Author Topic: 3 Personal Finance Tips from Big Data + Debunking the Coffee Savings Myth  (Read 11641 times)

oldtoyota

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Forbes claims that not shopping at Starbucks would not save people that much money since the average customer only goes there about three times per month and spends $24 per month.

They then say that the average Comcast customer pays up to $150 per month, so people should negotiate a new rate. The article says cable and mobile phone plans are the places to save $$.

Obviously, the writer has never lived in a place where Comcast has the monopoly.

http://www.forbes.com/sites/simonmoore/2014/08/13/three-personal-finance-tips-from-big-data/

Edited to correct typos.
« Last Edit: September 11, 2014, 06:00:41 PM by oldtoyota »

No Name Guy

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Re: 3 Personal Finance Tips from Big Data + Debunking the Coffee Savings Myth
« Reply #1 on: September 11, 2014, 11:53:18 AM »
It's easy to pay Com-bastards a low rate even with a monopoly.....I told them to get lost and now pay 'em nothing.  :-)

IMO the writer misses the point of the whole latte / Starbucks thing.  Going out for coffee when one is in financial straights is a symptom of the problem more than the problem itself.  The problem is the inability or unwillingness to cut out spending on frivolous things that bleed money.  $24 / month isn't a whole lot, but its something that can be done extremely easily - don't go to SBUX.  If you like coffee, drink it at home, or from the company pot (at my place, 25 cents gets ya a cup of brewed Starbucks coffee, another dime if you want liquid creamer).  A person who doesn't cut out the coffee out also probably won't cut the drinks out with friends (hello, 6 pack at home?), spending on frivolous clothing purchases, vacations when the hair is on fire, etc, etc, etc.....all the things seen in the anti-mustachian wall of shame and comedy.

The writer also misses the 300-400x factor that ERE / MMM folks know.  Lets see......$24 month x 300 = $7,200 that a person would have to have earning 4% to permanently finance that "[not] substantial" coffee out habit.  I see not having to save an extra $7200 to get to ER / FI / IW as being pretty damn substantial.

Jouer

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Re: 3 Personal Finance Tips from Big Data + Debunking the Coffee Savings Myth
« Reply #2 on: September 11, 2014, 12:20:59 PM »
Thanks for posting this oldtoyota.

This article is the lies part of "lies, damn lies and statistics." I don't even know where to start.

Ok, I guess I'll start with the author using one month of data. Would you look at one month and say that is your average spending per month or would you look at a whole year and divide by 12? A professional statistician (that's me) would validate the numbers by looking at multiple years...but at the very least you'd look at 12 months and take the average. Has the author not heard of seasonality? Let's see...January. People have less money because they are paying off Christmas (not us....but regular people). Oh wait, it's also freezing in half the country in January so maybe there are fewer sales since people are not interested in getting out of their cars...let alone leaving their houses.

Honestly, this is like saying "that one week I was sick in bed I didn't spend any money so if I extrapolate that out over a year, I won't spend money all year" or "it's sunny and 85 in California so I'll wear t-shirt and shorts even though I live in Minnesota".

My other quibble with the article is that using the average is just dumb here. Breaking the data up by deciles based on # of trips or $$ spent would be a good start. For instance, top 10% of customers spend $X so they could save X*173=Y over 10 years. Bottom 10% (mustachios??) only spend $Z so they can try and save money with Comcast....unless they also don't spend on Comcast. Oh shit, I've gone down a rabbit hole. I better stop here.



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Re: 3 Personal Finance Tips from Big Data + Debunking the Coffee Savings Myth
« Reply #3 on: September 11, 2014, 12:34:09 PM »
I really wish the author had included the source of this data. Jouer makes some very good points about statistics. No Name Guy is right on the point about it being a symptom. While it is very interesting to see where the big savings posts are, it is in the end worthwhile to save -everywhere-. I find going into Starbucks several times a month to be rather much too, myself. Maybe it helps that it isn't such a common chain here and I only get to go in when I go to a major city, but even just going to a cafe or buying any takeaway food is something I do at best twice a month and consider that much. Regardless of that though, shall take some pride in not having cable, the most basic internet subscription, and a pre-paid sim card with the lowest amount on it as I often use free alternatives such as Skype instead of calling or texting.

