Would You Rather Have Starbucks Or $700?

Choose right now… Starbucks or $700? Not Coffee or $700. Just Starbucks. Choose. Now.

Starbucks is in the news a lot. They are either opening their first store in Milan (highly suggest clicking on that link, the pictures are crazy), having trouble in Philadelphia, or boosting their stock price due to another great quarter. At one point there weren’t enough Starbucks stores in the United States to serve the demand for their coffee, and that was only last summer!

You’re probably saying that’s crazy because if you live in a major city it seems like there are multiple Starbucks on every block. You’d be right.

Now, we’ve seen a lot of the articles about how millennials could have so much more money or even be a millionaire if they cut out all their “trendy” food items such as avocado toast. A certain Australian millionaire even said the reason millennial aren’t millionaires is because of their avocado toast addiction. We saw some articles where the math was done and we even did it ourselves and found the idea a little far fetched. But it did get us thinking. Is there anything about our consumption habits that really do mess with our personal finances?

Absolutely. Besides the fact we rely so heavily on credit cards and think when something is on sale we “saved” money when in reality we really just spent less but our caffeine habits really do damage our personal finances. I’ll be the first one to admit I got Starbucks and Dunkin or whatever coffee was available to me in college almost every day. That was on top of my Keurig or Mr. Coffee (depending on what year I was in college) that I would make most days. Looking back, I wasted so much money on coffee.

I read recently that the average Starbucks order is $2.75 in the US and in NYC it’s $3.75. Most people I know stop for coffee at least once a day, usually on their way to work, every weekday. So 52 weeks in a year means 260 work days, we’ll be liberal here and say you get 15 vacation days you take full advantage of so 245 working days a year. We’ll go even further beyond that and say at least another 15 of those you’re running late and don’t get to stop to get your caffeine fix, now we’re at 230 days a year. Sounds like a lot but it’s pretty common for coffee drinkers to have at least a cup every day, specifically every morning, if not more than that. So some quick math of 230 days x $2.75 for an average order and you get $632.50 a year that you’re wasting on over priced, over roasted coffee.

Now I get it, if you’re addicted to caffeine like I am when you need coffee, you need coffee. Most likely your work has a coffee machine somewhere that you can get for free so let’s discount the entire working day and only focus on your mornings.

I personally bought a Mr. Coffee very similar to this one and use it every single day. The Mr. Coffee shown above costs $35.96 or just around 13 cups of coffee at Starbucks. Now for anyone who is going to say that they don’t have time to wake up and make coffee, I wake up at 4:50am and program this wonderful machine the night before to start making coffee at 4:45am, so not only do I have a fresh cup of coffee right when I wake up, I also get to wake up to the smell of freshly brewed coffee and honestly there’s nothing better than that.

I don’t even buy filters, my Mr. Coffee like the one I referenced above comes with permanent reusable filter that I just rinse out every night and put right back in. And you can pick something up like this Byron Stainless Steel Travel Mug for less than $10 and now you’re in business. Total outlay so far: $45.96 or less than 17 cups of coffee at Starbucks.

The last thing you’re going to need is coffee and this is where the real savings kicks in. You can do what I do and drink Maxwell House Original Blend Ground Coffee which sells on Amazon for $6.93. There is 240 6 fluid ounce cups in this thing! Conveniently happens to be just around the amount of cups we estimated the average person to need to go to work. That’s so much coffee. That’s less than 3 cents per cup of coffee! If you want to follow the famous Shark Tank Invest Kevin O’Leary you can take your $2.72 in savings and invest them.

Adding all this up that’s around $53 a year for your coffee addiction in the first year and it only goes down from there. Drink more than one cup a day at home? Raise your cost by $10 to $20 depending on what type of coffee you choose to order.

Some of you are going to say that all of this isn’t worth it. The daily expense is minimal on a daily basis and you don’t notice the overall sum you spend. I get it. Like I said before I have been there. But once I realized what was happening and how much I was spending my habits completely changed. The small daily expenses truly add up and turn into major expenditures. Don’t let this happen.

Take that extra $700 or more every year and invest that money or put it into your savings account and let that money grow. You’ll still be having your coffee fix every day, but you’ll be getting it in a way that allows you to minimize your expenses and optimizes your savings.

