I recently saw a meme which was really trying to prove you need a living wage, but the wheels turning. It basically said you cannot save your way out of poverty and mentioned splurging on a $5 coffee. The issue is those in poverty cannot afford to splurge on anything, especially a $5 coffee. I can recall a time where money was very tight and so I stopped purchasing any drink other than water on the rare occasion when I went out to eat with friends. That simple strategy saved me from $1-$3 and today the only non-alcoholic beverage I have with any meal other than breakfast is water. Anyway, let’s get back to the topic of today’s post. If someone makes $10 per hour and works full-time they will have $400 before taxes each week. At the end of the year the W2 will show they earned $20,800 and they would have taken home almost $18K. Making some general assumptions of a $300 car payment, $600 rent, $200 utilities, and $200 food then they will have left only $200 in discretionary income per month. Since they saved nothing for retirement in this oversimplified example I would say this person cannot afford to buy alcohol and needs to lower their monthly bills or supplement their income. I’ve seen more than a few college grads get out on their own and get an apartment costing $1,000-1,500 a month when they could get a roommate and cut those costs in half. I would say the person in my example should not pay for an expensive cell phone plan and should find the least expensive plan and phone they can where they can just make or receive a call. If they did buy a six pack of craft beer it would cost nearly $10 and leave them with only $190 remaining for the rest of the month. Now if they could cut expenses or supplement enough then perhaps buying alcohol would not break the bank.
I know I post on various beverages over time, some of them pricey, but at heart I am a saver rather than a spender. I like to know I am buying quality when I plunk down my hard earned dollar at a store, restaurant, or bar and when the selected beverage is substandard I feel like I have wasted my money and time. Try to be selective with how you spend your money and before dropping $5 on a coffee as a splurge, perhaps decide to drink the coffee at work and save that coin for a truly great beverage later on in the week. We’ve become a Starbucks society and don’t blink an eye at spending $5 or more on a beverage we can make at home for pocket change. If you are a caffeine addict and get your fix at a coffee shop keep in mind $5 per weekday is $1,300 per year and even a single dollar per weekday is $260 per year.
Probably not exactly what you expected from the blog today, but sometimes people need a wake up call. Often those who can least afford it spend money is the most absurd ways. Smoking is one example. It costs you when you purchase the cigarettes and also later for medical costs associated with your nicotine habit. With a pack of smokes ringing in at $5 a pack a day habit would cost you $1,825 annually. That is money that could be used to feed yourself or the family or even better could be socked away for retirement. Only after all needs are met and retirement is funded should one start to splurge on luxuries such as alcohol. If you can’t afford it then don’t buy it and if you can afford it, be sure what you are getting is going to be satisfactory, otherwise it is a waste of money.