The daily $5 coffee might be the next avocado on toast. I've seen many finfluencers telling their audience why buying your daily coffee wont make a difference to your house deposit anyway, so you might as well get that small joy you get each day and have the coffee!
I am a coffee lover. And I have probably spent a small house deposit on coffee over the years. But I disagree with what may be a throw-away line, because for me the daily coffee was symptomatic of a much bigger issue. Of course I don’t disagree with the numbers. $25 a week over 48 weeks of the year is $1200. This isn't going to make the difference between your house deposit or not. And there are certainly much bigger financial decisions the average person is making that would have a much larger impact. But if, like me, you believe the way you do anything, is the way you do everything, the mindset behind this is far more powerful.
A while ago, I had to start again financially. Having left a relationship and needing to reconsider how I support 2 kids and plan for the future was a cause for me to completely change my habits around money. I was earning an income that afforded me to make purchasing decisions without really thinking about them. I would shop for new clothes when I felt like it, go on the holidays I wanted and all sorts of other conveniences and would spend with little thought for my money. Nothing extreme but after the mortgage payment most of what was left would be spoken for. A situation I know many people would resonate with. Faced with a position of having to start again from effectively nothing, I needed to change. I started with the single biggest fixed cost, which was going to be my rent for the foreseeable future. I rented the lowest cost property I could reasonably choose with 2 young kids and then my discretionary expenses soon followed.
I quickly realised how the reason I never had much in the way of savings, had little to do with my income. And had everything to do with my spending. Despite being on a single income and child support to boot, I had built more savings than I ever managed to accumulate before. I was putting money aside into an investment that I was continuing to watch grow and I was more and more motivated to make grow, by cutting down even more on unnecessary spending. It was addictive. Before I knew it, I had become what we in Australia not so endearingly call, a tight-arse.
My fortnightly clothes shops became annual (at best). I refuse to use Ubereats, when I could pick up the take-away and save delivery AND the marked up food (and this went from 3 times a week to once). I reduced from at least 5 streaming services down to 2. When my now wife came into my life and we started to jointly save for our future home, it went to another level. Shopping at aldi first, then one of the other supermarkets (remaining nameless) and… you guessed it, dusting off the old coffee machine and kicking our daily coffee habit too.
I have spent every working day of the last decade and a half helping everyday people with their finances. And I can tell you there are not many people who have the ability to differentiate between a spending decision that is small and inconsequential vs big financial decision that is putting them backwards. For most people they way they spend money is a mindset. And if you deserve that daily coffee, you deserve the overseas holidays, the new clothes the upgraded car etc etc. This is why there are people on very modest incomes that have built wealth. While a high salary in my experience has little correlation with wealth. Of course it’s one thing to know this and another to put into practice.
My wife and I sometimes buy a coffee. But this is no longer an unconscious decision. It's very conscious. And when we have a specific financial goal and we choose to tighten the belt we will go months at a time without buying one. And it's not because the $100 will make a massive difference, it's because we know that mindset will carry into all of our spending decisions.
I'm not a psychologist but I have definitely had a turnaround with my mindset towards money. I hate parting with a dollar and I definitely didn’t used to be this way.
If you want to turn around your financial situation and don’t know where to start. Here is some ideas based on what we have done and still do in our house.
- Rent or buy the lowest cost home you can (within reason) - the longer you can do it 'hard' the better off you will be long term. This is much easier to do when you are younger and don’t have kids.
- Cars keep people poor. Drive the cheapest car that your ego will allow is a good saying.
- Plan ahead and plan for savings. Your weekly shop is a great opportunity to save, shop at the aldis and green grocers of the world first. Then the big guys last for the required items only.
- You pay for convenience. Scrap the uber eats and go pick up (it's better for the business too). This applies to other things too. Taxi or train.
- Review every single fixed cost you have (insurance, health insurance, phones etc) and get the best deal.
- Buy the gear and do it yourself: coffee, your nails etc.
- Instead of a night out, have a night in. Food, Games, booze whatever you enjoy.
- Sell unwanted and no longer needed items on fb' marketplace.
- If you want discretionary items (non-essentials) then write them on a list . When a big sale is on, check your list, buy it (if you still want it - most the time you wont).
- Check your bank statements monthly. Look at where your money is going and assess which areas still need work.
- Put your surplus money somewhere you can see it grow. High interest savings is a good place to start and consider diversifying into etf's or managed funds. Start to learn about these investments it becomes a hobby.
So if you are doing these things and still want your daily coffee then go for your life. But you might find you’ve swapped your caffeine addiction for one that more rewarding long term…
Bonus fact: if you have a home and are paying off a mortgage. $50 per week extra on a average home loan can save you 5 years and $90,000 in interest. A mortgage broker can work this out for you easily, if you want some math, get in touch. So if you and your significant other didn’t by that daily coffee and kept it in your offset account or paid off your home loan. It will actually make quite a difference (what you got to say to that finfluencers).