Make sure to subscribe on our website for all the latest personal finance and investing news and advice and follow us on twitter @themodernpiggy2. Have a question about personal finance you’d like answered or have comments or concerns or just want to chat? Email us at founders@themodernpiggybank.com

Starting The Dreaded Student Loan Journey

Paying down your student loans? Yeah, us too.

College? Awesome. Student loans? Absolutely not.

I have student loans. And I hate student loans. I hate paying them every month and only watching the principal balance drop minutely. It’s a problem a lot of people have and one that is not going to be fixed anytime soon. What we’re here to discuss is how you, as a Modern Piggy Bank reader, can pay them down as quickly and as painlessly as possible. But to really understand student debt and paying them back, we’re first going to dive into some facts about it.

If you read my article on budgets, you’ll notice that I consider student loans a major category and a main part of my overall budget. And yet that’s really not enough. Sure, I make the minimum payment every month but do I really want to be in a mountain of debt forever? Of course not! I, like you, want to be debt free. Did you know according to Forbes and Credit Suisse if you have $10 in your pocket and zero debt you are richer than 15%-25% of Americans respectively.

“If you’ve no debts and have $10 in your pocket you have more wealth than 25% of Americans. More than 25% of Americans have collectively that is.”

That’s actually astonishing. So if I go up to my 18 year old cousin and hand him a $20 bill he is now in the top 75% of American households. Wake up people! Credit is great, debt can be great. Bad debt is not great. Use it wisely.

And education debt is the United States is massive and current trends only show it increasing. According to Forbes which cites MakeLemonade student loan debt in the US has reached $1.5 trillion. If you get a free minute and want to blow your mind look at these pictures to see what $1trillion would look like in cash. Crazy stuff. And we have that and more just in student debt. Forget mortgages, credit cards, car loans, and anything else you can possibly purchase on credit, student loans dwarfs them all.

Don’t go into $100,000 of debt for a $40,000 job. -Some Random NYC subway advertisement

For example purposes, Jeff Bezos (CEO and Founder of Amazon and recently anointed richest man alive) has approximately $150billion. THAT WOULD NOT EVEN MAKE A DENT IN TOTAL US STUDENT LOAN DEBT. Nor would I want Mr. Bezos to waste his money on attempting to eradicate student debt. That would just be stupid.

But let’s face it, student loan debt is a huge issue. And I’m not talking about the overall student loan debt now, I’m talking about your personal student loans that you took out to go to college.

I’ll be honest, I never really thought about my loans until senior year. I would go to school, have a great year, and then just sign whatever the school sent me for my loans and whatever my parents put in front of me. I thought they knew what they were doing. And then senior year I logged onto my account and saw the debt I was truly in.

Sure, I had known about it in the back of my mind that this debt was piling up but it wasn’t real. It was an idea floating on the outskirts of my thoughts. Let me be the first to tell you that it becomes real, real fast.

So now I’m here, staring into what seems like an insurmountable abyss of debt and just trying to figure out how to climb out of the whole that so many Americans find ourselves in. But I have a plan.

I mentioned before that I had a goal to live off one paycheck a month and save/invest the other one entirely. Unfortunately besides building a cash reserve for emergency purposes I don’t plan on saving or investing much beyond some meager contributions to a Roth IRA. And that’s because most of my excess money will be going towards student loans. I want that debt out of my life forever. I want no debt, no credit card debt, no car payments, yes a mortgage but really nothing else besides that. Don’t buy something unless you can afford it is something I truly want to live by.

So how am I getting there? I’m allocating as much as I possibly can a month towards my loans without sacrificing my health, both mental and physical. I’m riding my bike to work so I can save money on gas and put that towards student loans (I highly recommend biking or walking to work if it’s feasible for you since it not only saves money but is healthier as well).

I’m making sure I’m only eating out when it’s truly a special occasion or a time to hang out with friends. Any money left over from my social life budget goes right into loans at the end of the month.

I’m also making payments more frequently than just the once a month timeline that everyone is on. If you get a gift or a bonus in the middle of the month, use it right then to pay down your debt. I know how tempting it is to go out and get the newest and coolest thing or that item you’ve been eyeing for a while but take the temptation away. Get your money and pay your loans right there and then. You can still make your normal payment but you’ll feel so much better about paying twice or more in a month.

