As you certainly know, I believe you should drink as many lattes as you can stomach. More accurately: I find cheapness-advice that urges you, Young Person, to cut out macchiatos to be condescending and ridiculous. If you want/need to spend less, the first luxury to skip is whatever isn't giving you much pleasure. If that's getting coffee out, fair enough, but you probably like getting coffee out, thus why you wait in line to do so.*
Well! Via Facebook, there's an op-ed by Helaine Olen providing a sound economic explanation (i.e. not what you were getting from WWPD) for why "expensive cappuccinos" will not be your economic downfall. More accurately: for why you are in such a sink-hole that these are merely expensive caffeinated drops in the bucket.
*I have, as you also know, a theory that coffee and food, but especially coffee, tastes better if prepared by a what-is-the-PC-term-for-hipster-when-you-don't-mean-anything-negative-by-it. My life's ambition is to get a flat white from this man.
Sunday, January 13, 2013
The NYT endorses your cappuccino habit
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23 comments:
So the op-ed basically says making the effort to manage your personal finances is worthless, because of broad economic trends not in your control? I don't buy that. You can't control GDP growth but you can control how much you are affected by it by making wise financial decisions. It really doesn't matter to me what average household net worth is as long as my net worth is going up.
My problem with cut-out-the-lattes advice is that, as Megan McArdle says somewhere, it's the big irreversible financial decisions that get you into trouble, like student loans or big mortgages. Everyday spending habits can be changed with a little willpower, but the big debts are there to stay.
See, I took the op-ed to mean basically what you're saying McArdle says - not that life choices don't matter, or that spending doesn't matter, but that very small purchases don't add up as much as we might think. More specifically: that if you owe 100k in student loans and are earning $100/month as an intern, it's not as if the difference between self-sufficient adulthood and your current situation is coffee out vs. at home. I thought this op-ed was a response to advice that says, if you just cut back on lattes, broader economic trends won't hurt you. It's not that broader economic trends are individual fate, so much as that lattes-or-not hardly matters.
I guess we read the op-ed in different ways. It sounds to me like a counsel of despair, similar to what I've heard from the less financially literate of my friends--the economy sucks and capitalism is unfair, hence my financial problems, and there's nothing I can do. Or as the author says,
"...the majority of bankruptcies result from health issues, job losses and fractured families, something no amount of cutting back can protect against."
But actually, basic financial responsibility* CAN help, because then you will have a savings account which will make unemployment, divorce or disease less likely to be catastrophic. And you will have planned for a lucrative career and taken out only reasonable amounts in student loans.
*Which may include cutting back on lattes if you are really broke or just don't care for lattes, but should also include the big financial decisions.
"It really doesn't matter to me what average household net worth is as long as my net worth is going up."
Maybe this isn't what you meant, but it kind of read like, "I don't care if people are struggling in poverty as long as I'm getting richer." That might describe you, personally, but it's not an ethical system I'd want a society I live in to be based on.
I also took her op-ed as a call to action, as she explicitly notes in her final line that to make a real difference, it's time to get out and fight for structural change.
Also, not to be a cliche, but YPIS. Not everyone can open a bank account, or, for that matter, can will themselves into a lucrative career, without racking up student loans, at that. Along the same vein, people would also be better off if they learned to just live off the interest of their trust fund and not spend the principle, so maybe the almost 50% of Americans who earn less than 25K per year can just get on that.
There was a good article awhile back on the cost of being poor, showing how living hand to mouth is more expensive in a variety of ways that are invisible to the middle classes. In this sense, another problem with "skip the latte" glosses over the fact that most struggling people don't drink and can't afford lattes in the first place. It sounds a lot more heartless to say "skip the BP medication" or "skip paying the electric bill this month," but these are the sorts of issues people in poverty are dealing with. By focusing on lattes* as the guilty pleasure makes it seem like most struggling people are just the entitled bourgeoisie.
*With connotation of "latte liberals" and Bobos, what could be more frivolous?
It doesn't matter to _my finances_ what average household net worth is. More generally, personal finance advice is all about personal responsibility. That's sort of the nature of the beast, which makes it not helpful for determining how a whole society should manage its finances, and less helpful for the poor, but still helpful.
One thing I have learned from other people's finances is how very many people who have middle- or upper-middle-class incomes have very bad financial habits and end up getting into debt, going into bankruptcy, or having judgments filed against them. I think these are the people who should be reading personal finance advice.
Privilege is only a partial protection from ignorance.
Last week, I kept close track of my spending, thinking that I was spending too much money on eating out, especially lunch and drinks. I dutifully went to Trader Joe's on Sunday night, bought stuff to make sandwiches and had a miserable, boring, repetitive week of lunch. I know there are ways to pack lunch that don't suck, but my kitchen situation, cooking abilities, and time management skills don't really allow for that right now.
