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MintLife Blog > Real Money Talk > #RealMoneyTalk: Your PSL Is Not Going to Make or Break Your Bank

#RealMoneyTalk: Your PSL Is Not Going to Make or Break Your Bank

Real Money Talk

A man notices his co-worker drinking a latte. He asks, “How often do you drink lattes?” 

“Every day,” says the co-worker. 

“Wow! Every day for 30 years of your professional career!” says the man. “That’s so much money! A latte a day means you’re spending about $1,900 a year. If you invested that money instead at an 8% return, you’d have $250,000. That’s enough to buy a Ferrari.”

The co-worker looks puzzled. 

“Do you buy lattes?” she asked the man.

“Nope.”

“So, where’s your Ferrari?” 

I originally saw this great little story in a post written by Morgan Housel many years ago, but it never left my mind. I adapted it from the original version so that it could fit within this very millennial conversation about breaking the bank because of buying too many lattes! I really love that one of the things this story emphasizes is how quickly people are willing to judge another person’s financial actions without looking in the mirror to self-reflect first. 

From 2013 to 2015, I followed one of the strictest budgets that anyone could ever build because I was determined to get out of $20,000 of debt. And looking back at that phase of my life now, I know that the only reason I was able to pay off so much debt so quickly is that I was highly motivated to keep at it week after week and month after month! My motivation came from a few different places, but in the top 3, was definitely guilt-free fun money. It was extremely difficult for me as a young 20-something to make so many sacrifices when everyone else was out partying and living that #YOLO life. But I knew that for me it would have to be sustainable so that I could survive almost 2 years of the strict budgeting lifestyle. 

It came down to finding the right balance. I started by giving myself 20% of each paycheck to spend however I wanted – that could be a pumpkin spice latte, avocado toast or whatever else I felt like buying! I know that if I hadn’t created a budget that allowed me to indulge a little bit with every paycheck, I simply wouldn’t have succeeded. This is what worked for me, and it’s so important that we all recognize that people are motivated by completely different things. That’s why the most important thing is not to go add up the cost of all the lattes you’ve had during the week, but instead to focus on the bigger picture so you can find that perfect balance in your spending. If you stop treating yourself completely and cut all spending on fun, you’ll certainly see that your motivation will disappear, preventing you from enjoying your life and recommitting to your money goals each day. 

Lacking motivation is one of the biggest reasons most people give up on goals before accomplishing them. And that’s why it’s so critical that you MAKE ROOM in the budget for some fun money. Get yourself a latte before work once in a while, because not treating yourself could mean not achieving your bigger, more ambitious money goals! During my debt repayment journey, fun money was spent in lots of ways; From buying wine on a Friday after a long work week to getting a mocha frapp on a Tuesday afternoon to help me get through the rest of a rough week. And honestly, it doesn’t matter what you spend your fun money on because the point is to treat yourself with indulgences that’ll allow you to feel like being on a budget is actually sustainable.

I really wish this wasn’t true! I wish I was writing a post that explained how skipping lattes in the morning was my strategy to becoming debt-free. But that’s just not realistic! Nobody with any kind of sense would argue that being extremely careful about how you spend small amounts of money is what makes a person financially successful or wealthy. It’s precisely the opposite of this thinking that actually will make a difference in your life. We’ve got to be very careful about the way we spend large amounts of money over and over again. The largest categories in people’s budgets are housing, transportation and groceries. Once I learned that I set my budget up accordingly with 3 main categories. The first one was fixed expenses/needs, which I put 50% of my income towards. The second category was debt repayment/future money goals (such as retirement investing) which got 30% of my income allotted to it. And finally, the remaining 20% was all mine for FUN!

There’s so much research out there on the behavioral finance side that proves that people are generally more successful with managing money on a weekly basis rather than a monthly basis. So if you get paid every 2 weeks you may want to split that paycheck into 2 and use half the first week and the other half during the next week. Then repeat that with your next check for the rest of the month. Looking at your money weekly rather than monthly can be a great way to notice where it is that you’re overspending and allow you to make adjustments accordingly. To start to save more money, I knew the lattes wouldn’t really make that big of a difference. I had to look at those larger expenses and get strategic! Moving from a one-bedroom apartment into an apartment with roommates helped me cut my rent in half. That freed up a few hundred dollars right there!

#RealMoneyTalk, don’t go off thinking that this post gives you all the permissions to buy whatever you want, as long as it helps you stay motivated. Absolutely NOT! The key message here is that it’s all about balance. If you’re doing too much or too little of something then you have to figure out ways to even out your behaviors and actions, which will result in you evening out your spending!

Comments (1) Leave your comment

  1. I 100% agree. You have to reward yourself if you want to stay motivated, that’s positive reinforcement 101. That being said, it’s important to continue asking yourself if the purchase is still rewarding. Don’t keep getting something because it’s become a habit, get it because you genuinely LOVE that thing. I personally like to live by the HELL YEAH rule. If I’m going to buy myself something, I can’t just feel like “yeah it’s fine”, I have to feel “AW HELL YEAH” about it. If it ain’t a hell yeah, it’s a no. Saves me money and mediocre experiences.

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