Something that never made sense to me was buying name brand food. Now I completely understand buying a brand for certain items, they simply taste 100x better and I won’t blame anyone for choosing the name brand, but if it’s something simple go for the generic brand. This has led me to have excess money in my grocery budget every month and the extra, you guessed it, goes right into student loans.

There are so many plans you can utilize to pay off your student loans. I’ve already started looking at refinancing my loans and consolidating them to simplify my payments. I highly advise you all to do the same. If you need some guidance, feel free to reach out to us in the Contact Us page and we will personally get back to you and help you navigate. Also make sure to share this article so your friends know they aren’t alone and there are strategies to dealing with your student loans.

Remember, student loans isn’t a debt that will disappear for you tomorrow, but follow us and you may just pay them down quicker and be debt free sooner than you ever thought possible.

“Budget” Isn’t A Bad Word

“Spend your money wisely.”. I undoubtably heard this phrase upwards of a thousand times. Since my first job at 15 to every job I’ve held since, this phrase became a constant thought in my mind. But I’ll be the first to admit I haven’t always lived by it and that’s part of the reason I’m here today. Writing about my experiences and bringing you along on my journey and hopefully one of your own. I’ve wasted money on everything from designer shoes and wallets to Harley Davidson Motorcycles. Looking back now, each and every time I bought something I didn’t need, I learned a lesson.

Now, I’m fresh out of college and I have a goal of where in life I want to go and where I want to be. I’ll share that goal with you sometime in the future but in essence it comes down to freedom. And that’s why I have a budget. A budget sounds like the exact opposite of freedom, you have to stick to it, live by it, and adjust it constantly. Not exactly what any of us want to be doing in our free time.

First things first, don’t make it a shoestring budget. Don’t think you can survive on $30 a week on groceries. Make it realistic. I over budget for my necessary expenses such as food so when I don’t meet that I put the rest away into a Roth IRA. Don’t think you need to cut your friends out of your life because you won’t be able to go out with them. Make room for your social life, it’s important for your health and you’ll be happier for doing it.

My main categories that I budget for on a monthly basis are:

Rent
Utilities
Groceries
Student Loans
Gas
Apollo (my dog)
Social life

These major categories allow me to budget for what I consider important while also allocating a certain amount a month towards my savings account and my retirement accounts.

In a perfect world, I’d meet all of my budget requirements with my first paycheck of the month and commit the entirety of the second towards savings, real estate, investing, and retirement. But I’m not there yet, I will be someday and you all will follow me as I work towards that. For now I make do with sticking to my budget and growing my savings and my Roth IRA.

For the first couple of months it was really tough, the biggest thing I noticed was that I was going out to eat with coworkers for lunch or drinks after work and that was killing my budget. It’s hard to say no to a drink after a long day and I’m not saying you should but just be aware of where your money is going. If you want to make another category on your budget for work related social life separate from your social life, feel free. Just don’t add too many categories that you’re left with nothing.

“Do not save what is left after spending, but spend what is left after saving.” -Warren Buffet

I can’t stress this enough. I’m an economics student and I understand about the life cycle of a consumer but it’s so important to start saving early and often. Don’t listen to the guys in your fraternity or sorority say that you should get as many credit cards as you qualify for and max them all out so you can enjoy college to the max.

I had an amazing college experience and came out with minimal debt (excluding student loans, which I’ll cover my experiences with at another time). But that small credit card debt didn’t become minimal until I neared graduation. That’s because like all 21 year olds fresh from their internships in NYC I was flushed with money and had a huge ego. Playing credit card roulette with my friends at the bar didn’t seem like a big deal. (For those of you that don’t know what this is, it’s when you and everyone you’re with puts their credit cards in a pile at the end of a night out and lets the waitress decide which card to put the entire tab on). I highly advise you not to do this. We rationalized it all works out in the end, let me assure you, it does not. So I didn’t budget well through college and it cost me heading in to the real world. Now I’m cognizant about what I spend my money on (and how tabs are separated) and where it goes. I know around how much I can spend on a night out and still be happy about it the next day. I know how often I should say yes to my coworkers and go grab that drink and still have money left over to put away in savings.

Seriously, don’t be afraid to budget. You can be as tough and strict on your budget as you want to be but my just putting the numbers down somewhere you will start making progress towards your goal. Small steps now mean huge returns in the future.