I didn't save money, really. And I was unhappy. For me, the $20 extra a week to grab a decent sandwich at lunch versus 5 days of turkey & swiss is worth it. Plus, if I just have egg & cheese on a bagel, I actually save money versus packing lunch.
But, as Britta said, this is certainly more applicable to those somewhere in the middle-class (including impoverished grad students living off $20K fellowships in NYC, but with some sort of safety net or financial means--like access to loans and credit) than the absolute poor, for whom it's not a choice between lattes or adding to savings or the like, but dinner or gas or the electric bill.
caryatis,
Except, I think her point was that focusing on "personal finance" in the sense of personal responsibility was, to continue the trend of cliches, like telling a terminal cancer patient to avoid paper cuts. The reality is that people's wages have declined in terms of PPP, and the costs of really important things (not lattes or color TVs) have risen much higher than inflation. Instead of taking for granted that people have less money and tell them to manage the small stuff around the edges, we could figure out why, compared to 3 decades ago, Americans have comparatively less money, and then try to fix that problem.
Britta, but my point was that the way to fix the broader economy is going to have very little to do with how to fix any given person's personal finances. And the problems with the broader economy should not be used as an excuse to avoid fixing the problems with one's personal finances.
In other words, if I'm a legislator, I might think about ways to reform the education system. If I'm a regular person, I should try to borrow only as much money as I will be able to repay and think about the cost-benefit ratio of my education.
I would also point out that this idea that poor people are spending money only on essentials is not backed up by the data. At least in the U.S., almost all of us spend money on things we don't strictly need to buy.
Caryatis,
I guess maybe it comes down to where we think latte-consumption enters into "basic financial responsibility." There are certainly people who never think about what something costs and just go for it, but I find that the comfort with daily $4 lattes, say, is significant mainly because it indicates a comfort with eating-and-drinking out and not thinking what that costs, and all the way up. But I also find that life is more pleasant and spontaneous if you have a threshold below which you don't give too much thought to a purchase. Some, but not too much. For me, at least, that threshold would be the price of a coffee.
Anyway, we're in complete agreement that if the lattes aren't your favorite, you shouldn't buy them only because $4 isn't much money. But the reason I keep returning to this topic is that lattes seem like appreciated $4 expenditures, whereas if you look at your most recent grocery bill, say, there's probably an obvious place you could have cut $4.
Britta, Caryatis,
I took this article to be about personal-finance advice targeting recent grads and other young-ish professional-ish sorts. I.e. people who are not generally thought of as poor, who may have whichever forms of cultural/educational capital, but who keep somehow running out of money. The ever-expanding "Young, Privileged, and Applying for Food Stamps" demographic, although it's not always that dire. People who are dealing with unprecedented structural challenges that they couldn't have anticipated. Things like, back in the day, you could get a job with a humanities BA and it would just pay less than a math one, but still a salary and benefits. Now the grads facing full-time post-grad unpaid internships are faulted for not choosing a more practical major, as if it's this well-established thing that you can have a BA and still be unemployable. Challenges of this nature. And I think I remember that writer being faulted for spending $1.50 on a coffee.
Fourtinefork,
Are you a grad student living off $20k in NYC? If so, do I know you off-blog?
Anyway, agreed with you and Britta that tips on how to save are different from tips for how to get by as a 16-year-old single mom. I guess the way I see it, the latte advice is the broke-but-middle-class equivalent to advice to the legitimately-poor to eat lentils instead of fast-food. Those focusing on lattes ignore that for this caste, coffee out is the pleasure. Maybe they even giddily pick lattes precisely because they know how much those who get them are attached to them.
Phoebe, I agree with your idea of a threshold being good for one's mental health. I don't want to be the guy who makes his own laundry detergent to save the 19 cents per load.
I realized I was finally financially comfortable when, 15 minutes after leaving the grocery store, I found I had no idea how much I had spent. I don't need to keep track anymore, because spending $20 versus $40 makes no appreciable difference. It's a very luxurious feeling. I suppose the truly rich feel this way at shopping malls.
See, I read the op-ed not as specific, practicable financial advice to young people, but as a broader statement about the reasons behind greater financial need. As such, I do think it's incomplete -- habits of saving and, well, tidy financial housekeeping do make a big difference. But insofar as she points out that a problem often treated in the media as personal is actually largely systematic, I think it's a valuable contribution. (Much the same way as the cost of having children to women's lives and careers are treated in the US as personal, when they are actually systematic, and it makes little sense to argue about daycare vs SAHMs, when broad changes should be fought for.)
I think there's also often a strong -- maybe Puritanical? -- undercurrent to these kinds of arguments: namely, that poor people do not deserve pleasure. I still remember a guy I went to grad school with -- totally leftist, into theory -- who said something that shocked me at the time. He was happy to give change to those begging on the streets of New Haven, and moreover did not care if they spent it on drink, or whatever other expensive sinfulness. His point was that they deserved some autonomy, and some pleasure.
