Is Your Latte the Reason You Can’t Buy a House?
How many times have you heard: “If you just stop drinking lattes you’d be able to afford a house”?
As a millennial woman, I’ve heard it probably once a day for the past 5 years.
So, in honor of all the hardworking millennial latte-drinkers out there, let’s do the math.
Will cutting out lattes help you buy a house?
I’m going to use Starbucks for this example, since it’s one of the most wide-spread coffee shops around the country, but of course there may be some variability based on which coffee shop you go to, and the area of the country in which you live.
I live in Northern Virginia, just outside of Washington, D.C., which has a very high cost of living.
A 12 oz Caffè Latte at my local Starbucks is $3.75.
The median home price in my area is $650,000.
The median home price in my area is around $650,000, but single-family detached homes can easily go for $1-2 million.
For this example, I’m going to use a 20% down payment, or $130,000 ($650,000 x 0.20 = $130,000).
For simple math, I’m not including: closing fees, home inspections, taxes, mortgage, insurance, or any other type of fee involved in purchasing a home. I’m literally only using the down payment.
So, let’s say I buy one 12 oz Caffè Latte at my local Starbucks every single day for a year, for $3.75.
$3.75 x 365 = $1,368.75
Buying a latte every day will cost me about $1,400 per year.
So if I cut out my daily latte, how many years will it take for me to afford a $130,000 down payment?
$130,000 / $1,368.75 = 94.98
So, it will take me 95 years of cutting out lattes to afford a downpayment.
Let’s try another scenario.
Let’s say you’re a basic white girl (like me) and come Fall season you have to switch your regular Caffè Latte to a Pumpkin Spice Latte.
Pumpkin Spice Lattes are a Fall favorite, but at $6 per latte, they’re an expensive drink. Will cutting them out help you afford a down payment?
Pumpkin Spice Lattes at my Starbucks are $5.95.
So, you drink a regular latte for 10 months of the year, and a pumpkin spice in September & October.
$3.75 x 304 = $1,140 (regular lattes for 10 months)
+
$5.95 x 61 = $362.95 (pumpkin spice for 2 months)
Total: $1,140 + $362.95 = $1,502.95
You end up spending about $130 more on lattes.
So, $130,000 (down payment) / $1,502.95 (cost of coffee) = 86.50
Even with the pumpkin spice switch, it will still take you 86 years to save for a down payment.
Now, don’t get me wrong, $1,500 per year on coffee is a lot of money. Personally, I prefer to make my coffee at home and use that money for trips or eating out at restaurants, but that’s my personal preference. I certainly do not believe that someone that buys one coffee a day is poor because of their $5 daily purchase.
So, if your heart is set on being a homeowner, what can you do?
Although buying a first home can be a big challenge, there are ways to do it.
Hopefully the myth is busted; your latte is not the reason you can’t afford a house. The fact of the matter is, home prices have grown at a much steeper pace than salary increases, making it more difficult for younger generations to break into home ownership.
Money is the ultimate balancing act between living for today and living for tomorrow. We must save for the future, but we also must live our lives today. I see no better way to maintain that balance than to allow yourself the pleasure of a cup of coffee.
Action Items:
Do you have a regular purchase like a latte? Maybe it’s a weekly manicure, a daily pastry from the bakery, or a weekly pizza delivery. Do a quick calculation and figure out how much you could save by painting your nails at home, or making your own muffins or pizza. I’m not telling you to give it up, just have all the information. You may realize that spending $4/day on a pastry is $100 per month you’d rather spend somewhere else.
If you’re interested in becoming a homeowner, start thinking of ways you could afford it. If you’re set on living in an expensive area, can you buy a condo instead of a house? If you’re committed to buying a house, can you find a cheaper city? Like most things in life, becoming a homeowner is a series of trade-offs and you have to decide in which areas you’re willing to compromise.
Does a daily latte sound like too much of an indulgence to you? Believe it or not, spending your money on pleasurable things can be an acquired skill. Check out my blog Treat Yourself to learn how to make intentional purchases that bring you pleasure.
Your life may not be perfect, but it is imperfectly yours. The only way to live it is your way.
