My thoughts on The Latte Factor February 19, 2019

By now, you’ve probably heard of the personal finance idea of The Latte Factor. It’s the idea that your small expenses add up over time, and instead of spending your money on daily fancy coffees (or other splurges), you could be saving (and investing) that money and come out much richer.

I’ve seen this theory used as a way to shame people (“you’re poor because you buy yourself a treat/lack willpower”) and it frustrates and angers me. As Helaine Olen discussed in her book, Pound Foolish (and in plenty of other places like her blog post here), the real expenses keeping many of us from building wealth aren’t the $3 coffees, but the $300 doctor appointments or the $3000 monthly rent or mortgage payments. The huge cost of education, housing, childcare, and healthcare are almost unavoidable (and seemingly always increasing, and increasing faster than wages are growing).

I’ve also seen plenty of people take the positive spin: that cutting out an expense (of something they don’t need anyway) can help them reach a goal for something they really do want.

I’m somewhat in both schools of thought at the moment. As I discussed in my previous post, our monthly expenses are quite high. We’re paying a lot on our mortgage every month, and even more on childcare! So, cutting out a small daily luxury (or a larger luxury or two) seems insignificant by comparison.

But I also mentioned in that post how I am going to look for ways to save money, including trying to buy fewer lunches at the cafeteria.

And guess what? I did! My new rule for myself is that I can buy lunch once a week (which gives me wiggle room) but that the rest of the week I’m bringing leftovers or sandwiches. I’m not just saving on lunches, but I’m also earning a bit more money this way. Eating lunch I brought from home is quicker since I don’t have to go all the way to the cafeteria and then wait for my food to be prepared. So I’m able to get back to work sooner, and with my current schedule, that means I’m back “on the clock” earning money and getting things done!

How do the “savings” look? Assuming a lunch in the cafeteria is $9, and if I were to buy every day for 50 weeks every year (assuming holidays/and some full days off), bringing lunch every day instead I’d save $2,250 a year. Which is pretty great! But I’m also still spending on lunch foods to bring in, just not as much.

It still seems like a great amount…until I realize that’s less than one month of childcare (cost for both kids combined). Yeah. Ouch.

Still. I like doing it. I like knowing I can just eat quickly and get back to work. I like being able to control something, even if it’s small compared to everything else. It’s the same reason I get a big rush out of using cash back websites or coupons at my favorite stores, even if it saves me “only” a few dollars. It feels good.

I know I’m fortunate enough that I don’t have to count every penny. And I do like the idea of finding ways to save money. The concept is fine for encouraging people to think about a new way to save. I just don’t like when it’s used as a way to blame and shame people.

How do you feel about the latte factor? Have you changed your spending habits? What did that change in consumption do for you?

On not sweating the small stuff October 7, 2012

We’re often told not to sweat the small stuff.  And sometimes, it’s the small stuff that makes life that much better.  Grabbing coffee with a friend.  Getting pampered with a mani-pedi.  Going out on a double date with friends.  Or meeting up for beers at the local watering hole.

But at the same time, we hear the refrain from personal finance types:  Beware the latte effect!  Skip the salon!  Cook dinner at home!  Just order water or turn friends down!

It gets confusing.  On the one hand, I want to enjoy my life, and I think that, while there are plenty of things you can do for free, there’s lots of small stuff that does cost money (maybe $5, maybe $50).  But I don’t like having to stress about every expense.  Of course, all that money can add up.  All the little things you spend money on throughout the week (a cup of coffee, a few lunches, a cab ride or two) can start to make a decent dent in your wallet.

So, how do you weigh what’s actually important?  Or is it more important to cut out all spending when you’re in dire straights than it is once you’re on your feet and making decent money?

I sometimes feel guilty wanting to treat myself to something.  “I could put the $10 for this meal towards paying off my student loans”.  “Skipping the $4 ice cream sundae will probably help me lose weight and become a millionaire”.  I mean, I know that if I put that $4 into a savings account that somehow has an unobtainable interest rate, and I let it grow for 500 years, it’ll be worth millions.  But I also like going out for tasty crepes and hot fudge sundaes.

