To spend 5% of my take-home income on coffee instead of debt...

[zabindya]

...if that amount comes to £250 a month, or £3,000 a year?

I'm not sure which is the more honest way to look at it. Just did my accounts and got a shock at how much I'm spending. I always thought "stop buying lattes so you can afford a house!!" was an out-of-touch boomer thing to say, but now I'm wondering if they were right...!

My income has increased massively over the last couple years, after a lot of investment on my part including significant student debt and private loans. On one hand 5% seems small, on the other hand £3k seems very meaningful! (And I probably spend a similar amount again on delivery/takeaway...) I'm struggling to adjust to how to think about these big numbers compared to what I'm used to. Any suggestions? (Bracing myself for responses )

@zabindya

I just had a thought. Tell me if this is a bizarre way to look at things.

There is a certain amount of "keeping up with the Joneses" which is actually useful in my corporate world. I have seen first hand in the last year or two how much of an advantage it is to be "in". Not just a networking contact but a friend, one of us, "our sort of people". (This sounds horridly social-climby but I'm just stating what I see.) I don't want to give this up for the sake of saving a few hundred quid in interest. My career opportunity came from this kind of connection.

So I don't want to give it up. But equally coffee is a very stupid expense. I'd be happy to spend £5k on a "keeping up with the Joneses" budget line item, but £5k buys a lot of spa days and ski holidays which are even better for deepening friendships. So my idea is, allocate the £5k for this, rather than more debt payments, but force myself to be thoughtful about whether the investment is actually an investment vs a habit?

Oh my god, just writing this makes me sound awful...

I personally think this is a good strategy. Allocate a fixed amount for networking-related opportunities. Or, alternatively, a fixed amount for weekly non-essentials such as coffees, drinks, takeaways. You might decide to keep buying coffees but give up the takeaways for example. You can even open a new bank account just for this purpose.

Whenever I get paid I always immediately transfer 1/3 into a savings account. 1/2 goes into the joint account with DH and is used for bills, groceries and other essentials. I spend the remainder on whatever I want, and I never feel guilty about spending it.

You are spending a combined 500 a month on coffee and takeaway?

Think about that. After-tax?

It's tempting to indulge when income rises but with just a tiny bit of effort and planning you can find satisfying frugal alternatives.

Imagine having all that money to pay down debt, save or at least travel.

To be crude, as you now spend, it's literally all ending up in the toilet.

You seem young and doing really well for your age. You seem to be someone who knows how to make the most of a given situation and it sounds like your payrise in the last couple of years is linked to making connections. I would guess the job you are in can be high pressure and the having a break for coffee and grabbing a takeaway may help you stay in the arena (I have family in finance and it can be very tough). It does sound like some of the connections can be very useful and the short break may be good for you. I think do what seems best for you with career opportunities, sounds like you are on track to pay off the student loans/private loans that were an investment in your career.

Sorry you're doing great for any age

@BackwardsPrawn

You spend your money on what you like but I always thought of it like this..

£3k a year over a working life is £120k. That's 2-4 years (ish) of retiring early if you saved it in a pension instead.

How grateful will 57 year old you be to be able to give up work then, if you want to, rather than hang on for 60?

And once your early years / youthful opportunities for investing are gone, they are gone for good. You can't recapture the time in the market. You have to save harder, later, to compensate.

"So I don't want to give it up. But equally coffee is a very stupid expense. I'd be happy to spend £5k on a "keeping up with the Joneses" budget line item, but £5k buys a lot of spa days and ski holidays which are even better for deepening friendships. So my idea is, allocate the £5k for this, rather than more debt payments, but force myself to be thoughtful about whether the investment is actually an investment vs a habit?

Oh my god, just writing this makes me sound awful..."

You really don't sound awful, I would say clued up.

When I found out how much I was spending on coffee shop coffee I bought a mini coffee machine to keep at my desk. I had been spending £6-700 PA, the machine was about £60. It's up tp you to decide whether what you spend your money fits with your values and ethics. As for me, I wanted to spend that money on clothes instead!

I used to spend a fortune on takeaway tea (hate coffee ) chocolate, bottles of water...but had to stop when I took out a stonking great loan to do my flat up.

I buy multipacks of chocolate from the supermarket. I take my own tea and milk into work, and I filter water at home and bring it in using a water bottle. I've saved tons of money, and am now living within my means.

Starbucks is an absolute ripoff when you can make your own coffee at home for a fraction of the price. As pp have noted, say you're doing your bit for the planet. It gives you a pass.

If you can afford it and enjoy going for coffee...why stop? I spend quite a bit on take away coffees. I think its money well spent as I enjoy it and it adds sometime to my day.

Thanks for the advice everyone. Especially thank you to those who have been in a similar situation. Instinctively I know that in my situation, the potential upside from promotions/opportunities is high and something I want to chase after - upside not just in terms of money but also power, influence, ability to effect change.

However I will definitely take into account the wise advice from posters saying not to make my career 100% dependent on "the Joneses" who will drop me if I can't keep up.

