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Tess Vigeland: And finally, no trip to Seattle would be complete without a visit to the city’s famed Pike Place Market. The flying fish…
The ubiquitous buskers — try saying that five times fast. And of course the guy charging a buck for you to take a picture with his six-toed cat.
But among these Seattle cliches, one more stands out. And it also just happens to be a personal finance cliche. We had so much fun with Seattle-certified financial planner Karen Ramsey earlier in the show that we asked her to meet us at Pike Place for a discussion of this received wisdom.
Vigeland: So Karen, here we are outside the very first Starbucks.
Karen Ramsey: Welcome.
Vigeland: Thank you. But I don’t see a cup of coffee in your hands.
Ramsey: Well, no, you don’t see a cup of coffee in my hand, because I don’t drink coffee. But I’m probably one of the only two people in the city who don’t.
Vigeland: Well, the reason we’re here, is because it does seem like Starbucks has become a part of personal finance lore.
Vigeland: Ask anyone, you know, how you can cut your budget — “Oh, it’s the $4 cup of coffee that’s gotta go.” What do you think about that?
Ramsey: Well, I say, let’s take a different tact. What if you really looked at what you spent your money on in all categories, and then you decided what’s really important to you. And if coffee drinking is really important, then that’s not where you should cut. Maybe it’s eating out. How about that telephone charge that you have every month, that you now have a $200 “you must have cell phone” bill every month.
Vigeland: And it doesn’t taste very good.
Ramsey: And it doesn’t taste very good.
Vigeland: And does keep me awake.
Ramsey: No, it doesn’t. The thing to think about in the spending of money is how much does it really cost you to do what you’re doing. And are you consciously doing that or is it unconscious. So if people get a couple of Starbucks coffees a day, seven days a week, 52 weeks a year. Do you know how much money that is?
Vigeland: Do people really drink that much.
Ramsey: We’re in Seattle, yes. That’s $2,912 a year.
Ramsey: So I could go to Hawaii for that much money.
Vigeland: Why do you think the Starbucks cup of coffee has become so symbolic of frivolous spending?
Ramsey: Well, I think it’s something that people do unconsciously. We didn’t used to have to go to anywhere to get our cup of coffee; it was brewed at home. And then, it started out at, like, a couple bucks. And now it’s escalated. So it’s gotten to be a big ticket item, as opposed to where it started, which is where everybody felt like they could do it.
Vigeland: So, your real message here is that you gotta decide what’s important to you, and if it is that $4 cup of coffee, or at least the $4 latte, so go for it.
Ramsey: That’s right. Yes, it’s all about your personal goals and values and what’s important.
Vigeland: Well, I have not had my grande, extra hot, non-fat dirty chai yet today, so I believe that’s going to be about $4.25 for me, but I’m going to do it anyway.
Ramsey: If that’s what makes you happy, go for it.
Vigeland: Thanks, Karen.
Ramsey: OK, thanks.
And to test this budgeting wisdom, we asked a few Seattleites wandering around Pike Place if they would ever cut out the daily coffee run.
Man 1: I would never cut back on coffee. Ever.
Man 2: I don’t drink coffee.
Woman 1: Probably not. Being a true Seattleite, I drink coffee everyday, and it’s something that I probably wouldn’t be able to make from home.
Man 3: I’m pretty much addicted to the bean. So I would cut back somewhere else, before I cut back on my coffee consumption.
And by the way, this week Starbucks announced first quarter profits of $217 million. That’s a lot of lattes.
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