Kaspian

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Re: 3 Personal Finance Tips from Big Data + Debunking the Coffee Savings Myth
« Reply #4 on: September 11, 2014, 12:47:10 PM »
Forbes claims that not shopping at Starbucks would not save people that much money since the average customer only goes there about three times per month and spend $24 per month.

I don't believe that for a second!  Where are they buying their coffee the other 20 business days of the month when they go to work?  They expect me to believe these people are packing a thermos?  Dunkin' Donuts coffee counts.  So does Cinnabon.  So does anywhere where there's someone who's job title includes the word "barista".

Still, let's believe them and go with the $24/month.  (See attached.)

Jouer

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Re: 3 Personal Finance Tips from Big Data + Debunking the Coffee Savings Myth
« Reply #5 on: September 11, 2014, 12:57:46 PM »
Kaspian, 80% of customers from that month may have only gone once (i.e. not regular customers, just someone who was dragged in by a friend while running errands on a Saturday). That would massively bring down the average. We have no idea because they didn't provide the data.

Elderwood17

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Re: 3 Personal Finance Tips from Big Data + Debunking the Coffee Savings Myth
« Reply #6 on: September 11, 2014, 01:09:22 PM »
The author is making some valid points, but missing the real issue of paying money for small conveniences that are totally unnecessary.  Those frugality muscles get built up on the little, creating the discipline to tackle the bigger things.

Now, if I would just cut the cable completely.......

Eric

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Re: 3 Personal Finance Tips from Big Data + Debunking the Coffee Savings Myth
« Reply #7 on: September 11, 2014, 01:47:21 PM »
IMO the writer misses the point of the whole latte / Starbucks thing.  Going out for coffee when one is in financial straights is a symptom of the problem more than the problem itself.  The problem is the inability or unwillingness to cut out spending on frivolous things that bleed money.  $24 / month isn't a whole lot, but its something that can be done extremely easily - don't go to SBUX. 

Excellent point.  And I think it's something most writers miss.  Sure if that's your only frivolous expense, it's no big deal.  But chances are that if you can't adjust this spending, there's lots of other places where you'd be wasting money was well.

TheDude

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Re: 3 Personal Finance Tips from Big Data + Debunking the Coffee Savings Myth
« Reply #8 on: September 11, 2014, 03:58:42 PM »
$24! I drink starbucks occasionally.  But coffee only cost $2 how the hell do spend $24 in three trips.

Beric01

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Re: 3 Personal Finance Tips from Big Data + Debunking the Coffee Savings Myth
« Reply #9 on: September 11, 2014, 04:02:34 PM »
I'm paying Comcast a ridiculous sum and I don't even have cable - only internet. They just keep raising the bill every month and there's nothing I can do about it. They have no reason to reduce my rate as there are no competitors for me to switch to, so I have no negotiating power. I would practically cut off internet if it weren't amazingly useful - I wouldn't have discovered Mustachianism with it. It's bad when internet is 10% the cost of your rent...

bluecollarmusician

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Re: 3 Personal Finance Tips from Big Data + Debunking the Coffee Savings Myth
« Reply #10 on: September 11, 2014, 04:18:24 PM »
$24! I drink starbucks occasionally.  But coffee only cost $2 how the hell do spend $24 in three trips.


That's what I was thinking too....

Eric

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Re: 3 Personal Finance Tips from Big Data + Debunking the Coffee Savings Myth
« Reply #11 on: September 11, 2014, 04:41:35 PM »
$24! I drink starbucks occasionally.  But coffee only cost $2 how the hell do spend $24 in three trips.

That's what I was thinking too....

What's a "coffee"?  I'm not even sure what that is.  Is that like a double half caf latte without the foamed milk?

Emilyngh

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Re: 3 Personal Finance Tips from Big Data + Debunking the Coffee Savings Myth
« Reply #12 on: September 11, 2014, 05:17:13 PM »
I took the authors main point to be along the lines of making sure that one is critically examining the real effects from what they're cutting.   While cutting coffee can save $24, one can probably knock more than this off of one's cable bill by just negotiating.   So, if one loved their coffee and were going to put energy into cutting back, one call to the cable company could be worth more than cutting out all of the Starbucks.

