Starbucks is my nemesis. I can’t stand Starbucks. It isn’t just because their coffee tastes burnt and is ridiculously strong. It isn’t just because is caused coffee sizes to go from small and large to tall and venti. It isn’t even because when they entered the market with their ridiculously high prices the cost of an espresso drink went from a maximum of three dollars to six dollars or more. It is because they took a luxury – going for coffee – and made it into an everyday thing.
Before Starbucks you’d go for coffee with a group or a date after a meal. You’d spend maybe $2, wait for a while (there was always a wait), and then get your coffee served in a fancy, real glass or ceramic cup. Everything about it was luxurious, from the china to the patterns in the foam because your were paying for the experience. You would then sit down with friends in comfortable couches and chairs and spend an hour or so discussing life or playing a game. Getting coffee was an event. You went for the experience, not just for the coffee.
Today you spend $4 or $5 for that same coffee drink. After being herded through the order line, you wait en mass for your name to be called. Finally someone calls your name and hands you a paper cup over a counter. You then fight to get a place at the condiment table, struggle to get the lid off to add your milk or sugar, and then walk or drive away. Whether you plan to stay or leave, everything is packaged to go and it is obvious they would prefer that you go. The experience of going for coffee is gone. It is like paying for a movie and being handed a video cassette.
Today in Money magazine a financial planner was making the point that cutting driving expenses by carpooling was more important than cutting minor expenses like lattes. Saying that carpooling 30 miles a day could save about $1500 per year would allow you to “drink all the lattes you want.” A daily latte, however, at $4 Starbucks prices (and it doesn’t matter where you go – once Starbucks came in, the price of coffee went up in all coffee houses) will cost you more than $1000 per year, so the costs really are equivalent. Go for a mocha or one of the fancy drinks, or go some evenings or on weekends, and you’ll add another $500 per year (and probably $18,000 calories per month) and your latte habit will cost more than you save carpooling, particularly if you miss some days and drive separately.
This isn’t to say that carpooling isn’t a good way to save money – it is – or that you need to give up getting coffee ever to save money – you don’t. The point is that if you want to live better financially and be able to save up for things and pay cash, rather than always being in debt and spending a third of your income on interest, you need to make luxuries luxuries – something special. If you get a latte everyday on your drive to work, it becomes banal very quickly. Why not grab a cup from the gas station on the way, or better yet, buy an $8 bag of coffee the next time you’re at Starbucks. You can then brew a cup at home every day for a month for equivalent of two Starbucks visits and take it with you in the morning. Heck, you could even put a few cups in a thermos for later.
When you go for coffee, really go for coffee. You are paying for the experience of using their coffee-house, their books, their games, and their atmosphere. Any good coffee-house should be designed as a place to spend time. Take advantage of it. If it is just a counter, go somewhere else. It isn’t worth the money.
When you are just looking for a cup of coffee on the run, go somewhere cheaper. You can save a thousand dollars a year or more and could easily make the difference between having some money to invest each month and not. This will put cash in your bank account, allowing you to have the cash needed when you’re ready to get a new (used) car, so you to save all of that interest. You’ll be getting income from your money rather than paying interest on your debt, which in turn will allow you to pay cash for some other luxuries – such as vacations and extra homes.
It also might let you send your kids through college debt free and pay for a home health aide when you’re old, allowing you to stay in your home rather than needing to go into a nursing home in a Medicaid bed. Saving money and staying out of debt isn’t always about the big things. Sometime making small daily changes is all it takes to radically change your life. And a luxury doesn’t seem very luxurious when you have it everyday.
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Disclaimer: This blog is not meant to give financial planning advice, it gives information on a specific investment strategy and picking stocks. It is not a solicitation to buy or sell stocks or any security. Financial planning advice should be sought from a certified financial planner, which the author is not. All investments involve risk and the reader as urged to consider risks carefully and seek the advice of experts if needed before investing.