Why isn't a poor person entitled to eat something tasty? I like lentils and I know how to make them delicious, but if I had to eat them as often as some internet commenters suggest the poor do, heck, if I had to eat lentils everytime I read an internet commenter writing about lentils, I would probably puke. And why isn't a grad student entitled to a good cup of coffee? Kim Kardashian has done nothing to make human civilization even a bit better, and yet she's entitled to all the Starbucks runs she wants because she lives in a society where morons are worshipped, but a twenty-something who studies and teaches literature and, hey, what the fuck, actually advances human knowledge a little bit, doesn't deserve a bit of foamed milk? Really?
i,
Agreed re: your overall analysis of the article, and it seems we both think this is like lentils.
Because we both read Jezebel. Every time there's a post on healthy eating, a million people pipe up with, "Omigod, beans cost like, a dime for enough to feed you for two years, and then you buy pepper for five cents and paprika for ten cents, and I can make the most delicious thing out of this that's totally healthy and filling. So why are the ghetto people still going to McDonalds?"
That thing tends to drive me nuts because although I've become a pretty good cook in the last few years, and am a total foodie, and can make a curry out of anything, beans continue to be a pain in the (ahem) ass. Even if I soak them, most take an eternity to cook anyway. So not only do I have to think of it the night before, but the dish that should take me half an hour with soaked beans -- according to the cookbook -- winds up taking two hours, everything else in the dish is total mush, and those beans are still hard as rocks. I know that I'm supposed to buy fresh beans to avoid that, but when you're buying cheap beans (rather than wonderful, but expensive Rancho Gordo) you can't tell if they're fresh or not.
So yeah, I can totally see how someone who's poor and has two jobs and rides the bus for hours every day could make ends meet by cooking beans all the time. Especially if that person also has kids who happen to be hungry *now*. Yeah.
Canned beans?
But yeah, I agree that occasionally buying luxuries is human nature. It even fulfills a psychological need sometimes, to relax, to reward yourself for getting through a hard day, or simply not to feel so deprived all the time. I have even blogged about it:
(http://zagavory.blogspot.com/2009/11/poor-cant-just-eat-oatmeal.html)
That's why I think that respect and understanding for the poor does not require us to pretend that they do not waste money or do not engage in conspicuous consumption or can't benefit at all from financial advice because they never had even a dollar to set aside from _absolute necessities_. You know who buys lottery tickets, right?
@caryatis: Yeah, I've heard of canned beans -- the point is, they're no longer so cheap when they're canned. The whole "you can buy kilos of the stuff for pennies" type argument, like the oatmeal one you quote, is based on bulk dry goods.
I'm not a fan of treating the poor -- or speaking of them in our little internet salons -- as though they are mindless automatons carrying out a program of society and fate. But I'm annoyed at how knee-jerk and unsreflective that kind of comment becomes. I read your post, and the writer you quote and justly criticize clearly has no idea what it means to travel for hours on public transport, how much more difficult it is to buy in bulk when you have to carry it all home, and how much harder all of that is when you have multiple jobs and kids to take care of. She's essentially mocking people who in many cases work harder than she can imagine, and if she were in their shoes but with her own bank account, she'd be ordering Chinese delivery faster than you can blink.
I also read the article in the way i did.
I think a problem with personal-finance type advice for the poor is that it assumes that there are real potential returns to saving money. For a person with high or even medium disposable income, spending it vs. saving it can make a very big difference in future quality of life (and not necessarily a huge dent in present quality of life). In this sense, there's the classic instant vs. delayed gratification issue. The problem is that, for most poor people, saving money leads to deprivation in the short term, but not any greater gain in the long term. Given this, it is generally more rational for a poor person to spend the money they have now, on pleasures, rather than save the money for later. This applies to all the solid advice for middle class people with prospects--stay in school, don't get pregnant as a teen, and so forth. We take the pay-offs as self evident, but if your prospects are unemployment, low-paying employment, or black market employment, the usual advice doesn't really apply. (Drug dealers don't care if you have a high school diploma, and neither does McDonalds or any of the other minimum wage paying job opportunities in the ghetto.)
With middle class people this is also true for certain things. If a medical bill costs $100,000, it doesn't matter if you have $1,000 in the bank or $10,000 in the bank, you still can't pay it and will have to declare bankruptcy or work out a lenience program (which is dependent on income and savings, at least the last time I spoke to a hospital administrator about it). Given this, the more "rational" approach would be to spend income now, rather than save it away and then have to pay more on the medical bill while still getting the same results as if you had saved less.*
Another issue is that once you have to borrow a huge amount of money, or owe a huge amount of money, very small amounts of money don't seem to matter, especially psychologically: what's the difference between owing $100,000 and $100,004? Very little.