Part of the difficulty is that it feels odd to have a budget line item explicitly for, essentially, social climbing... Although the intention is to use it as a limit and way to be intentional about the spend! When you're just excitedly flashing cash around the place it doesn't feel as cynical.

BTW I love all the suggestions to take up fancy herbal tea in environmentally-friendly cups, this is the kind of practical advice I needed

Do you pay the maximum into your pension? Finished paying off your mortgage and own your own home?
Nothing wrong with an occasional coffee but if you're spending that much think how you could spend that money - on a luxury holiday, into your pension, over paying your mortgage.

@BackwardsPrawn

You spend your money on what you like but I always thought of it like this..

£3k a year over a working life is £120k. That's 2-4 years (ish) of retiring early if you saved it in a pension instead.

How grateful will 57 year old you be to be able to give up work then, if you want to, rather than hang on for 60?

And if invested correctly the power of compouding will double or even triple that amount meaning early retirement is 8-10years instead. What a lovely position to be in - go part time or retire early.

Crazy, sorry no other way of putting it. I have a thermos mug, a cafetière and I buy Lidls French roast coffee. I drink mine black and dp adds milk. We spend £3 a week on coffee and milk. We eat toast or cereal at home. We take sandwiches to work. We don't have takeaways very often (maybe 4-5 times a year) but we do eat out most weeks - we all have finite resources and have to budget to suit our needs and goals - we will be mortgage free in 9 months.

We could afford to eat out every day, hire a cleaner and stay in nice hotels but we are choosing financial security for the long term

@zabindya

Thanks for the advice everyone. Especially thank you to those who have been in a similar situation. Instinctively I know that in my situation, the potential upside from promotions/opportunities is high and something I want to chase after - upside not just in terms of money but also power, influence, ability to effect change.

However I will definitely take into account the wise advice from posters saying not to make my career 100% dependent on "the Joneses" who will drop me if I can't keep up.

Part of the difficulty is that it feels odd to have a budget line item explicitly for, essentially, social climbing... Although the intention is to use it as a limit and way to be intentional about the spend! When you're just excitedly flashing cash around the place it doesn't feel as cynical.

its not only if you can't keep up....they can drop you on a whim....honestly be wary.

I used to spend this when I taught in a college. They had a Starbucks on campus so I would go downstairs every break and lunchtime and get a cappuccino. Some days I’d also get one when I got to work so it was about £50 a week. It’s easily done and definitely easy not to notice how much you’re spending because it’s ‘only £3.50’ or whatever. Same with meal deals which I also regularly bought. You’ve realised it’s more than you can afford to buy a flask to take coffee from home and a water bottle and drink more water!

Madness in my opinion. Pay your debt back. Household bills are rising quickly and debt could spiral.out of control if you are not more careful with money. You could lose your house because you drank too much coffee. Just buy a coffee machine.

It depends what you want really. If you want to buy a house then yes you need to stop the coffees and takeaways. £3k might sound small, but when you add in takeaways and it comes to £6k a year, just from those you’ll save £60k in ten years even without additional saving on top.

In my 20s Me and my now DH didn’t spend nearly as much as you on extras, and certainly no £3k ski trips. We still had some meals out and cheap holidays but focussed our money on saving, made pack lunches and rarely had takeaways. By 27 we had bought our first house, and now early thirties we have a four bed in the South East. If I had spent £6k on coffees and takeaways a year, and had expensive holidays there is no way I would be in this position now.

The other problem with trying to keep up with "the Joneses" at work at the expense of building up savings / a house deposit, is that lots of them will be buying homes whether through hidden frugality or family /partner wealth and all of a sudden the gap between you will widen anyway. So you have to play smart.

Also, I'd rather put £3k extra annually into my pension fund than lining the pocket of a coffee shop owner.
The money saving expert website has lots of tips on how to get the best deals and to save money. www.moneysavingexpert.com/

I agree it's a good idea not to waste your money on things you don't feel the long term benefits from such as coffee and takeaway.

However I do believe that money spent on travel is never truly wasted, and your twenties are such a good time to do it before you have dependants and are young enough not to mind slumming it in a hostel or cheap hotel.

It would be a shame to worry so much about the future that you don't appreciate the here and now.

When trying to keep up with the Joneses be very wary of which Joneses you are trying to keep up with.

Have a long cynical look at the people you are trying to network with. Which of them could genuinely help you. Which of them could be good contacts. Which of them are just out for a good time.

When the DCs were small and the mortgage was large it seemed that everyone else was going on exotic holidays while we were going camping if we were lucky.

I eventually realised that I was looking at the wrong people. I was looking at people who had reached a certain level in their career but werent going any further. They had high earning partners and didnt feel the need to pursue their own careers.

The people who had genuine influence were more like me, main or sole breadwinners and still pursuing their careers. They were on the up and had far more influence than the 'exotic holiday' group.

Go spend £200 on a really nice coffee machine for home, and a really nice thermos mug. Only max 1 coffee a week bought out at coffee shops.

You’ll save £2750 in the first year.

It's an addiction no more gracious than a heroin one.

Frame it as such and free yourself from its clutches.