Tim Ferriss. He’s out of touch. If you somehow missed it, there was this one time when he spitballed the fact that people have $5000 in disposable income to spend each month on his podcast. No, dude, they don’t. But he’s not the only person who might be out of touch with money. Last week, I thought I was the one with the money math problem.
Last week, Des posted about the latte factor. Though I actually think the latte factor is very real–and I’m still dealing with the consequences of it every single day–I don’t think it is as crippling as some people make it out to be. She reminded people that they could still sip their coffees and carry on with their money goals. And she’s absolutely right. It is possible, no, it’s necessary, to indulge in things that truly bring you joy and still kick all sorts of financial butt. True story.
After reading her post, I went back to some of the other posts that I’ve read about the myth of the latte factor recently. Of all the posts I read, it was actually a comment that gnawed away at me more than anything else I read. Someone suggested that $100 a month on coffee isn’t going to make or break anyone. I was stunned. Is that reality and I somehow missed the memo?
$100 a month on any one thing in our household is a big deal. In fact, we have $300 set aside for spending for the month for two people. Some months that includes things like highlights for me and graduation parties for him. But other months, that spending goes towards prescription refills and Christmas presents. So, if I drank away $100 of that money each month, I’d be awfully limited in terms of, well, pretty much anything else. And if we both drank coffee at that price tag? It had better be some damn good coffee.
Automatically, my instinct was to think hard about our budget. Yes, there are areas where we could do a bit better. But it’s pretty efficient and lets us drive hard towards our goals. So the only logical conclusion is that I make a lot less money than I should. I mean, if most people can swing that kind of expense then we must not be doing as well as I think. How is it possible that for someone who has thought so hard about money for over a year, I got so out of touch?
But you know what? I don’t think the general population actually has $100 to burn on coffee each month. In fact, I know it. The Census Bureau puts the median income for Illinois households in 2015 around $50,000. Let’s assume that’s $50,000 after taxes. If two adults swig back Starbucks for $100 each per month, that clocks in at $2400 a year. Put differently, that’s nearly 5% of their income. True, 5% is a really small number. But if most people follow the 50/20/30 rule, that means people’s discretionary income makes up 30% of their yearly budget–and now 5% of that is sliced off just for coffee.
While it’s true that there are states with higher median incomes, they’re not that much higher. And let’s not forget the ubiquity of Starbucks. Starbucks is not just for the six-figure earner. Starbucks is for everyone. Why else would I pass six of them on my way to work? Why else would it be brewed on college campuses where people are so up to their eyeballs in debt that they have to make up words for it?
To say $100 is no big deal for most people simply isn’t true. People might actually agree. But that might actually be the problem. We can’t lament the fact that most Americans don’t have an emergency fund and then not bat an eye at an extra $1200 a year.
Is $100 a month the biggest challenge people face? Absolutely not. But if you’re really not sure if $100 is actually a big deal, think about how you would react to having an extra $100 a month. Surely, if you found a crumpled Ben Franklin staring back at you, you’d snatch it up. Right?
So Tell Me…You’d pick up the benjamin, right? Is an extra $100 a month a big deal to you?