*I agree there are other good reasons to save/invest money, but the big structural changes in the US are the skyrocketing cost of healthcare, education, and retirement, which are no longer guaranteed by employers or the state.
Not to spam the comment section, but I thought of a good analogy. Sexual violence against women is large structural problem which needs to be targeted by educating and retraining men, getting police to take it seriously, treating rape victims much better, and not tolerating violent images or references in culture at large. If someone were to say that the reason sexual assault is a problem is because women wear short skirts and drink, I think we would all consider this victim blaming. Now, given the culture we live in, I would give practical advice to my female friends and hypothetical daughters which would be along those lines--don't drink too much in public, don't drink alone, be careful getting home after dark, and so forth. However, I would never consider that this practical advice suffices to combat sexual violence if not also tied into combating structural problems.
I think personal finance is similar: I would raise my children to follow the advice caryatis mentions: don't borrow more for your education than you can reasonably pay off, save X% of your income every month, lattes are treats, not necessities, etc. However, I wouldn't consider this adequate to help my child be successful in the future, as the problems they really face are structural and political and need to be combatted on that level: huge transfer or wealth to the upper 1%, unsteady employment prospects, and skyrocketing costs of life necessities with no political will to solve the issues.
Ok, LAST post in a row, I promise.
I think a problem with the NYTimes (and why it's not actually a leftist paper), is that it does take "struggling" to be the freelance writer in Brooklyn, and not the single mom in the Bronx. There's a total erasure of actually poor people from all these conversations about poverty in elite circles. This erasure, even/especially by people who claim to be progressive, is another reason why there's no political will to fight poverty.
For a nonpolitical point, caryatis, I spent Christmas with my brother's wealthy in-laws, and what was interesting was not that their lifestyle was so different from how I was raised, but that there was just a slight layer of excess with no concern about the cost. Pick up an extra 3 turkeys at Costco just in case? sure! Too cold? Turn up the heat in the 5,000 sq ft house? why not! This salmon looks funny? don't taste it to make sure, just throw it away!
I grew up wanting for nothing in a very comfortable environment, but there was always a sense that spending money was about priorities. High quality and plentiful food was important, but in turn that meant also minimizing waste. No moldy thing got thrown away until my mother was absolutely sure you couldn't scrape off the mold and still eat it. Turning up the heat or taking long showers wasn't allowed, because spending lots of money on utilities wasn't how my parents wanted to spend their money, and they let you know that. (Turn up the heat? It's 65 already. Put on another sweater, do you think electricity grows on trees??)
Thanks, Britta, that was interesting. Your first comment reminds me of a book on poverty from an economic point of view which argues that making big life charges which might bring a person out of poverty, such as saving money or attending and graduating from school, is difficult because the good you gain from any one action makes very little difference to your life. In other words, there's increasing marginal utility.
If you have $0 in savings, and you choose to refrain from buying a lottery ticket and instead save $1, that savings is of very little value. It's only many, many small saving decisions later, when you have enough money to be able to cover that unexpected car repair or medical bill, that you really feel the value of saving.
Or with education: going to class today is tedious and may even mean forgoing earning opportunities. You don't feel the value of all those small decisions to attend class or study until years later when you get the high school degree.
It really is easier to make wise decisions when you are richer and can feel the impact after only a few wise decisions.
Here's a review:
http://rortybomb.wordpress.com/2009/12/03/persistence-of-poverty-and-increasing-marginal-utility/
Such an interesting conversation! The things I miss when off-line for most of the day.
Britta,
"Another issue is that once you have to borrow a huge amount of money, or owe a huge amount of money, very small amounts of money don't seem to matter, especially psychologically: what's the difference between owing $100,000 and $100,004? Very little."
Expect a post addressing this.
"I think a problem with the NYTimes (and why it's not actually a leftist paper), is that it does take "struggling" to be the freelance writer in Brooklyn, and not the single mom in the Bronx. There's a total erasure of actually poor people from all these conversations about poverty in elite circles."
I mostly agree with this. I only disagree insofar as there's this popular assumption that if you're merely "broke," but college-educated, white, etc., everything sorts itself out. There seems to be a caste of "privileged" people who aren't, who can't make rent, who don't have a safety net, and who end up lumped in as part of the brattiest generation. Whereas there's some degree of understanding re: the authentic poor, that the system is thus and individual bootstrap-ness can't solve much.
caryatis,
Yeah, that was an interesting article. I mean, I'm hesitant to consider humans as homo economicus, but I think there is some truth to it. I know when I'm totally overwhelmed with about 80 things to do, I procrastinate way more than when I'm mostly on top of things, I think for that reason, since it feels like doing one thing is just a drop in the bucket, so why bother.
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