In the movie Godzilla, the gigantic monster started off as a small harmless lizard on some island. As it was left unchecked, it ate so much rubbish we dump on the island that it gradually grew into a humongous monster. One day, while suffering from diarrhoea, rushed to the toilet and destroyed half the city along the way…
The moral of the story is that devastating effects come in small packages spread across a period of time. I can think of several famous analogies such as ”death by a thousand cuts” or “cooking a frog slowly“. All describing a smiliar experience of suffering a slow agonising death without the victim realizing until it is too late.
So what do all these have to do with savings for investments? The major problem with most of us is that we are oblivious about our normal spending patterns. Small savings in our daily spending routines means more money saved for investments. Take the following example:
Starbucks Latte versus Kopi
A posh cafe latte costs about S$3.50 with tax. Prepared by happy looking baristers (coffee makers), it makes you feel like the most important person in the world! The courteous baristers smile and ask about your day. They almost seem to actually care about your day. This coffee boosts your ego as it tickles your taste buds.
Consider the alternative – Kopi. This coffee costs only S$0.70 without tax. This raw unadulterated heartland coffee is brewed from the hot stuffy depths of any nearby coffeeshop. The brewer is normally an old uncle who does not give a damn about you or your day. There are only 2 versions available – with or without milk. The coffee does nothing for your ego and often leaves you in perspiration.
Both types of coffee will satisfy the daily caffeine addiction of most folks. However, the Latte costs almost 700% more than a simple Kopi just to massage your ego at the expense of your wallet! The cost of a Latte is able to fuel your caffeine needs for an entire week in the form of a Kopi. On an annual scale, you will save approximately S$1,022 just by drinking Kopi instead of Latte. Hence, a great way to savings is to start taking stock of your spending by cutting down on unnecessary costs.
So should we ever pay for a more expensive Latte? Does it mean that we should deprive ourselves from the luxurious coffee that life has to offer? The best approach is enjoy luxury in moderation. Spoil yourself occassionaly instead of making it a daily habit. Always remember not to take cost cutting into the other extreme. You would never get wealthy being stingy either!
You’re devaluing the personal value of a cup of coffee as pure caffeine injection. Which is a fallacy. “You should drink sawdust in a gym sock with hot water poured over it, and you’ll become a millionaire!” This is the oldest drone/crock in the personal finance world. Don’t you people have anything more creative to say than this??
Fact is, you’d save a lot more money by bringing lunch to work. Or even better — think in the positive instead of the negative and sell your blood plasma every couple of weeks. That will earn you a few lattes right there.
Or save even more money buy marrying a wife who won’t screw you for half of every thing you own after running up a lifestyle of massive credit card bills on you. Nobody ever mentions that saving you more than a couple of bucks a day, but it sure as hell does.
Hey. You may have taken this article to an extreme. Read my last paragraph again carefully. Luxury is a form of indulgence that should be enjoyed sparingly. Else it becomes excessive.
I am sure folks who do not have Starbucks in their area are not suffering as a result. Life goes on.
So in a nutshell, everything in moderation is the key. Of course this example will not apply to everyone. If you have a gazillion dollars to spare, go bathe in Latte if that is your fancy!
This simple routine is for folks whose every dollar counts. The point is not to be stingy, but rather be more prudent in your spending. So to each their own. You can drink your Latte, while I can get a bonus of S$1k a year to invest and work for me.
[...] by Ryan "Buffet" Lim, Alexia [...]