Now, I agree with others that $24 is not insignificant, that perhaps the stats are off and people regularly buying coffee are spending more than even that, that really one should cut *both* cable and coffee, and that someone having issues with cutting out starbucks probably has bigger spending problems.    I'll also add my own that  the average American's spending is so fucked up that more complex messages like the authors can confuse them and just help them justify their behavior. 

However, with that said, I think that the point of the article as I see it has some merit.   One should always run the numbers when making a decision regarding what to cut.   *Sometimes* the larger savings may feel counter-intuitive (eg., paying interest on a mortgage to invest that instead, etc).

oldtoyota

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Re: 3 Personal Finance Tips from Big Data + Debunking the Coffee Savings Myth
« Reply #13 on: September 11, 2014, 06:03:29 PM »
I'm paying Comcast a ridiculous sum and I don't even have cable - only internet. They just keep raising the bill every month and there's nothing I can do about it. They have no reason to reduce my rate as there are no competitors for me to switch to, so I have no negotiating power. I would practically cut off internet if it weren't amazingly useful - I wouldn't have discovered Mustachianism with it. It's bad when internet is 10% the cost of your rent...

I am with you. Comcast sucks, and they have the monopoly where I live.

ender

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Re: 3 Personal Finance Tips from Big Data + Debunking the Coffee Savings Myth
« Reply #14 on: September 11, 2014, 06:06:55 PM »
$24 bought me 4 pounds of unroasted coffee which will last months.

Definitely a better option :D

Beric01

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Re: 3 Personal Finance Tips from Big Data + Debunking the Coffee Savings Myth
« Reply #15 on: September 11, 2014, 06:14:48 PM »
I'm paying Comcast a ridiculous sum and I don't even have cable - only internet. They just keep raising the bill every month and there's nothing I can do about it. They have no reason to reduce my rate as there are no competitors for me to switch to, so I have no negotiating power. I would practically cut off internet if it weren't amazingly useful - I wouldn't have discovered Mustachianism with it. It's bad when internet is 10% the cost of your rent...

I am with you. Comcast sucks, and they have the monopoly where I live.

I am seriously thinking about switching to dial-up and showing Comcast the door. Of course, that means no streaming video. Maybe if I threaten to switch to dial-up unless they lower their rates?

The thing that astounds me is that here in the heart of Silicon Valley, home of the computer revolution, internet options are so bad.

Eric

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Re: 3 Personal Finance Tips from Big Data + Debunking the Coffee Savings Myth
« Reply #16 on: September 11, 2014, 06:19:54 PM »
I'm paying Comcast a ridiculous sum and I don't even have cable - only internet. They just keep raising the bill every month and there's nothing I can do about it. They have no reason to reduce my rate as there are no competitors for me to switch to, so I have no negotiating power. I would practically cut off internet if it weren't amazingly useful - I wouldn't have discovered Mustachianism with it. It's bad when internet is 10% the cost of your rent...

You don't have an AT&T U-verse option at your place?  I've been successful at playing them off one another. (Sunnyvale)

MrsPete

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Re: 3 Personal Finance Tips from Big Data + Debunking the Coffee Savings Myth
« Reply #17 on: September 12, 2014, 06:27:04 AM »
I have never spent a single penny on coffee in my entire life, so clearly I can't save money in that category. 

Two real morals exist here:

1.  Investigate your own spending and search for ways to cut costs. 
2.  You can only do so much; that is, you only have so much time and energy.  So put your energies towards your big dollar leaks and let your penny leaks go. 

shadowmoss

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Re: 3 Personal Finance Tips from Big Data + Debunking the Coffee Savings Myth
« Reply #18 on: September 12, 2014, 06:39:50 AM »
I've mentioned mobile data plans before as an option, depending.  Usually it is more expensive and slower than hard-wired data such as cable modems.  However, just in case it would be an improvement for someone:

http://www.rvmobileinternet.com/resources/millenicomverizon/

Millenicom is (from the article) approx $90/mo for 20G of data.  It is mobile.  It is at least a second option.

dude

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Re: 3 Personal Finance Tips from Big Data + Debunking the Coffee Savings Myth
« Reply #19 on: September 12, 2014, 07:10:17 AM »
I was a $1.76/day SBUX guy for a long time (tall drip coffee in my stainless steel travel mug, for the $0.10 discount.  That's $52.80/month, $633.60/yr.  That's more than many people pay for their cell phones.  yeah, that shit adds up.  SBUX is an occasional treat now (for me, anyway; DW continues her habit unabated, and never bothers to use the travel mug I bought her -- argh!).

