Small Expenses Add Up: Workers Spend An Average Of $3,000 Annually On Coffee And Lunch At Work
The “latte factor”, a phrase coined by personal finance guru David Bach that refers to small, incidental expenses that add up over time, has gotten a bad rap, lately. Many who give money management tips have discounted the value of eliminating small expenses in favor of swinging for the fences with big time cuts such as refinancing mortgage debt to lower the monthly house payment. They argue that cutting back or eliminating small expenses, as in latte coffee drinks, does little to improve one’s finances when compared to cutting some of the large expenses in the budget. In short, cutting incidental expenses is a waste of time and effort.
The “latte factor” reflects significant potential savings
Well, the “latte factor” has just made a comeback thanks to a recent survey of American workers. In their current Workonomix survey, Accounting Principals, a leading finance and accounting staffing firm, discovered that 50% of American workers spend an average of $1,000 per year on coffee at work. In addition, two-thirds of workers prefer to buy lunch rather than to “brown- bag” it, spending an average of $2,000 annually. Just those two seemingly small expenses during the workday added up to an average of $3,000 per year per worker.
And small expenses don’t matter? $3,000 per year breaks down to $250 per month. That’s more than the cable bill. That’s more than the cell phone bill. That’s more than many pay for their gas and electric utilities each month. Rosa and I budget $250 a month for groceries.
Don’t get me wrong. I don’t have a problem with refinancing the mortgage to reduce interest expense and lower the monthly house payment. I’ve always advocated doing all that is practical to reduce spending so there is more money to devote to saving. And that includes taking a look at incidental expenditures such as coffee and lunch at work. How can a person afford to overlook $3,000 of potential savings? It’s abundantly practical to consider cutting back or cutting out some of these small expenses for two reasons: (1) They can add up to a significant sum over time, and (2) cutting these types of expenses is easy and relatively painless.
Track spending, identify potential savings, then cut back incrementally
Don’t let small expenses rob you of potential savings. Track your spending over a period of two or three months to identify incidental expenses that may be candidates for reduction or elimination. Then cut back incrementally. For example, if you have been buying your lunch at work five days a week, cut back to four or even three days a week. Take a lunch you fixed at home the other one or two days. After you get used to that, bag your lunch an additional one or two days a week. Eventually, the lunch you buy at work becomes the exception, a way to treat yourself, instead of a regular expense.
Whether you purchase lattes or not, you will discover incidental expenses that can be reduced or eliminated, saving you hundreds of dollars over the course of a year, if you take the time to track your spending.
K.C. Knouse is the author of True Prosperity: Your Guide to a Cash-Based Lifestyle, Double-Dome Publications, 224 pages
