It was recently announced in the news that Starbucks (SBUX) will be closing over 600 stores due to a phenomenon nicknamed “The Latte Effect.” This basically describes the actions people often take when economic times are tough and money is tight, which includes cutting back on extra expenses like coffee, manicures and hair treatments. While some people may be able to relate to this ...
My mother and I recently went through our normal expenses to cut out the fat. My mother states that she and my father will save over $10,000 per year! I know my husband and I will be saving well over $1000.
Starbucks may simply have overexpanded too. I can walk to four Starbucks outlets, and one kiosk in the neighborhood supermarket. And three independent espresso places.
I wish I could find a way to cut an extra $1000 from our spending each month — that would be nifty. But the only luxury I have that is listed is the cell phone, and I don’t know how much of a luxury that is when I do not have a phone at work, or when I am traveling away from home and am trying to hook up with my friends. Maybe more of a utilitarian convenience than, say, a pedicure or enhanced cable services.
Cutting back is hard, but you’re right, it is good to get in the habit before you get to the point where you’re struggling. Of course there are a million things to add to the list–particularly insurance and groceries in my case–but realizing that you have a problem is the key. Most people simply don’t.
The importance of saving on the small stuff cannot be over stated. These small amounts really add up.
On my blog I created an interactive calculator to illustrate the true impact of saving small amounts over the long haul. Check it out:
http://moneyandsuch.blogspot.com/2008/02/latte-factor-calculator.html
Cutting back on unnecessary expenses and saving them instead in a retirement fund will actually make more sense. Before you know it, you’re already a millionaire when you reach 60, if you save it in a mutual fund that earns at least 3%/yr.
Sam
Fix My Personal Finance
http://fixmypersonalfinance.com
@ sam
Ummm, I hope the 3% was a mistype for the mutual fund. You may be a millionaire, but it won’t be worth anything since the inflation rate of 3% will make it entirely a mute point
600 stores closed means that there’s going to be a lot of unemployment.
To poster #6, “mute point”? I’d say that’s a Freudian slip, eh?
I’d love to cut back on all the channels we get from dish satellite. Unfortunately, my significant other is a disabled former Marine. He’s on social security disability and awaiting an increase in his disability rating from the VA. In the meantime, when he’s having to take it easy and sit down, he enjoys watching the Science Channel, Discover, History Channel, Military Channel. Plus, since he contributes a significant amount of $$$ to the household expenses, he feels he has a say in which package we will subscribe.
Perhaps it’s time I called Dish Network to see if they’re offering a worthwhile package that will save me a good chunk of change each month.
Here is my dilemma, I have cut those things so far out of my life it isn
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