It’s Your Money…
It’s your money, and you can spend it on anything you want. You do however, need to decide if what you are spending it on is more important to you than other potential priorities, some you may not have even thought of.
Think of financial goals and priorities like a coin toss. In the same way a coin has two sides, your spending priorities do as well. On the one side is what you are spending money on now, and on the other side is what you want in the future – which is more important to you? Are you willing to give up one so you can have the other? For example restaurant lunches every day may not seem like, or be listed as one of your priorities , but when you choose that sort of short term discretionary spending above investing for the future, you are making it a priority. Will $2,000 or more a year spent on lunches bring you greater peace of mind, happiness, and long-term stability, than if you had used the money to pay off your debts, save for a house or your retirement, or start an emergency savings fund? Perhaps you love to travel – would you take your lunch to work or give up expensive coffee (or any other unnecessary expenditure), so you could take an exotic vacation every couple of years? Would you give up or cut back on travel, to save for a house? They are your priorities, so only you can choose what they are and their order of importance.
Is your list of goals and priorities financially realistic? Have you done the math?
Does your wish list include an expensive house or condo, nice car, travelling, entertaining, and retiring at 55? If you still have student loans or a lot of consumer debt (credit cards, in-store credit, auto-loans, etc), that may not be possible unless you have a high level of income, as well as the determination to get out of debt and curb your spending. You may have a long list of things you want, without giving much thought as to how you will pay for them all. Unless someone is born a trust fund baby with a silver spoon in their mouth, the reality is that we can’t afford everything we want. We all make compromises or trade-offs, and focus on only our top financial priorities. In other words:
I want, I want, I want, has to be balanced with I give, I give, I give…
Are you Making ‘Cashbucks’ Coffee a Financial Priority??
If you are not a big coffee drinker, you may be blissfully unaware of how much some of these coffees actually cost. Using the menu at Starbucks as an example, the prices are listed below for a few of their large ‘designer’ coffees. While “grande” sounds very large, it is only the medium of their three sizes, but for our example it is large enough.
Skinny Vanilla Latte – Grande – $4.15
Caramel Frappuccino – ” – $4.45
Salted Caramel Mocha- ” – $4.95
Choosing the Caramel Frappuccino because it is priced in the middle, the $4.45 paid for a cup of it should give us reason to pause and consider that this is half an hour’s work for some people earning minimum wage. If you don’t think $4.45 is a big deal, consider the fact that around 70% of the world’s population lives on less than $10 a day, including many of the people that pick your coffee beans. Since the high price you pay for coffee isn’t being passed on to them, perhaps it’s time to take some of it back and put it to good use.
Here is what happens to you financially when you are willing to give up a $4.45 designer coffee every day, and invest that money instead. The 1 1/2% rate of return is roughly the return you could earn if you invest in a 1 year Guaranteed Investment Certificate or Term Deposit. The rates can be as low as 1/2% depending on how much you are depositing, so it pays to shop around. The higher rates in the chart come with increased levels of risk, with 7% being the historical average rate of return for the stock market. The prices listed don’t include any sales tax and/or goods and services tax that you may have to pay. This could add 5% to 15% or more to the price, depending where you live.
There have been several articles and blog posts lately attacking the ‘Starbucks makes you broke’, and other ‘give up coffee and save money’ advice. There are those that like to debunk anything that appears to pass judgement on any of their habits or indulgences, and then there are those that have simply missed the big picture. ‘Broke by coffee’ was never about the coffee. It is, and always has been, about priorities…
The most common priorities tend to involve retirement, buying a home, emergency funds, and for parents, having enough money to pay for their children’s education can often top the list. Everyone is different, and what may be of utmost importance to you, may mean nothing to someone else.