No Name Guy

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Re: 3 Personal Finance Tips from Big Data + Debunking the Coffee Savings Myth
« Reply #20 on: September 12, 2014, 09:17:52 AM »
Another comment on the Coffee versus Comcast theme of the author of the original article and one of the earlier comments about doing the "big" things:

I'm a backpacker and there's a lot of similarity to optimizing ones pack weight and optimizing finances.  Yes, by focusing on the "big" things, you can get the biggest payoff in absolute terms.   Switching out a 2 person "traditional" tent for a cottage industry single wall will save 2-3 pounds, which is huge.  Likewise, getting a smaller apartment, closer to work, will save lots of money in absolute dollar terms.

The thing in both cases however is that often times those big changes take a lot of effort (or in backpacking, buying replacement pieces of gear).  Moving to a smaller apartment, closer to work takes a lot of effort to find a suitable place, that's actually lower cost, actually moving, etc, etc, etc. 

Doing the small things however often times takes practically no effort.  On the hiking thing, leaving unnecessary / excess items at home is the cheapest, easiest way to reduce pack weight.  Effort?  Nadda, other than a touch of thinking.  Cost?  Free.  The same applies here with the small things - it takes practically no effort to NOT go to Starbucks and NOT spend the money (and brewing a cup at home instead).  It takes practically no effort to NOT go out for drinks with the friends after work, picking up a 6 pack or bottle of wine on the way home instead.  Etc, etc, etc.

The dollars saved per unit of effort expended is high.  And since the barriers to implementing these multiple small changes are so low, there's no excuse to avoid doing them.  Also, if one DOESN'T do these easy things (or backslides on the small things), it can largely negate the benefit of what one does do on the bigger things.  "Hey, I'm saving $200 / month on the lower commuting and rent with the new place, I can afford to go out for dinner more often now!"....and there goes the savings right out the window.

Beric01

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Re: 3 Personal Finance Tips from Big Data + Debunking the Coffee Savings Myth
« Reply #21 on: September 12, 2014, 10:21:14 AM »
I'm paying Comcast a ridiculous sum and I don't even have cable - only internet. They just keep raising the bill every month and there's nothing I can do about it. They have no reason to reduce my rate as there are no competitors for me to switch to, so I have no negotiating power. I would practically cut off internet if it weren't amazingly useful - I wouldn't have discovered Mustachianism with it. It's bad when internet is 10% the cost of your rent...

You don't have an AT&T U-verse option at your place?  I've been successful at playing them off one another. (Sunnyvale)

Only AT&T option here is 768 Kbps - i.e. so slow it's not really an option. But maybe it is an option since I'm spending so much right now.

oldtoyota

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Re: 3 Personal Finance Tips from Big Data + Debunking the Coffee Savings Myth
« Reply #22 on: September 13, 2014, 07:47:22 PM »
$24! I drink starbucks occasionally.  But coffee only cost $2 how the hell do spend $24 in three trips.

That's what I was thinking too....

What's a "coffee"?  I'm not even sure what that is.  Is that like a double half caf latte without the foamed milk?


What language are you speaking? ;-)

Travis

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Re: 3 Personal Finance Tips from Big Data + Debunking the Coffee Savings Myth
« Reply #23 on: September 16, 2014, 05:11:08 AM »
The first and biggest thing that jumped out at me in the article was the author citing an average of 3 purchases per month, not a median.  Average means there are people like me who spend money at Starbucks once every six months, and people like one of my best friends who buys something every other day as part of her routine and spends $50 a month. And she buys some of the cheaper items on the menu.  It matters A LOT where on the spectrum you fall.  I have coworkers who spend as much on Starbucks as they do on their cell phones and cable. As someone pointed out earlier this is a single month of data.  It's right after Christmas spending and New Years resolutions.  Statistically it has little value.  It was disingenuous for the author to make the claim "coffee isn't the money pit many assumed it to be."  It is if you're part of the above the average in that survey group or you spend more in months other than January.

