Coffee and Robots

Been thinking about this RNZ article I came across: How many years would you have to skip coffee to save enough to buy a house?.

The audience of the article is ostensibly folks who have yet to buy a house, but do buy. They heard that maybe, through small, daily, personal sacrifices they could save enough to get their first home. I am not sure if this is a commonly held belief: do folks think the only thing preventing our first home is your daily coffee? It feels like a notion some website can create whole-cloth and people assume people must be discussing it in some corner of social media they haven’t seen.

Anyway, this is the math they give:

But if you currently buy a coffee a day for $5.50 and decide to save the money instead, you could save $2007.50 a year.

If you could do that every year, with a 5 percent return each year, you’d have $26,000 after 10 years, $69,000 after 20 years and $138,000 after 30 years.

At the moment, a typical first-home deposit is about $140,000 (or roughly 25,450 coffees if you paid $5.50 each).

If you were having breakfast at a café once a week and saving $20, giving that up could save $1040 a year or $70,777 after 30 years.

In other words, if you didn’t buy coffee for 30 years, and had a pretty good return rate on your savings, then you’d get halfway to your first deposit.

But no worries, the realtors are quick to shoot this down.

Liz Koh, founder of Enrich Retirement, said the problem for many people trying to save a house deposit over a long period of time was that house prices increased faster than their savings.

“By the time you have spent a few years accumulating the deposit, houses would have tripled in price. However, it is a still a good idea to save and it’s an even better idea to cut down your outgoings so you can borrow more.”

Sidenote: I absolutely hate the way realtors and money people talk. It reminds me of funeral directors, where there is an aversion or taboo to the subject they are discussing and so cannot say it directly, and so will create new terms to discuss it indirectly. How we get the word “cremains”, or here the term “outgoings”. Why are finance folks so averse to their subject though? Is it some guilt they feel?

Anyway, this realtor says that it doesn’t matter how much you save cos the rate of saving isn’t going to ever match the rate of houses going up. But, no matter, you should do it and should even cut back even more. Just sit in in an austere stillness until you can borrow enough to maybe buy 30 to 50 years in the future.

But actually, her advice is even worse:

“A better approach is to buy something small and run down and add value to it, then sell and do the same thing over again,” Koh said.

“Part of the problem is that first-home buyers seem to want to buy their forever home from the outset, and it’s not always practical or affordable to do that. Investing in property is a great way to make money, and a good lesson to teach is the lesson of leverage and how you can make that work for you over time to build wealth. It just requires some smart thinking about how to buy the first property.”

In other words: The problem with people trying to buy a home is that they are trying to buy a home. They should instead become house-flippers or slum-lords. Their tip for first-time home buyers is to buy something they cannot imagine living in, with the promise it will be leverage for that first home. The first rungs of the property ladder are buried underground.

It’s crazy to me that this is what she’s saying, in a single quote: - it’s imposible to save up enough to ever buy a home - you should still cut your spendings regardless - you should also be buying more property

What is the property they are referring to here? An empty lot? A slum? The implicit subtext is you are buying something to quickly sell it, but to whom?

The concept of saving enough to buy a home you can grow old in, to not see it as investment but just a home is just absurd to them.

The worst is at the end, this other realtor:

Dean Anderson, founder of Kernel Wealth, said while house prices had historically gone up faster than savings for many people, he was not as sure it would continue into the future.

“The metrics supporting house prices are at their limits.”

He said someone who was on a lower income and in debt could pay that off more quickly by cutting down on small luxuries like a cup of coffee.

If you have a loan of $20,000 on a 12 percent interest rate that you’re paying off at $306 a fortnight, you could have 156 weeks left to run on the loan. If you topped up that payment by $20 a week, you could clear the debt 20 weeks early.

“metrics at their limits”, ”..to run on the loan”, “topped up the payment”, “clear the debt”. An aesthetically disgusting vocabulary.

And this guy’s advice is the same as the other person: stop buying coffee. It is a luxury–a small one, but still a luxury.

He continues though:

“However, when past that it is about choice and trade-off of value. A daily cup of coffee to me is worth it, that’s because I know I can derive greater value by focusing on my work, building a business, building my salary, which will be far more impactful than the cost of the coffee,” he said.

What is he talking about? Other people should not buy coffee to top up their loan repayments, but for him the coffee helps him focus on his grind and building his salary? Coffee is an investment in his hustler mentality.

And he goes on:

‘Thinking aloud, and even based on chats we’ve had internally in the last week, if I was starting out today I wouldn’t be worried about the coffee. I’d be doing everything I can to figure out how to protect my future and income prospects from being disrupted by AI.’

The conclusion: stop worrying about houses and coffee, be freaked out about the robots.

“Based on internal chats we’ve had this week” is an incredible idiot phrase and this man sounds coked out. Like he gets a call from RNZ asking this coffee question and his answer is, “Sure, yah, if you can cut down coffee you should, get outta debt. Me, coffee is a key to success, I ain’t going to cut i t because it brings me more money through proper mindeset. But anyway, just spitballing, AI is going to disrupt everything, why are we talking coffee and houses? You should be preparing for that. Anyway i gotta go!” THAT is his first-time home-buying advice. How can you read this article as anything but hopeless?