Today I saw a screencapped post that said something along the lines of “If you give up your daily Starbucks habit, by the end of the year you’ll have $2000, which is nowhere near the $60,000 you’ll need to put a down payment on a house!”
It made me think about how we, as a society, often frame discussions about finance. Generally speaking, the Internet and TV scolds are not, themselves, financially literate. The thing that every Fox News Uncle seems to forget, come Thanksgiving, is that order of magnitude matters. Different target audiences have different financial goals, and the attainability of those goals varies wildly.
Like lots of things, the advice is only useful for folks in the middle. If you’re poor, then you’re likely not going to be able to save up for a down payment, no matter what you do (though your municipality may have other programs to help you buy a house, etc.). And if you’re poor, you are already not buying daily Starbucks. You’re probably not buying any Starbucks, unless it is as a treat.
The advice of “If you have a daily Starbucks habit, you can reduce it in order to save money” is Technically Correct. (The best kind of correct!) And I am confident saying that for the people who buy daily coffee, reducing it to “weekly Starbucks and cheap office K-cups or brew the rest of the time” is, in fact, a great way to save up an Emergency Fund: a thousand dollars in a disused savings account to help you through an unexpected household expense. This would catch a slice of America that lives at the intersection of “can’t afford an unexpected household expense” and “buys treats.” But I’m not actually sure how large that slice is. (And I am curious.)
On the other end of the savings scale, you have Big Expenses. Putting away your pennies won’t be enough to save a whole down payment, even with the miracle of compound interest. This part is where real choices about lifestyle need to be made, if (again) those choices are even available to you.
I think the availability of that kind of choice during my childhood is what shapes my somewhat blinkered expectations of financial capability. My parents explicitly told me, as a teenager, that they made the conscious decision to only buy new cars every ten or so years in order to save the equivalent of the car payment in the other years. They told me that they chose not to fly to Europe every year, not because they couldn’t afford to but because they didn’t want to spend that much money. They prioritized being able to pay for my college over their own lifestyle. And I think, to some extent, I have a little bit of survivor’s guilt over that. It’s not too much; they’re doing okay in retirement. But I feel acutely aware of the need to not squander their gifts to me.
I think, when pigs learn to fly and the TV scolds decide to actually offer reality based advice, they should focus on the correct Order of Magnitude: reducing $1000-level expenses (like airplane vacations) in order to save for $10,000-level goals (like a house down payment).
Or they could offer the other end of the advice: reduce your $5-level expenses to save for $100-level goals (like an unexpected car repair). That would actually be useful, modest advice that some (not zero) people can actually use.
But modest advice doesn’t feed the rage machine. And that’s why I titled my post the way I did. I don’t think they will be doing that anytime soon. But it would sure be nice if they did. 🐖 💸
