[GJM] Fw: [globalnetnews-summary] In weak economy, forgoing $4 lattes for home brews

[mary rose]

How the changing environment is forcing us to change our habit patterns.
Perhaps for the better?  .

mary rose

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Sent: Friday, June 20, 2008 9:20 AM
Subject: [globalnetnews-summary] In weak economy, forgoing $4 lattes for 
home brews



http://seattletimes.nwsource.com/html/businesstechnology/2008006001_apnomorelattes.html
In weak economy, forgoing $4 lattes for home brews

The "latte effect" of the go-go years had consumers spending $4 a day on 
coffee. Now the downturn is forcing them to rethink the wisdom of such 
habits.

By CANDICE CHOI

AP Business Writer
NEW YORK -

The "latte effect" of the go-go years had consumers spending $4 a day on 
coffee. Now the downturn is forcing them to rethink the wisdom of such 
habits.

As inflation squeezes budgets, middle-class Americans are taking fresh stock 
of their spending in search of ways to save a nickel or a dime. The result: 
People are giving up a variety of small financial vices.

For Michelle Hovis, that means refilling her husband's used soda container 
from a 2-liter bottle she buys on sale for 98 cents. She tweaked his daily 
habit of buying a 20-ounce bottle when the price crept up to $1.39.

"The price of gas, milk, eggs - everything you can't control - is going up. 
So you need to watch the things you can control," said Hovis, a 31-year-old 
stay-at-home mom from Iron Station, N.C.

While the idea that little costs add up is nothing new, it comes with added 
sticker shock as food and gas prices sprint along at a record pace. The 
result is that people are finally putting the brakes on vices once 
considered necessary - like frappuccinos.

Milk, coffee, fresh fruit and bread were among the items that got more 
expensive by an average of 0.9 percent in April, the largest one-month 
increase since January 1990. Gasoline prices were up nearly 21 percent 
compared to a year ago.

Workers' wages, meanwhile, dropped for the seventh consecutive month.

The result is fewer latte runs. Literally.

Last month, Starbucks Corp. blamed rising food and gas prices when it 
reported a 28 percent drop in second-quarter earnings, and said sales at 
U.S. stores open at least a year had dropped - indicating some may finally 
be summoning their inner Scrooges. Coca-Cola Enterprises Inc. also said last 
month that weak U.S. sales - especially on some 20-ounce beverages - will 
likely cause its earnings to drop

Consider the jaw-dropping math behind "the latte effect" in today's economy.

A $1.50 bottle of soda for each weekday of the year, for example, would add 
up to about $390. Now at $2 in some parts of the country, the habit comes 
with an annual price tag of $520. Over five years, that's $2,600.

This is the point where a financial planning guru might multiply the cost 
out for decades, demonstrating how a carbonated beverage is quietly robbing 
you of your retirement. Except now it's consumers crunching the numbers and 
agonizing over their wasteful ways.

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"Unfortunately, pain is required for change. The pain of the uncertain 
economy, of gas prices and food prices, is becoming an important reality 
check," said Sheryl Garrett, a financial planner based in Shawnee Mission, 
Kan. That means people aren't eating out as often or spending as much on 
clothing and vacations.

For New York City resident Natasha Patel, the penny pinching means no more 
cab rides home on weekends. Instead, she relies on her monthly subway pass, 
saving about $20 in taxi fares a week ($1,040 over a year, $10,400 over a 
decade).

She also canceled her cable and Internet package, pocketing another $120 a 
month ($1,440 over a year, for anyone keeping track).

"It makes you really hone in on the things you really want to do, rather 
than doing stuff just because you can," said Patel, a 34-year-old academic 
counselor at Columbia University.

Taxis, mocha lattes and sports cable packages aren't even options for those 
who are suddenly out of a job. Others who rein in pricey habits are seeing 
the savings gobbled up by gas prices or mounting debt. But even among the 
relatively comfortable, rising prices are upending habits they've long known 
were costing too much anyway.

Cutting back doesn't have to mean a joyless existence, however. Simple 
measures like using cash instead of credit cards can make people more 
conscious of how much they spend, financial planners say. Taking a few hours 
to scan cell phone and cable bills for unnecessary charges can save, too. 
Shopping around for better deals when contracts run out is another good 
idea.

"Most people are not even conscious of how much they spend," said Laurie 
Hensley, who teaches a course on personal finance at Cornell University.

In some cases, the cost of all a person's habits can add up to more than 
basics like rent and transportation, she said.

That's not to say the little habits will determine your financial fate. 
Other factors - mortgages, bad interest rates, credit card debt - are likely 
the bigger drains on your budget. But when times are tight, it's a chance to 
review all spending, big and small.

Giving up pricey routines isn't stopping the Hovis family from enjoying 
life. Instead of buying prepackaged Lunchables at around $4 apiece, Michelle 
Hovis makes her own using deli meats and cookie cutouts; her daughters don't 
know the difference.

To save money on gym memberships, they now take their two young daughters on 
family bike rides. There are no more trips to Chuck E. Cheese, but they have 
even more fun taking picnics at a nearby peach orchard.

"We get to spend time together as a family," Hovis said.