It’s almost a running joke that personal finance writers like to bring up the idea of cutting out that ol’ daily trip to Starbucks as a way to save money. I do it sometimes myself.
“If you cut out a daily visit to Starbucks on your way to work, where you’d spend $5 a visit, you’d save $1,250 a year!”
So, why does that strategy come up all the time?
First of all, it’s a true statement with really easy math behind it. If a person goes to Starbucks every workday and spends $5 there, that’s $5 per visit times 5 visits per week, or $25 per week. If that person works 50 weeks a year, that’s $25 per week times 50 weeks per year, or $1,250 per year. If you’re spending $1,250 per year at Starbucks right now and you stop doing that, that’s $1,250 in your pocket. It’s absolutely true and the math is really easy and obvious.
Second, the Starbucks example is really tangible. It’s easy to relate that whole experience of going to Starbucks and getting yourself a venti whatever. It’s an experience that hits a lot of senses (visual, touch, taste) that lots of people are very familiar with. Translating something that tangible to a financial principle is a good way of explaining it.
Finally, a lot of people are actually doing this very thing. Starbucks rakes in over $10 billion a year in revenue. If you start adding in all of the other coffee chains, like Caribou, and all of the other stores that sell coffee along with other things, like Dunkin’ Donuts, and all of the other local coffee shops…. that’s a lot of people getting their morning coffee at a coffee shop in the morning. The best estimate is that dedicated coffee shops alone sell about 10 million cups of coffee in the US each day, and that doesn’t include all of those other businesses like Dunkin Donuts and McDonalds and other places that also sell a ton of coffee. This “daily cup of coffee at some shop” routine is a pretty common one in America today.
It’s pretty obvious why this tip shows up so often on frugality sites, but that’s not the end of the story. The value of the “Starbucks strategy” runs much more deeply than that.
Digging Below the Surface
If you look at this tip on the surface as advice to cut back on your trips to Starbucks (or your preferred coffee vendor), it’s a good tip for a lot of people, but it’s not nearly a good tip for everyone.
According to USA Today, about 83% of American adults drink coffee each day, so right off the bat, that Starbucks tip is useless to 17% of American adults. Furthermore, a lot of coffee-drinking adults drink their coffee straight from their own coffee pots (or the one at work) and don’t necessarily go to a coffee shop of any kind with any regularity.
In short, that coffee shop strategy completely misses the spot for a lot of Americans who simply don’t go to the coffee shop at all, or only go as a rare treat (that’s the camp I’m in).
If that was the end of the story, then it would simply be a mediocre frugality tip.
But that’s not the end of the story.
The “skip the coffee shop stop” tip is actually just a specific and very tangible example of a broader frugality strategy, one that applies to virtually every American.
Here it is: if you can find some unnecessary expense that you repeat with any frequency, finding some way to cut back on that expense will save you significant money.
The “skip the coffee shop stop” frugal tip fits right in that framework. It’s an unnecessary expense that’s repeated with some regularity, and cutting back on it saves significant money. The coffee is the “unnecessary expense” part. Going to the coffee shop with any regularity is the “repeat with any frequency” part. Dropping that coffee shop visit is the “cut back on that expense” part. The $1250 a year is the “save you significant money” part. It’s the same exact tip, just written in a more general way.
The key thing to remember, always, is that when you see that tip about saving money by trimming your coffee stops, step back and look at the broader picture.
A Bigger Look at the “Starbucks Tip”
So, let’s look at that broader tip again:
If you can find some unnecessary expense that you repeat with any frequency, finding some way to cut back on that expense will save you significant money.
Whenever you make that tip into a more specific case, like the “cutting back on coffee shop visits” tip that started this article, what you’re doing is turning it into a more obvious and more exclusive tip that people can more directly apply to their lives but only if they have that unnecessary regular expense in their lives.
If you do go to a coffee shop on a regular basis, the more specific strategy of simply not going there as often is one that applies directly to your life that you can take action on immediately. On the other hand, if you don’t drink coffee, that tip is useless.
The general version of the tip is the middle ground – it’s indirectly useful to pretty much everyone, but it requires some work to make it directly useful. You have to think about unnecessary regular expenses in your life in order to turn it into any sort of action that you can actually use.
Here are ten examples of this. Each one of these examples is a specific frugality tip that will have a direct positive impact on your finances if and only if you actually partake regularly in the expensive and unnecessary routine being described. Some of these will apply to you and be useful – others will not.
1. If you buy name brand laundry detergent like Tide, try the store brand which can save you as much as $0.20 per laundry load, which can add up to $73 per year if you do laundry daily!
2. If you go to the bookstore once a week and buy a $15 book there, replace that bookstore visit with a library visit and pick up the same book for free. Over the course of a year, that will save you $780!
3. If you eat out more than once a week, cut it back to once a week. As the average meal at a restaurant costs $12 and it’s easy to eat at home for $2, you’ll be saving $10 per meal you cut. Cut out two meals eaten out per week and you’ll save $1,040 a year!
4. If you drink soda more than once a week, cut back to a single soda a week. The average cost of a soda is $0.50, so if you cut it back from a daily soda to a weekly soda, you’ll save $3 a week, which adds up to $156 a year!
5. If you buy name brand dishwashing detergent like Cascade, try the store brand version which can save you as much as $0.20 per dishwasher load, which can add up to $73 per year if you do dishes daily!
