Is the "Latte Factor" Grande Logic?

The bear's sister-in-law, a recent college graduate living in one of the nation's priciest cities, forwarded to us an article in the New York Times: More Advice Graduates Don't Want to Hear by Damon Darlin (the follow-up to last year's Advice to All You Graduates: Let's Start with that Daily Latte).

I read the articles, and it's all sound advice. We recently met with the Fidelity Investments dude who handles our 401K at work, and being shown simple graphs is enough to make you want to save every penny. (Do you want to buy the used and rusty wheelchair in your retirement years, or do you want to pay for the hip replacement surgery?)

But the article was good to point out the simple fallacy of one of the writer's own arguments, described in various publications (ad nauseam) as the "latte factor":

"Other people, my wife among them, pointed out that I may have been too draconian on that [skipping the latte] point. Consistent savings is a lot easier if there are small rewards along the way; otherwise, life seems as if it is just one bowl of cold grass porridge after another."

Simply, I get an inordinate amount of pleasure from a well prepared latte. 3 dollars (not every day) is money well spent if I derive considerable pleasure from it. If you choose your indulgent choices carefully, it can be part of a well conceived budget.

I have read a handful of books and magazine articles on budgeting, investing, and creating wealth. The biggest financial mistakes you make are not going to come down to a latte unless you are making a choice between Starbucks and eating ramen. The math doesn't work. I don't care how many times I hear it, but unless you're pulling into the cafe for 7 bucks a day, you're not going to save much over a year or a lifetime. It's the large expenses in life that will drag you down if you make choices above your means.

Invest consistently, take a care of your body and mind, give to charities with your money and time, don't borrow what you can't pay back, and buy things that last. Clothing, electronics, utilities, automobiles, education, health, home or apartment: think very carefully about purchasing those things, and you'll be fine.

And if you want a cheap way to drown your sorrows over your maxed-out credit card or looming student loan payment, consider the 3 dollar latte.