking care of your financial priorities, including paying off debt, saving, and investing there is nothing wrong with splurging a little.
Good luck and happy drinking if you so choose.
This is a MySmallBank.com blog written by Allan Kirby, who writes and produces Personal Finance articles and videos.