I go back and forth.  Some days I spend with abandon.  And by that I mean I go out for a few meals and buy a new dress.  Other days I force myself to walk away from a coffee shop or bakery.

So, which side do you lean to?  Saving every penny and aggressively saving and paying down debt?  Or do you treat yourself (or others)?  I’m wondering if it would help if I actually set a budget for “fun stuff” so that I’d know it’s okay to spend it.  How do you find the perfect balance and not sweat the small stuff?

Reading Books: Get a Financial Life June 19, 2011

No matter how much I think I know about personal finance, I’m always willing to learn more.  So when I heard about Beth Kobliner‘s updated edition of Get A Financial Life:  Personal finance in your twenties and thirties, I knew I had a book to add to my reading list.

My overall impression of this book:  READ THIS BOOK!  I think it’s a great book, both for the recent grads as well as people still trying to take control of their finances.  Plus, the updated version reflects the current economic situation as well as newer tax codes, so you won’t hear the old general advice that has since been debunked.  The book is divided into sections that guide you how to get your financial life in order by examining your budget, managing/paying off your debt, finding the right banks for your checking AND saving needs, and other steps and decisions like investing, setting up and contributing to retirement funds, buying vs. renting, selecting insurance (health, disability, life, car, homeowners/renters, etc.), and filing your taxes.

The thing I really liked about these different sections was that they had actual information and resources included.  It wasn’t merely things like “make a budget”, “open a 401(k)”, and “check out mutual funds”.  There were actual explanations about the benefits and drawbacks of a lot of financial choices, as well as in-depth information and examples of the consequences if these decisions.  I definitely learned some things I didn’t know before!  I learned a lot about the different income limits for different retirement funds, and the amount of coverage I should be buying for my car insurance.  I got a better idea about all the different investment options, and the difference between mutual funds, bond funds, and the tax implications of investing in these different funds.  She includes lots of information that, had it been my personal copy (and not a library copy) I would have gotten out highlighters and post-its to remind myself of the important information.  Throughout, she provides links to websites and calculators (which would be even more handy in an ebook format where you could click-through to the sites), as well as recommended books for further reading on each subject.

So, I’ll reiterate:  Read this book.  I took a lot of notes for myself while reading this book.  It got me thinking about my current financial setup and how I can improve it.  And maybe I might even buy myself a copy so I can highlight the important points that I will want to come back to (there was a lot of useful information for homebuyers that I don’t need right now, but will need in the future). Plus there’s a great list of resources at the end of the book (more books, magazines, blogs, websites, etc.) that will help me add to my to-read list.

Have you read the book?  What do you think?  I’d recommend it to pretty much anyone!  Buy it for recent grads!  They’ll grumble at being told what to do, but they’ll appreciate it 🙂

Weddings are expensive for everyone March 20, 2011

First:  No, I am not engaged.  Just wanted to calm everyone down.

Whenever I read a personal finance book/blog/website, I am warned that I better save up for my wedding.  I’m quoted figures like $20k, or more, for even a small wedding.  I’ve thought, “Well, I love my friends and family and everything, but $20k for one day?  Are you serious?”  Even though I’m not planning a wedding or anything, I’ve already made a few ( financial) decisions about if/when I get married.

My dress will NOT cost thousands of dollars. I’ve seen episodes of Say Yes to the Dress (I admit, I watch it from time to time!) where the girls have a price goal of $5k, or more, or sometimes the father announces “Price is no object, I just want my little girl to be happy”.  At which point I yell at the TV.  I want to look good, but I’m pretty sure I can look pretty good without spending a fortune.  Plus, I’d only wear the dress one day.  And knowing my luck, I’d probably spill something down the front of it.

My cake will be amazing. I don’t need it super fancy.  I need it super tasty.  I also don’t need it in the shape of something ridiculous and difficult to make.  I might even go with cupcakes.  Haven’t really thought farther than “delicious cake”.

Other than that, haven’t really given much thought to what I’d want for my wedding.  So, we’ll just cross that bridge when we get to it.

