I enjoy subscribing and reading your stuff.

We have to be more creative.

I give myself a budget a week (say $50, less than what I was spending originally) so I can have the occasional coffee or work lunch (to be social mainly). Any amount leftover, I use to buy myself a little something something which gives me incentive to use as little as possible.

It is working a treat! Working in a little pleasure fat goes a long way in keeping me on that wagon in a way that righteous deprivation never will!

I personally plan on saving more than $4k per year for retirement (the Roth annual limit).

Also, I hope to make more than $101,000 per year sometime before I turn 60. That is the salary limit for Roth IRA; if you make more than that you can’t contribute the full $4k, and if you make $116k or more you can’t contribute at all.

The Roth IRA is awesome. Since I’m young and under the salary cap, I will max it out this year. But thinking that you’ll only need to save $4k per year seems naive, and thinking that everyone will make less than $100k per year for the rest of their lives is depressing.

I think the purpose of the ECRD is just to realize that you can nickel-and-dime yourself and have a more carefree day-to-day experience, or you can nickel-and-dime into your savings and it will have large positive effect. Sure, the 10% is a stretch but that is forgivable in the same way that assuming all coffee is $4 is forgivable: they’re out-of-the-air numbers that are relatively reasonable, and serve to highlight the point that by giving up stuff that isn’t *that* important to you can give you the freedom to achieve things that *are* important to you.

That’s where I would put the emphasis. It isn’t the coffee part that’s expensive, and your point is DEAD ON that if coffee is important and enjoyable to you, then choosing it as your ECRD object to forego is a stupid decision. In my case, I drink the free coffee at work so this didn’t affect me. But I try to pack my lunch more often even though in SF there are 40 restaurants within a block of my office.

I also agree with the final weak point you highlight, that giving up an ECRD but not following larger financial goals is futile. There is a danger that a person could walk past Starbucks every morning and feel like they were prepared for their future since they didn’t fall for the ECRD.

People always focus on Bach’s ECRD/LF, even though I think his more important advice is to keep track of your expenses for two weeks, add it all up, and if you are shocked by some of the items (which you probably will be), then correct your behavior regarding those items. His guess is that most people will be shocked at how much they spend on coffee. I was shocked to see how much I spent on work lunches. Find out where your money is going, and fix it if you’re not happy.

On a final tertiary note, caffeine is DEFINITELY not a drug to go cold turkey on. Almost unanimously, doctors say to gradually reduce your intake by a drink every three to four days.

Sorry for the long comment!

I completely agree that “a majority of people” do not understand the future value consequences of thier purchasing decisions, and that point wasn’t meant to apply to a majority. I don’t believe that everyone is average or below, either. So much “financial advise” is doled out by authors to apply to the “lowest common denominator” in intelligence and fortitude in order to sell more books and be relevant to the most amount of people. I don’t think everything has to be dumbed down and I give readers more (metaphorical) credit.

A Roth IRA is a good choice for long-term investing built on savings from elimination or reduction of an expensive habit. Finding tax advantaged accounts once the Roth IRA is maxed out can be troublesome. If the 401(k) is available and not maxed out, you could increase your contributions there as a result of reductions elsewhere. If it’s an emergency you’d prefer to fund, then a high-yield savings account is a good choice. And my goal with the article is to tie these tips into everyday saving, so I’m focusing on more of the latter.

Great comments, Toby, I really appreciate it.

I’m sorry, but I have to disagree. I would argue that a majority of people do not “understand the consequences and future savings they are giving up”. I think a majority of people look at their ECRD and think, “It’s only $4, no big deal, what’s $4 anyway.”

I know I’ve done it before walking through Target. “Oh, this thing is only $1, no biggie, what’s $1 anyway?”

Unless you are in/taking control of your finances and have learned about FVM calculations and have done a few on your own finances, there is no way you can assess what that $4 means for your future as you spend it day-in and day-out.

As far as DB, he’s not my messiah so I’m not going to get all bent-out-of-shape. I agree that his return is stretching it, but pumping up the return by a couple of percent makes the numbers grow much bigger which has much more impact with his readers. People who don’t understand FVM suddenly start to “see the light”. Compounding rocks!

Also, your points against his Latte Factor can all be overcome. If you use your LF savings to fund a Roth IRA that is invested in low-cost mutual funds, you can avoid most taxes and fees which may get you closer to the 10% annual return. By pointing out that Sharebuilder costs $4 you are ignoring all the investments that can earn similar returns but are free of transaction costs.

Lack of caffeine causing you to miss the opportunity of a lifetime? You’re pretty desperate here, aren’t you? The universe would really have to have it in for you to make that occur while you are on caffeine withdrawal.

At the end of the day, you have to admit that ECRD and LF are not that far apart. While David’s 10% return is a stretch, it’s not impossible. Everything else you both pretty much agree on.

-Toby