Time for tea?
Fancy coffees and other small indulgences are termed “non-essential spending” in personal finance language – we can do without them without too much worry. When trying to cut costs or boost savings, the “latte-nomics” school of personal finance will often recommended stopping buying coffee and lunches from stores and making at home instead.
While there is merit in this approach, it might pay to consider whether more radical lifestyle changes could make a greater financial difference. In 10 tips for planning an early retirement, house size is highlighted as a big cost that makes a big difference for monthly spending. The costs of running a smaller home versus a mansion could equal several years of lattes and shop-bought lunches. Of course property dynamics and individual circumstances will vary – as well as personal choices.
If it’s in your budget
In an Ask Ian blogpost on the cost of coffee eating into retirement funds, ING senior economist Ian Bright says ensuring financial planning is in place tends to be more important than worrying about coffees.
“Assuming you are putting money aside for a pension in the first place, it is unlikely that the extra you would accumulate by foregoing your latte will make the difference between penury or comfort in retirement,” blogged Bright.
“The simplest thing to consider is whether you really can afford your coffee habit. It is not a question of whether you know how much you are spending on coffee alone but whether you know how much you are spending and saving in general.”