MoneyCat

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Re: 3 Personal Finance Tips from Big Data + Debunking the Coffee Savings Myth
« Reply #24 on: September 16, 2014, 06:05:26 AM »
The real savings comes from combining multiple cost-saving measures.  Cut out the Starbucks, cancel your cable TV, change your cell phone provider, get 5 cents off per bag for using reusable bags at the grocery store, buy in bulk, ride a bicycle to work or walk instead of driving, turn down your thermostat in winter and turn it up in the summer, line dry your clothes instead of using a dryer, etc.  It's the combination of all these measures that adds up to thousands of dollars in savings per year.  When you look at just one thing like cutting out Starbucks, it doesn't seem like much and many people just give up.  People need to look at the big picture.

Chuck

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Re: 3 Personal Finance Tips from Big Data + Debunking the Coffee Savings Myth
« Reply #25 on: September 16, 2014, 05:40:35 PM »
When I bought my house, one of my non-negotiables when selecting a location was Verizon FioS. And thank goodness.

RetiredAt63

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Re: 3 Personal Finance Tips from Big Data + Debunking the Coffee Savings Myth
« Reply #26 on: September 16, 2014, 05:50:08 PM »
Small differences in location can matter.  If I were to move to Ottawa, I would make sure I was served by Ottawa Hydro instead of Hydro One.  Big difference in rates.

When I bought my house, one of my non-negotiables when selecting a location was Verizon FioS. And thank goodness.

darkadams00

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Re: 3 Personal Finance Tips from Big Data + Debunking the Coffee Savings Myth
« Reply #27 on: September 16, 2014, 07:34:31 PM »
To one degree or another, most folks just don't understand the concept of saving over time (not interest or investments, just saving). I have paid for nice Christmas gifts with money saved by using public transit, walking, and/or biking. Starting in January, deposit those specific savings in an account weekly, and the amount at the end of the year will amaze you. I did this in a jar in our kitchen one year when our children were young--they loved counting out the money at the end of each month. That lesson was the perfect example that taught our youngest how to save for his first guitar.

And just last year, my brother complained when I wouldn't take a particular day trip with him for > $300!! His exact words were "$300 won't break you." He makes less than half what I make but doesn't understand why I live off less than what he makes. He doesn't have a clue.

One note of caution to the anti-Starbucks crowd. I only drink water and coffee, either depending on what I'm doing and where I am. My liquid intake costs less than that of pretty much anyone who drinks anything besides water. I can bike to one of our many nearby coffee shops on a weekend fall morning, drink coffee with my wife, and have a great inexpensive date for less than a 6-pack or a bottle of wine at home. A person can skip coffee at every coffee shop in town and spend even more in the booze aisles of grocery and liquor stores. It's not the buying that's the problem. It's the buying without adequate thought or consideration that's the problem.

Gerard

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Re: 3 Personal Finance Tips from Big Data + Debunking the Coffee Savings Myth
« Reply #28 on: September 19, 2014, 02:06:14 PM »
The thing in both cases however is that often times those big changes take a lot of effort (or in backpacking, buying replacement pieces of gear).  Moving to a smaller apartment, closer to work takes a lot of effort to find a suitable place, that's actually lower cost, actually moving, etc, etc, etc. 

Doing the small things however often times takes practically no effort.  On the hiking thing, leaving unnecessary / excess items at home is the cheapest, easiest way to reduce pack weight.  Effort?  Nadda, other than a touch of thinking.  Cost?  Free.  The same applies here with the small things - it takes practically no effort to NOT go to Starbucks and NOT spend the money (and brewing a cup at home instead).  It takes practically no effort to NOT go out for drinks with the friends after work, picking up a 6 pack or bottle of wine on the way home instead.  Etc, etc, etc.

The dollars saved per unit of effort expended is high.  And since the barriers to implementing these multiple small changes are so low, there's no excuse to avoid doing them. 