But my other realization about weddings?  They’re not just expensive for the Bride and Groom (or their parents, depending on the situation).  They’re also pretty expensive for the guests.

I’m planning on attending two weddings this year.  I’m glad to be going, because I love the couples that are getting married, and it will be great to be there on their big day, and share it with them and a lot of other friends.  But these are the first weddings I’ve been invited to that require travel.  All other weddings that I’ve been to (with the exception of my older sister’s) have been local.  A GPS-guided drive to a town outside of Boston.  No flights.  No hotel stays.  Just a drive to a beautiful wedding.

So, I’m realizing that, besides saving up for my wedding, I need to save up money for my friends’ weddings.  Airfare isn’t cheap.  Round trips tickets could be upwards of $500.  And even with a group rate, the hotels are still $100 or more per night.  Plus, there’s the wedding gift, and I’m probably going to need a new dress.  Yes, I want to buy some new dresses.  And so maybe I’m using my friends’ weddings as an excuse for new dresses.

So, I am going to have to start two different wedding funds:  the one for my own wedding, and the one for my friends’ weddings.  They’re going to keep getting married, I can’t stop them!  And I want to go.  I don’t want anyone to think I’m not willing to go to a friend’s wedding.  Now I just need to figure out which flights to get.  I’m really bad at shopping for flights, through all those online sites.  Where do you go to find cheap flights?  I’ve tried a lot of the aggregated sites like Kayak, Expedia, and Travelocity, but I also know that not all airlines are searched by those sites.  So, suggestions would be greatly appreciated on that front!

Also, I’m curious…those of you out there that have gotten married, or are getting married soon:  how much did your wedding cost?  Is that $20k figure books keep throwing around accurate?  Did you spend a lot less or a lot more than that amount?  And how did you keep your costs low?

How much will you spend?  And do you have any definites like my dress and cake plans?  Is cost no object?  Or will you be trying to get by spending as little as possible?

My Personal Finance Confessions October 30, 2009

I have a confession to make.  I’m not a perfect person.  I know.  It’s hard to believe.

But seriously.  I know there are so many rules that you’re supposed to follow when it comes to personal finance.  And I think I do a pretty good job at following most of them.  I spend less than I earn.  I transfer money automatically to my savings account every month.  I contribute to my 401(k) up to the company match.  I fully fund my Roth IRA every year.

There’s one thing that I don’t really do.

I don’t budget.

There.  I’ve said it.

I was talking to a friend the other day, and she was lamenting how her mother was so impressed with her sister, because her sister budgets and has a vacation fund.  This friend was unemployed, but had been staying above water thanks to her savings that she’d built up.  She wanted recognition from her mother on this fact.  I commended her!  I’m very impressed by her high level of savings.  I assured her that, once she got back to work, she could start a vacation fund if that’s something that is important to her.  And that’s when my admission came out.  I told her that I don’t have a budget, either.

Why don’t I have a budget?

I don’t have a budget because it would be really boring and not very useful.  I have many consistent expenses every month (rent, utilities, car payment, student loans payment, etc.) which I know will happen each month.  Most of those costs are pretty non-negotiable, though I would consider paying more towards my loans to lower the principle.  The expenses I have every month that aren’t exactly the same each month are things like food (grocery store, lunches, dinners) and gas.  But in those cases, I have a total that I try to stay under.  I keep my grocery spending under $100 a month, and also keep my dining out to once a week, maximum, (and trade-off who pays with my boyfriend when we go out), and try to keep those expenses below $100 as well.  I’m trying to cut down on how much I spend at the cafeteria (i.e. trying to bring my lunch more often, buying cheaper options) but I try to keep my expenses in the cafeteria below $30 a week.  Yes, when you add up all this money over a year,  it’s quite a bit of money.  But I like going out to eat every once in a while.  And I need to have groceries.  I tend to spend less than any of the budgets.  But I don’t actually budget the money, i.e. figure out what money I have available to spend, then divide it between all of my expenses.  And I’m not really sure where I can lower any of my expenses (outside of the variable food), since I rarely go shopping.

