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Will Drinking Fewer Lattes Really Improve Your Finances?

Will Drinking Fewer Lattes Really Improve Your Finances?

For many working folk, that $4 morning latte is more than just a pre-work caffeine fix—it is a sort of reward to oneself, either for making it out the door in time to stop at the coffee shop, as a treat after an early morning workout, or maybe for simply getting out of bed at all. Whatever the excuse we make to splurge on expensive coffee, that little cup acts as a symbol of our working selves, in a way, and of the sacrifice of eight or more hours of our lives each day to our jobs. Unfortunately, it is also symbolic of the many unnecessary ways we find to waste money and stunt financial growth in our daily lives.

A common bit of financial advice over the past few years has been to reduce the number of trips to the coffee shop, but people often wonder if cutting out the grande vanilla lattes can really help get their finances on track. Aside from looking at the amount of money saved by not going to Starbucks or your local café on a daily basis, how can cutting one everyday expense change the way we think about our budgets?

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Cutting Out Needless Expenses

First, let’s look at the obvious: fancy coffees such as flavored lattes and cappuccinos can cost upwards of $4 a pop at many chain coffee shops, and if you add in those tempting pastries, you could be dropping $7 before you even get to the office. For those who make this a daily habit, that’s anywhere from $20 to $37 a week! Squirreling that money into a savings account instead could get you an extra $960 a year (and that’s on the low end) to put toward a mortgage, new car or a vacation. In his Lifehack guest post, Charles LaReaux explains how you can save $18,000 over the lifespan of your mortgage by cutting out a $3 cup of coffee each day. If your caffeine habit calls for pricier drinks, imagine how much more you can save by quitting!

Aside from the savings on the coffee itself, however, cutting out one needless expense may just change the way you look at your spending as a whole. Realizing that survival is possible without a daily mocha, many come to see the other non-essentials eating up their paychecks: trivial everyday expenses like eating out, paying for cable television and buying only name-brands waste hundreds of dollars a month. Becoming frugal in one aspect of life may inspire a re-examination of your spending as a whole.

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Find Cost-Effective Alternatives

Discovering cheaper alternatives to getting a caffeine fix can lead to finding cheaper ways to provide many daily rituals: making coffee or tea at home saves a bundle, with a pound of whole or ground beans costing as little as $10 and a box of 25 black or green tea bags running as low as $5. That’s nearly a month’s supply of caffeine for what you would spend in a day or two at a coffee shop.

The same savings apply to entertainment and groceries. Monthly movie streaming services like Netflix cost under $10 a month, which is less than the price of one movie theater ticket, and far less than a monthly cable bill. Buying non-perishable groceries like rice and paper goods in bulk is often much cheaper than paying for smaller packages each time you hit the store. When at the grocery store, look at what items you are spending the most on: buying fewer pre-made, name-brand items and meat can reduce your bill significantly, and you’ll find that fresh produce and other whole foods are much cheaper, not to mention much better for our bodies.

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There Are Long-Term Holistic Benefits As Well:

Speaking of the health and budget connection, cutting out fancy coffee drinks may also improve your health, thereby reducing costly medical bills in the future. Not only are caffeinated beverages contributors to increased heart rate, insomnia and heartburn, expensive designer coffees like lattes and mochas are packed with extra fat and sugar, adding unnecessary pounds and increasing risk of diabetes. As Lifehack writer William Masters points out, cutting out certain dietary and habitual vices does not just save money on the items themselves, but also reduces the associated health risks and costs that come with them—things like cholesterol medication, insulin and surgeries. Remember that the more health conditions you have, the higher your insurance premiums will be.

Having said all of that though, think of ways to make the real behavioral changes automatic. Contribute to your company’s 401K straight from your paycheck so you don’t have to exercise the willpower to save each month, and set aside automatic savings in a separate account which you don’t have easy access to. Willpower is finite, and while resisting the daily latte helps, don’t waste your willpower on small tasks if you can put it to better use to effect meaningful change.

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Featured photo credit:  latte on a wood table via Shutterstock

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Last Updated on March 4, 2019

How to Use Credit Cards While Staying Out of Debt

How to Use Credit Cards While Staying Out of Debt

Many people will suggest that the best thing to do with your credit cards during these tough economic times is to cut them up with a pair of scissors. Indeed, if you are already in huge debt, you probably should stop using them and begin a payback strategy immediately. However, if you are not currently in trouble with your credit cards, there are wise ways to use them.

I happen to really love my credit cards so I will share with you my approach to how I use mine without getting into deep financial trouble.

Ever since about 1983 when I got my first Visa card, I continue to charge as many of my purchases as possible on credit. Everything from gas, groceries and monthly payments for services like my cable and home security monitoring are charged on credit. Despite my heavy usage, I have maintained the joy of never paying any interest fees at all on any of my credit cards.

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Here are some tips on how best to use your credit cards without falling into the trap of paying those nasty double-digit interest fees.

Do Not Treat Credit Cards as Your Funding Sources

Too many people treat their credit cards as funding sources for major purchases. Do not do this if you want to stay out of trouble. I use my credit cards as convenient financial instruments so I do not have to carry around much cash. In fact, I hate carrying cash, especially coins. When you buy things on credit, the purchases are clean and you will not get annoying coins back as change.

I do not rely on my Visa, MasterCard or American Express to fund any of my purchases, large or small. This brings me to my golden rule when it comes to whether I will pull out any of my credit cards either at a retail or online store.

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I never purchase anything with my credit cards if I do not have the actual cash on hand in my bank account.

If I really cannot pay for the item or service with cash that I already have at the bank, then I simply will not make the purchase. Remember, my credit cards are not used as funding sources. They are just convenient alternatives to actual cash in my pocket.

Make Sure to Always Pay Off Balances in Full Each Month

The next very important part of my overall strategy is to make absolutely sure that I pay the balances in full each and every month no matter how large they are. This should never be a problem if the cash has been budgeted for my purchases and secured in the bank. I have always paid my full balances each month ever since my very first credit card and this is why I never pay interest charges.

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Using Credit Cards with Rewards

Most of my credit cards are of the “no annual fees” type, including one MasterCard on a separate account I keep at home as a spare in case I lose my wallet or incur any fraudulent charges. However, I do use a main Visa card which does have an annual fee because all purchases on that card reward me with airline frequent flyer points. For me, the annual fee is worth it since I do travel and I get enough points to redeem many free flights.

You have to decide for yourself if you will charge enough purchases on credit each year without paying interest charges to warrant a credit card that rewards you with airline points (or other rewards). In my case, the answer is “yes” but that might not be the case for you.

I occasionally use a MasterCard or American Express card on small purchases just to keep those accounts active. Also, I have been to the odd retailer that accepted only a certain type of credit card, so I find that having one from each major company is quite handy. Aside from my main Visa card which earns the airline points, the rest of my cards are of the “no annual fees” variety.

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So this is how I use my credit cards without getting into any financial trouble with them. This strategy is recommended only if you are not in debt, of course. In fact, it is worth keeping in mind once you’re out of debt so that you can keep your credit cards active and treat them responsibly.

What are your credit card usage strategies? Let me know in the comments — I’d love to hear what methods you use.

Featured photo credit: Artem Bali via unsplash.com

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