Frugal Bagel Gives You Permission to Enjoy Your Latte In Peace


Coffee gets a bad rap in frugal circles. The number one tip on any hacky, cliche list of frugal tips is "Cut out your morning Starbucks and save THOUSANDS PER YEAR!"

Personal finance guru David Bach is credited/blamed for this by describing "the Latte Factor" in his 2003 book The Automatic Millionaire. The term is really referring to any automatic habit where you spend money, not for anything of value or because you've made a decision, because you are used to it and that is just what you do.

I actually don't think this is a bad concept. Habits are powerful, and they explain why we make suboptimal choices over and over. I can think of plenty of examples in my own life of questioning a habit and deciding to stop or change it: from demoting eating dinner out from a several-times-a-week activity to an only-special/social-occasions activity, to cutting out disposable paper products, to discontinuing my book and DVD collections, to cutting out certain junk foods like gum and soda, to carrying a reusable water bottle. None of these habits are huge wins, financially, but they're little things that add up over time. I do agree that there can be a kind of snowball effect where anything you do hundreds of times is worth optimizing, even if each individual time is not that expensive or damaging.

I get that coffee is just supposed to be an example of this, but it's held up so often, and is so often the only example, that I feel it's unfairly maligned. It's also blown out of proportion. For the save-thousands-per-year assertion, which Bach makes (also adding that that money, invested over time, could eventually add up to A MILLION DOLLARS!!!), you have to make several assumptions:
  1. You drink coffee out every single day, usually at Starbucks.
  2. You spend $5+ on coffee every single day. (In which case you are probably drinking some kind of froofy sugar-laden drink and the coffee is the least of your worries. Helaine Olen ripped into the math in her book Pound Foolish.)
  3. You don't really value this ritual, it's just a mindless habit.
I suspect this is not true for most people. Certainly, none of these are true for me. I drink coffee sporadically, between one and four times per week, and I spend between $1.60 and $2.50 per cup. That adds up to maybe $300 per year. And while $300 isn't nothing--it could add up to $13,000 if invested over twenty years!--I'd gladly pay $300 a year for a membership to Coffee Anytime I Want Club. Because: each cup of coffee is glorious.

I love coffee. I love going to get coffee. I love that little walk with the caffeinated reward at the end. I love the taste. I love the bitter depth of the flavor, combined with the savory richness of that little splash of cream. I love it with breakfast, with a snack, or on its own. Where and how else can I be so happy, so satisfied, for just a couple of bucks a pop?

Far from being an example of a mindless habit that I don't really value, what coffee represents to me is an inexpensive, simple pleasure that I completely value the hell out of, far more than other things I could buy with the same money. To me, the "Latte Factor" is a positive thing, and it means "The thing that you enjoy way out of proportion to the amount it costs." That is absolutely the last thing you should be getting rid of if you're trying to economize.

This is the reason people are afraid of frugality: they feel they're going to be browbeaten into giving up the little things they really love, things they know are frivolous or unnecessary, but that bring joy into their lives. They hear the advice to give up coffee and wash Ziploc bags or whatever and judge that, mathematically and emotionally, it's not worth it.

To my mind, giving up something you love and that doesn't cost much is the opposite of frugal. It's just pointlessly self-denying. At its best, frugality is about optimizing things you honestly do not care about. The best are "big wins": finding an inexpensive health insurance plan that fits your needs can save you a ton of money and affect your daily life not at all. Sure, sometimes those tactics involve doing something small many times over, like buying store brand laundry soap, or making your own in five minutes. Spending $12 on name-brand laundry soap doesn't feel as frivolous as buying coffee, but I maintain that it's totally worse if you're spending ten of those dollars for a name brand you don't even care about when an alternative would get your clothes just as clean and change absolutely nothing in your life.

Not all of my frugal tactics have zero effect on my life. Some make my life better. My homemade laundry soap is easier on my skin. Unsubscribing from catalogs and email lists not only prevents me from succumbing to sales, it saves me time so I can focus on things that are more fun or interesting or productive. I don't really enjoy a lot of the things that people are "supposed" to like, like going to bars or clubs or exotic beach locales, so frugality gives me an excuse not to do those things. If I loved those things, I'd prioritize them.

If you don't really like coffee, then don't buy it. Don't buy anything you don't really like. That's frugality, and life, 101. But don't give up a small inexpensive ritual you truly love because retiring two months sooner is more important than twenty years' worth of little rays of sunshine.

Remember: Frugal Bagel's redefined Latte Factor is a good thing. Find those little things in your life that you truly love, and that bring you joy far out of proportion with how much they cost. And enjoy the hell out of them.


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