So, am I making a big mistake by not budgeting?  I know where my money goes by tracking my expenses (after the fact) with Mint.  But I don’t plan things out.  I just inherently know my limits, and try to avoid spending money when possible.

Slacking on tracking April 5, 2009

One of the best ways to get a real idea of where your money is going is to track every expense.  Most financial gurus (and personal finance bloggers) will tell you that.  And that’s what I’ve been doing since August of 2007.  Or at least, I’ve been trying to track everything since then.  I’ve mentioned before that I have quite a few ways I keep track of my money.

I’ve noticed that I’ve been slacking off when it comes to keeping track of the things that I usually track.  With walletproof, I’ve only been actively adding my dining out expenses (including my lunch spending in the cafeteria).  There are repeated expenses and income that I’ve allowed to continue on the site, but I haven’t readjusted them to coincide with the correct days.  And I mentioned before that I started using a program called NutriSum, where you track your weight, eating habits, and exercise.  At the beginning, I was logging my progress every day.  Now I log the information when I remember to, and sometimes go back days to fill in the missing numbers.

So what does this mean?  I think for me, tracking everything gave me a sense of control; I knew where everything went, and I could watch as I reached my budgeted limit for the different spending categories.  But now that I have an idea of where things are going (especially with the help of my other tracking websites like Mint), and can set my limits there.  I think I have only been tracking dining expenses because I use credit cards or online bill pay for most purchases, which makes everything easy to track online.  The only thing I spend cash on (usually) is food at the cafeteria.  Going to those websites every once in a while to confirm that I am staying within my limits (and as a bonus, I can monitor any suspicious activity with any of my accounts) seems to get the job done.

I never have been a big spender.  I do occasionally have a spendy month when I buy something that’s long-term (updated wardrobe, new glasses, computer, car) or for birthdays and Christmas (I like buying things for my family).  But those occasional purchases are budgeted in, and wont happen too often.

As for the health tracking, I think that it got me started on healthier habits, and made me aware of what I should be doing.  I’ve now started eating breakfast every day (mmmm oatmeal!), been drinking more water, and avoiding snacks after dinner.  I’m not as good with the whole grains and fruits/veggies goal, but I do remain aware of what I’m putting on my plate, both as I go through the grocery store, and when I pick my meals at the cafeteria.  And I’ve been trying to stick to my exercise regimen (2-3 times per week to start), though I sometimes do 2 instead of 3 days.  But I know what I need to do, and can remind myself that I am working towards a healthier life.

Do you track every penny?  Should I be?

Giving Mint a try September 29, 2008

So all those people in the personal finance blogosphere have been talking about Mint for a while.  I figured I already was using enough different ways to track my money:  I use walletproof to track my expenses pretty closely, and watch My Portfolio from Bank of America, and follow my networth on NetworthIQ.  I’ve tracked my 401(k) and other retirement accounts on Google Finance.  So, you could say I enjoy tracking my money.  I think I like it in part to see what sort of progress I’m making towards paying off debts and growing my net worth.  I also find that tracking my expenses keeps me on top of my spending.  And I think I’ve found that I use different sites since none of them quite fit all my needs.  I like walletproof because it’s simple and helps me to monitor my spending; manual data entry makes me aware of what I’m spending, but I might still forget to enter some of my expenses.  My Portfolio tracks rather nicely most of my assets and liabilities, but sometimes it’s hard to categorize every transaction.  NetworthIQ requires manual data entry, but I do that once a month.  This means I’ve got a static number that can be compared each month, as opposed to the dynamic values found in the automatically updated amounts in My Portfolio.

I had actually created an account with Mint in November of 2007, but I got nervous about security, so I didn’t enter any of my account information into the site.  Then, a few weeks ago, I figured I should go ahead and give it a try.  Actually, just today, I came across a post helping to debunk some Mint myths.

