The Starbucks myth
🔸 Plus: Taylor Swift’s new album crashed Spotify🔸 The gang that specialises in stealing expensive Lego🔸 The Winkelvoss twins bought into Real Bedford FC🔸
Your 2-minute guide to demystifying money and making you richer
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The Starbucks myth
One of the most divisive debates in personal finance is “the Starbucks myth”. This is the idea that if you give up your daily habit of buying a latte at expensive coffee chains you’ll be able to save enough money to buy a house.
The numbers typically look like this: If you spend £4 a day, every day, at Starbucks then that’s about £120 per month. In a year, that’s £1,440. If you’re looking at a mortgage with a 5% deposit then £1,440 would get you a £28,800 chunk of the loan. By amazing coincidence, the average price of a house in the UK right now is £285,000. So your Starbucks habit is costing you almost exactly 10% of your mortgage!
Therefore, if you’re drinking at Starbucks you somehow lack the discipline to get on the property ladder, the myth says.
A lot of people don’t like this trope because, obviously, the two major factors in buying a house are:
Your income (which controls how much you can save for a deposit and how much you can afford in monthly payments).
The price of the house (which your mortgage will be based on).
Coffee isn't really a factor.
Yet the Starbucks myth — invented in 1999 by a man named David Bach — won’t die.
The Telegraph embraced it and even created a calculator to show you how bad your coffee spending is. The Mail found an American financial planner who thinks that if you give up coffee you’ll become $315,000 richer in retirement.
Your annual marijuana budget
Then, last week, I noticed that the US personal finance writer Darnell Mayberry published a post in which he calculated the amount of money he spends annually on marijuana. It was $2,400. More than he thought. He spends roughly the same amount on groceries and his car payment:
“Until I started tracking my finances, I never would have thought marijuana would have been among my top-five expenses … I can’t help but consider ways to cut back.”
He’s done similarly confessional posts on booze and Nike shoes.
That got me thinking.
I have no idea what I spend at Starbucks
So I decided to look. I went to my bank account, downloaded my transactions from January 1st to date into a CSV file, and then uploaded it into Google Sheets. Then I ranked it alphabetically, so I could see all the places where I spend money clumped together.
The good news is that I’m only spending £53 per month on Starbucks, Costa, and my neighbourhood coffee place, The Lab.
But I couldn’t help but notice that my spreadsheet was dominated by … Uber Eats. Readers, I’m ashamed to say that I’m currently spending £95 per month getting food delivered to my house. That’s nearly £1,200 a year because I can’t be bothered to make my own lunch. That sum, if applied as a deposit on a 5% mortgage, would get me £24,000 of the loan.
Apparently, I am spending the equivalent of 8.5% of the average price of a house on Thai food and sandwiches every year! (Assuming I leveraged my lunch money into a mortgage.)
My spending on weekend brunch — to which I am addicted — came in at another £94.
The purpose of telling you this is not to rescue the Starbucks myth from its critics. Rather, it is that until I sorted my bank statements in a spreadsheet, I didn’t really know what my discretionary expenses were, or what they added up to. I had no clue that my Uber Eats habit is out of control.
But now that I do, I can see that I’m spending £242 monthly on stuff I can easily cut back on (£53 + £95 + £94). That’s £2,904 annually that could be going into an S&P 500 index tracker — if I wanted to live like a monk.
While I can’t get those expenses to zero — I still have to eat and drink! — I have some choices. I have some variables I can control.
Do this periodically because you’re bound to find surprises in your own finances. A video streaming subscription you’re not actually using. A phone payment plan that could be renegotiated. Amazon really adds up when you’re not paying attention.
And for dessert …
Taylor Swift’s new album crashed Spotify. Downdetector reported a sharp outage at the moment her album was released.
Squatters moved into Marco Pierre White’s old restaurant. The move comes days after anarchists moved into one of Gordon Ramsay’s old sites.
The Winkelvoss twins dumped $4.5 million into Real Bedford FC. These are the guys who sued Mark Zuckerberg over their claim he stole Facebook from them, and later became crypto gazillionaires. Real Bedford is currently top of the Spartan South Midlands Premier Division — four rungs under the football league.
A rare 50 pence coin minted in 2012 could be worth £1,000. The coin shows an Olympic swimmer with her head under water. It was quickly withdrawn and replaced by a version showing the swimmer’s face more clearly — the original design is now worth a small fortune to collectors.
Boston Dynamics’ new humanoid warehouse robot is terrifying. See the promo video here.
Samsung is forcing its staff to work a six-day week. “Considering that performance of our major units, including Samsung Electronics Co., fell short of expectations in 2023, we are introducing the six-day work week for executives to inject a sense of crisis and make all-out efforts to overcome it,” said an executive.
A crime gang that specialised in stealing expensive Lego sets has been arrested. Four people allegedly took about £242,000 of the product to sell on the black market.
More from Moneyin2:
The savings account with a 25% return that young people routinely ignore
Ignore financial influencers - the stats say they’re usually wrong
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Photos: Franklin Heijnen via Flickr.
I'd been wondering about this. Will have to download and alphabetize. And maybe I can sort an older family member's too. Thanks for the topic!