This puts into clear words some stuff I've been mulling over lately. Thanks.

dok33

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Re: 3 Personal Finance Tips from Big Data + Debunking the Coffee Savings Myth
« Reply #29 on: September 19, 2014, 02:16:10 PM »
The thing in both cases however is that often times those big changes take a lot of effort (or in backpacking, buying replacement pieces of gear).  Moving to a smaller apartment, closer to work takes a lot of effort to find a suitable place, that's actually lower cost, actually moving, etc, etc, etc. 

Doing the small things however often times takes practically no effort.  On the hiking thing, leaving unnecessary / excess items at home is the cheapest, easiest way to reduce pack weight.  Effort?  Nadda, other than a touch of thinking.  Cost?  Free.  The same applies here with the small things - it takes practically no effort to NOT go to Starbucks and NOT spend the money (and brewing a cup at home instead).  It takes practically no effort to NOT go out for drinks with the friends after work, picking up a 6 pack or bottle of wine on the way home instead.  Etc, etc, etc.

The dollars saved per unit of effort expended is high.  And since the barriers to implementing these multiple small changes are so low, there's no excuse to avoid doing them. 

This puts into clear words some stuff I've been mulling over lately. Thanks.

Definitely, also at some point you also run out of the big stuff but I've been really surprised at how quickly the little things add up.  We've shaved probably close to $100/month here and there on things like setting the thermostat higher/lower, using gas buddy to find the cheapest fuel, comparing $/oz on food etc.  No real effect on quality of life and the only effort required was a little bit of thinking which is probably good for you anyways :)

We have the $20/mo Time Warner "Value Internet" (much to the chagrin of my teenager) and my at-home coffee comes from Sam's club and runs ~$5/lb, 3lb bag lasts me a month.  Rest of the day I drink "free" coffee from the Keurig at work although I'd prefer they spend that money on bonuses and salary instead...
« Last Edit: September 19, 2014, 02:19:01 PM by dok33 »

TurtleMarkets

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Re: 3 Personal Finance Tips from Big Data + Debunking the Coffee Savings Myth
« Reply #30 on: September 19, 2014, 02:57:42 PM »
$24 bought me 4 pounds of unroasted coffee which will last months.

Definitely a better option :D
You roast your own coffee?  I have never meet someone outside a Brazilian that did that.

hybrid

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Re: 3 Personal Finance Tips from Big Data + Debunking the Coffee Savings Myth
« Reply #31 on: September 19, 2014, 03:08:15 PM »
The thing in both cases however is that often times those big changes take a lot of effort (or in backpacking, buying replacement pieces of gear).  Moving to a smaller apartment, closer to work takes a lot of effort to find a suitable place, that's actually lower cost, actually moving, etc, etc, etc. 

Doing the small things however often times takes practically no effort.  On the hiking thing, leaving unnecessary / excess items at home is the cheapest, easiest way to reduce pack weight.  Effort?  Nadda, other than a touch of thinking.  Cost?  Free.  The same applies here with the small things - it takes practically no effort to NOT go to Starbucks and NOT spend the money (and brewing a cup at home instead).  It takes practically no effort to NOT go out for drinks with the friends after work, picking up a 6 pack or bottle of wine on the way home instead.  Etc, etc, etc.

I like and appreciate the concepts you've hit upon. It's akin to 401Ks. Folks are waking up to the notion that change is always harder than doing nothing, so if a person joins a company where the default is to set aside 5% of pay into a 401K and the employee is on the hook to change that, employees as a whole will save more. No surprise that where the default is to not be a part of a 401K less money is saved.

I can appreciate that the lowest fruit for us was to make changes that would take real effort to undo. Once we cut cable getting cable installed again takes a little effort, Find the best value plan, wait for the technician, etc. It's actually a little bit of effort to be spendy, so it is easier to avoid.

There are times I give myself a nice little pat on the back when I deserve it (packing lunch instead of grabbing a quick lunch at the uber-convenient and tasty food cart) but more often than not I don't deserve much credit for simply being a lazy f___ and not making the effort to spend money. Ah, well, life is hard enough, I'll take some easy wins here and there!

 

Wow, a phone plan for fifteen bucks!