The one weird part I’ve noticed is that it only imported some of my recent account transactions, but also imported a few that are a lot older.  I’m also looking forward to when they have a more in-depth analysis of investments and retirement portfolios.  And I’ve also found some of the categories to be odd or missing, and there doesn’t seem to be a way to add extra categories.  For example, I want to label my T-pass purchases as Transportation, but the closest I can label it is Travel.  It’s not a really big deal, but I’d like to have more accurate descriptions of my transactions.  I do like the analysis features, as well as the automatic data retrieval.  I do find it odd that, when you are able to compare your expenses to big cities, Boston isn’t listed.  But that’s a minor issue.  At any rate, I think I’ll add it to my list of financial tools.

One thing that I think comes up a lot with these sites, besides security concerns, is the inability to import some of your accounts.  Of my friends that use Mint or My Portfolio, a few (including a blogger or two) aren’t able to add accounts/debts from smaller organizations.  I’m sure that both companies are working on including more, but in the meantime, you’ll have to enter the numbers manually every month for My Portfolio (and I’m not sure if there’s an option like that for Mint).

On a related note, has anyone else had issues with My Portfolio, specifically with updating imported ING accounts?  I’ve found that it wants me to re-enter my login information, but when I do, it still doesn’t work.

How do you keep track of your money (or lack thereof)?  I know Penny was asking the same thing a while back (and heard from quite a few people!)  But I’m curious as well!  And I’d love to hear if anyone has that My Portfolio/ING thing figured out.

Haircuts and budgets October 10, 2007

[originally posted Saturday, September 08, 2007 11:50 PM]

So, I realized that getting your haircut can be a lot cheaper if you don’t care that much. I asked around with friends to see what was good/cheap/nearby and got some good recommendations. I suppose this post will be extra helpful for anyone living in the Davis area, since that’s where some friends were living. So, I think these are probably all good places to go, if you trust my friends! I got recommendations for Salonika and Salon Femia in Davis Square, Salon CU and Amal Niccoli Salon (ask for Julie, according to a friend) in Ball Square, and Supercuts in Porter Square.

I ended up going to Supercuts, believe it or not. I got a pretty darn good haircut! Compared to the $35 or so that most of the salons were charging, I paid $19 (including tip) for a hair washing and a cut. And I desperately needed a hair cut. I was going against all those rules of getting it cut every 3 months or whatever it should be. Oh, and don’t worry, I had gotten a haircut within the past year, it was back near my family’s house. That’s where I had gotten my haircut all through college. I didn’t really trust the place in the student center, and so I’d just get my hair cut whenever I went home for a vacation. I got it cut around shoulder length this time around, which will hopefully make me look and feel a lot less dumpy. The people there were really nice, and, really, I didn’t need anything fancy! So, the moral of this story is, you don’t necessarily need to go to a fancy salon. I might end up going to one of the other places some time, depending on where I’m living, and what I’m looking for with my hair. I probably would have gotten more attention, and a thorough blow drying (you pay extra to get your hair washed and/or blow dried at Supercuts) had I gone to one of the other places listed. And I’m guessing people have horror stories of both the really cheap places as well as the really expensive places. So, if you’re on a budget, and you’re not willing to spend more than you have to to get just a basic cut, go for the cheaper locations! If you have difficult hair to work with, or you’ve found a place you like, I’m not saying you shouldn’t go!

Well, hopefully that came through with enough of the “go for cheap if you want” without hurting anyone’s feelings (hair stylists, big spenders).

I do want to update soon about my recent trip to Nicaragua (quick preview: That place is AMAZING!) I really appreciate the comments I’ve received, by the way, and hopefully you’ll keep reading my site (and letting me know what you think)! Thanks! And thanks also to those of you who have emailed me about getting an ING savings account or ING electric orange checking account referrals. I hope you are enjoying your new account! (and your $25 bonuses!) Anyone interested, please do shoot me an email!

Wow, too many exclamation points! This is what happens when you’re writing a post after midnight.

[Edit: I also saved money by signing up for their email program. Yes, it’s another email clogging up your inbox, but I got a $2 coupon, and they’re going to send me coupons every few months, along with a reminder that I might need another haircut]