6. If you commute to work every day, find someone to ride share with one day a week. Cutting just one day of commuting a week out of your life, assuming a 20 mile round trip and a typical rate of $0.50 per mile in total costs, will save you $500 a year.
7. If you have a typical cable subscription that runs $100 a month, try eliminating the channels you watch less than once a week and downsize the package. For most people, this will cut an average $100 bill per month down to $60 per month, saving $480 per year!
8. If you eat out for lunch at work more than once a week, cut back to once a week and join the brown bag club. Take your own lunch to work (cost around $2) instead of eating out (cost around $12) and save $10 while networking with those who don’t eat out. If you normally eat out three times a week and cut it back to once a week, that’s $20 saved per week, which adds up to $1,000 a year!
9. If you buy name brand garbage bags like Glad, try the store brand version which can save you as much as $0.08 per bag, which can add up to $30 per year if you use one daily!
10. If you pay for auto insurance, shop around for better rates once a year. If you can trim even 5% off of the average annual insurance rate of $1,000 per year, that’s $50 per year you’ll save!
So, how many of those ten tips applied to you? Just go through the “if” statements and see how many of them describe something you actually do. I’m guessing that at least one or two of them apply to everyone reading the list, with quite a few readers finding that a lot apply to them. At the same time, a lot of them probably whiffed for you because they just don’t apply to your life.
This is the problem with big lists of frugality tips: almost all frugality tips come with an “if” statement like that, either directly stated or implied. That “if” statement means that the tip is directly useful for some and not useful at all for others. Here’s the catch: when you start using a lot of frugality strategies, you start finding that fewer and fewer “ifs” apply to you on long lists of frugality tips. This doesn’t mean that tip lists are useful – sometimes you’ll find a few great ideas and there’s always one or two that apply. It just means that the more frugal you are, the fewer “ifs” apply to you, and thus the less useful a big list of frugality tips becomes.
So, what can you do when you want to keep seeking out the most bang for the buck in your life? You find your own “ifs.”
Find Your Own “Ifs”
Again, let’s look at that general frugality strategy:
If you can find some unnecessary expense that you repeat with any frequency, finding some way to cut back on that expense will save you significant money.
The key to turning this general and not very directly useful tip into something that’s directly useful to you is to figure out what those repeated unnecessary and reducible expenses are. Once you’ve identified those, then frugality becomes about walking through each of those expenses and figuring out how to get the most bang for the buck out of them. You now have very specific things you can search for online and can find very specific frugality tips and articles that directly work for you.
So, the challenge really comes down to identifying what your repeated unnecessary and reducible expenses are.
You can start by simply going through your credit card statements and your bank statements and figuring out all of the places where you spend money regularly. Get several months of statements and look for each and every repeated expense.
Some of those items, like grocery store visits, might also include lots of individual purchases that you can cut back on, so if you can, look through your grocery receipts.
What you’re looking for are patterns in your spending. What things are you spending money on over and over again? Gas? The electric bill? Insurance? Groceries? A store related to your hobbies? Amazon? Are you buying dish soap regularly? What about freezer foods?
Start totaling up the amounts you’re spending on each of those individual things.
Then, when you have some totals, look at the ones that you think are too high, as well as all of your regular monthly bills.
Every single one of those things is a source for frugality that’s geared toward your life.
Next, ask yourself how you can cut spending on each and every one of those things. What you’re doing is turning that general frugality tip…
If you can find some unnecessary expense that you repeat with any frequency, finding some way to cut back on that expense will save you significant money
… into a bunch of partially completed frugality tips:
I spend too much on paper towels; how can I cut back?
I spend too much on homeowners insurance; how can I cut back?
… and so on.
At this point, Google becomes your friend. Just type in “save money on paper towels” or “best bang for buck paper towels” and see what you find. You’ll immediately be pointed at a frugal strategy that works specifically for you on something that you’ve just realized is a spending problem.
Then, do that for each thing you’ve discovered. Type in “save money on homeowners insurance” or “best bang for buck homeowners insurance.” Type in “save money on cell bill” or “best bang for buck cell phone plans.”
This takes time, but this is an extremely effective way to find a whole bunch of frugality tips that work specifically for your situation.
In Defense of the “Starbucks Tip”
So, let’s back up to those big lists of frugal tips that include things like “don’t go to Starbucks every day.” You might think those lists are mostly full of tips that aren’t useful, but the reality is that almost all frugality tips follow this general formula. They identify something specific that you might be doing and offer a way to cut that cost.
The problem is that the list doesn’t know your life. It doesn’t know which of those “ifs” apply to you, and it doesn’t know which strategies you may have already employed. All that the list can do is provide a lot of tips and hope that a healthy number apply to you and your situation.
It’s up to you to make that list as valuable to you as possible by knowing your “ifs”. Know what tips you’re looking for and which ones really apply best to you.
Knowing that makes frugality articles much more useful. You can quickly scan them for only the tips that match what’s relevant to you.
Remember, the “Starbucks tip” isn’t a bad tip, it’s just a specific form of a very generally useful strategy. Take that general strategy and bend it to what you need and you’ll have more relevant frugal ideas than you know what to do with.
The post The Advice of “Don’t Go to Starbucks Every Day” and What It Really Means appeared first on The Simple Dollar.
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