I’d like to put an excel sheet in here that you all can download and use to create your own budgets but we’re still fine tuning the website to be optimized for that sort of thing. For now, if you’re interested in putting together a better budget, or start one altogether, reach out in the contact me section. It’ll go straight to my email and we can set up a time to talk and I’ll be able to send you the tools needed from there.

Making The Most Out Of Your Savings Account

Know How To Make The Most of Your Savings

Why You Have A Savings Account

It’s always important for anyone and everyone to make the most of their money. Have it go further, spend it better, save it, and ultimately just have more of it. When most people think of their money they probably think how they can save better and how they can make more. Sure, there’s ton of online advice that shows the things you can do every month: create a side hustle, take some surveys, or get cash back on the things you were going to buy anyway. Yes, we admit these are all great things and would never discourage someone from working to make an extra dollar but like Warren Buffet said “If you don’t find a way to make money while you sleep, you will work until you die.”

“If you don’t find a way to make money while you sleep, you will work until you die.”

For most people they only make money while they are awake and at their jobs. So lets start talking about simple ways to make money while asleep. Because if you have to put in extra hours to make more money you’re just trading your time for that money. Enter savings accounts and compounding interest. Defined by Buffet as the “8th wonder of the world” (We’re gonna reference Buffet a lot through our articles, he is one of our main role models), compounding interest is the vehicle that lets your money make money and that money make even more money, all from the safety and security of your FDIC insured bank account.

You Already Have A Savings Account, So Who Cares?

All savings account aren’t made equal though and in the current environment of rising interest rates it’s good to look around and really understand how much your money is growing without effort or risk.

Chances are you probably have the same bank your parents set up an account for you at sometime early in your life, or you went to a college town where the options were few and had to open an account at the popular bank there. Our school gave the option of opening a college account right from orientation that would like up with our student ID’s. Nothing says starting College off right than a new bank account and maybe even a new credit card for all that responsible drinking you’re going to be doing.

There’s plenty to say good about the big national banks but when you look at the rate of interest they return on your savings, they are anything but at the top of the pack. I recently moved to a new city and neither bank I had accounts in in the North East existed down south so I took a dive through online articles comparing bank accounts and savings accounts while also hitting the pavement and going to local credit unions to try and decide what’s right for me. And that’s a tough question to answer and we advise you to think long and hard about what you need from a bank or credit union before you switch. This part takes a little more thought and we caution that you should not just jump in to a new account.

Now, I know it seems a little daunting but you can have your savings in one place and your checking in another. Personally, I use Marcus by Goldman Sachs. They offer approximately 16x the national average for interest on savings accounts and have incredible ease of access that everyone will love. There are no fees attached and your money starts compounding daily, starting the very first day your deposit hits their accounts. But there is a slight catch. Marcus only offers savings accounts and personal loans so you will have to keep your checking elsewhere. For me, dit was easiest to choose the local credit union that has an unbelievable ease of access in my city and also lets me tap into the Credit Union Network of ATM’s anywhere in the world, giving me quick and easy access to cash, at no fee whatsoever. There’s also the added benefit of credit unions that they usually offer lower rates on their big purchase loans such as home and auto and as someone looking at getting into real estate investing, this was extremely important to me.

Getting back to interest however, it’s what allows your money to grow from $100 to $101.85 in a year (if you use the current rate offered by Marcus) without even thinking about it. Yes’m, I realize that’s not a lot but let’s say you start with $1,000 in savings. You have a compounding interest rate of 1.85% and you don’t plan on touching your savings for at least 3 years. Without making any more deposits you will make an additional $57. I know, I know, this doesn’t seem like a lot but expand

this formula out and you’ll really see the benefit and magic of compounding interest and shopping around for the best rate.

Bringing It All Home

Let’s say you just graduated college, and for us, we just did. We’ve got $4,000 that I didn’t blow in college that I saved up from my internship. I’ve got my first job and I’m making enough to pay the bills and have some left over. In a conservative scenario, after accounting for my expenses like my social life and a dog, let’s say I can contribute $300 a month to that already $4,000 in savings. At the end of 3 years, if no withdrawals are made, I’ll have made an extra $521 dollars. Way outpacing the current rate of inflation. Going even beyond those three years and you;’re compounding on all of that as well. And that’s the magic of compounding interest.

It won’t get you rich quick but it will help you grow over the long term and that’s what the Modern Piggy Bank is all about.