There are some personal finance writers who seem to just love writing about coffee. No, I don't mean articles about whether Starbucks will ever get under $24 or over $30 again, I mean the stop-buying-coffee-and-put-an-extra-$400-a-year-into-your-IRA genre of articles. Ever seen those? I ran across another one recently, and I swear these writers seem to think that buying coffee is just a waste of money.
Folks, I don't know about you, but my morning coffee isn't a waste -- it's a prerequisite for civilized human interaction.
And yeah, I can (and actually do) brew my morning cup at home these days, but back when I was commuting to the big city and had to rush out early to catch the train, I hit the local green-awning-covered storefront every morning and didn't think twice about it. It was a cost of doing business, just like the train ticket and The Wall Street Journal.
You have to live now
If you're like I was, I bet you're not prepared to give up that daily bit of bliss and comfort in exchange for an extra few hundred bucks a year, even if I include a calculation showing that $400 a year invested at 10% for 40 years comes out to almost $213,000, or roughly what a triple venti soy latte is expected to cost in 2047.
OK, maybe they won't be quite that expensive. But the kind of articles I'm talking about are full of not-so-helpful assumptions. I mean, how many of us are willing to deny ourselves those small doses of immediate pleasure or convenience in order to reap a benefit far in the future. I read one article recently that suggested skipping lunch and investing the savings.
Well, it didn't actually come out and say "skip lunch." But it did say that buying lunch costs $9 a day, and if you stop buying lunch and bring it from home, the money you'll save five days a week, 52 weeks a year comes to "about $2,350 a year." Of course, that figure doesn't include vacation, nor does it pay attention to the money you spend buying groceries to bring lunch from home. Starve now, retire later? No thanks.
The REAL money drains
I have yet to meet anyone who gave up coffee (or lunch) and put the resulting savings into their retirement accounts. It just doesn't work that way: you end up buying decaf, or bottled water, or an extra bag of chips with lunch, or something else. Actually redirecting that cash into your IRA requires a level of budgetary control and micromanagement that most of us just can't muster -- or at least can't sustain for more than a few days or weeks. And it's hard to think of coffee (or lunch!) as a "money drain" -- for most of us, coffee is a simple, affordable pleasure that brightens our mornings.
But many of us do have some real money drains -- places where we end up spending more than we need to, without getting any pleasure or benefit. Here are two big ones that come to mind:
Credit card interest and fees. There's a reason that leading credit card issuers like Bank of America
(NYSE:BAC)and JP Morgan Chase (NYSE:JPM)generate tons of cash from their card operations year in and year out. If you carry a sizable balance on your credit cards, you could easily be spending well over $1,000 a year on fees and interest payments. Get a grip on that debt and save that money instead.
- Deferred maintenance. You know how this one goes: Wait another year to redo the roof and you may end up paying thousands more to repair water damage. Ignore the car's funny sound and you could end up replacing a transmission. Even if insurance or a warranty covers most of the added cost, you'll still get hit with deductibles and lost time and possibly increased insurance rates. Not good. Resolve to fix small problems before they become big problems, and maintain a rainy-day fund to help you do just that.
Want more thoughts on plugging real money drains? Check out Motley Fool Green Light, our personal finance newsletter. Motley Fool Green Light co-editors Dayana Yochim and Shannon Zimmerman offer hundreds of dollars' worth of money-saving ideas every month, guaranteed. A 30-day all-access free pass is yours for the asking.
Fool contributor John Rosevear, who has firsthand experience with the leaky-roof thing, does not own any of the stocks mentioned above. Bank of America and JP Morgan Chase are both Income Investor recommendations. The Fool's disclosure policy knows who to call when the roof starts to fall.