Here's Why It's OK To Have That Morning Latte

Do you ever feel guilty about that $US4-a-day caffeine drip you have hooked up to your arm? You’re not alone.

Ever since financial author David Bach seized on the latte as a symbol of how small daily purchases can do a number on your bank account, personal finance writers have issued a clarion call for coffee drinkers to kick the habit and protect their wallets.

But does nixing Starbucks and brewing at home really save you that much money? Entrepreneur and microblogger Jim Wang isn’t convinced. In a recent post on Daily Finance, Wang argues that Bach’s “Latte Factor” theory misses the value of time. Wang writes:

“To take the coffee example, you could buy yourself a coffeemaker, coffee grounds and filters, brew your own coffee and save yourself a few dollars each day. But you’d also have to alter your morning routine to include brewing coffee, and you’d likely not brew a comparable product to a Starbucks cappuccino. All that to save a dollar a day? That’s crazy.

You feel effective because you’re doing something to save money, but the actual benefit is quite minor given all the extra work. It’s also unlikely that you’ll stick with these big changes, especially if it disrupts your normal routine.”

In other words, Bach assumes that coffee drinkers value the money they’d save by not buying expensive lattes more than the amount of time they save and pleasure they get by doing so. Wang argues that if buying that latte makes you happy and more productive, it doesn’t make sense to cut it out for the sake of a few extra dollars a day.

What’s important, he says, is to be intentional about your spending: “Save in the areas you don’t care about so you can spend in the areas you do care about.”

Besides, if you’re really trying to fill your coffers, it’s much more efficient to focus on increasing your income through smart investing than to spend time and energy trimming marginal costs. “Unlike cutting costs, growing your income has an unlimited upside,” Wang concludes.

I’ll raise a latte to that.

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