Wednesday, May 31, 2017

High Housing Costs vs. Avocado Toast

By now just about everyone has heard how wealthy Australian Tim Gurner admonished young people for wasting money on avocado toast while they complain about high housing costs. This has led to a predictable backlash. It seems that avocado toast is easy to mock. As is usually the case, neither side of this “debate” is entirely right or wrong.

It’s tough that rents and house prices are so high today. No matter how frugal people are in all other areas of spending, rents and mortgages are still painfully expensive. But wasting money in other areas doesn’t help.

David Chilton once wrote that people most underestimate the costs of “(1) cars; (2) dining out; and (3) little things.” Rather than literally discussing avocado toast, we should look at it as a stand-in for “little things.”

The cost of little things adds up quickly. Most of us have little idea how much we spend on our habits. For most of us it’s easily hundreds of dollars per month. I’d be willing to bet that if most people were asked to guess their total spending on little things, they’d guess less than half the correct figure. I’d like to think I’d do better, but maybe I wouldn’t.

I recall asking one of my sons how he managed to spend $1000 in one month at university. He wasn’t sure. When we checked his debit records, the answer was “a little bit at a time.” He had more than 50 transactions, none of which was over $40. This was enough of an eye-opener for him that he cut way back.

Some people say that cutting back on lattes and avocado toast will never make enough of a difference to put a dent in the high cost of rents and mortgages. This depends on how much you spend on little things. And unless you have actually tracked your spending for a while to know how much you really spend, you can’t be sure that little things don’t matter.

Other people argue that we shouldn’t be forced to give up every little indulgence in life just to be able to afford a place to live. There is truth in this. Maybe the odd latte isn’t a problem. But is this really all of your habitual spending on small things? I know I spend small amounts on many different things.

Suggesting cutting back on small purchases causes some people to immediately imagine the one type of small purchase they most enjoy and declare they’re not giving it up. This reminds me of asking a hoarder to get rid of some stuff. Instead of looking around for things he didn’t need any more, one hoarder I knew would sit and think of the one thing he most wanted to keep and would angrily declare he wasn’t going to get rid of it.

We need to avoid being like the hoarder who wouldn’t even examine his possessions. If high rent or mortgage payments are a problem in your life, one way to ease the pressure is to examine all areas of spending for things where you’re not getting much value for your money. Don’t make the mistake of ignoring small purchases. Many of us have enough small purchases in a month that they add up to real money.


  1. re: As is usually the case, neither side of this “debate” is entirely right or wrong.
    -- Avo-toast man is definitely on the wrong side (of his own biases). He vehemently chides young people (esp. Australians) for spending money foolishly instead of saving to buy a house. Except that Aussie RE is some of the most over-valued and expensive RE in the world (1/3 of the world's least affordable RE markets reside in Australia). So...he wants Millennials to stop buying perceived over-priced food items -- which they can consume debt-free -- and save that money to buy vastly over-priced real estate (of which he is a contributing cause) which will bury them under a mountain of debt for the rest of their life. Gurner is a prime example that wealth does not equate intelligence.

    re: He had more than 50 transactions, none of which was over $40.
    -- Perfect example of how people get into overwhelming credit card debt (the average CC transaction is $100). The perceived "free benefits" also make this kind of nickel and dime CC spending addictive.

    re: Suggesting cutting back on small purchases...reminds me of asking a hoarder to get rid of some stuff.
    -- Except that true hoarding (as opposed to simply having a lot of junk) is a mental disorder. Unless one has an addiction to shopping, reducing a small-purchase habit is not even in the same ballpark as compulsive hoarding.

    1. @SST: I'll stick with neither side being entirely right or wrong. Gurner is wrong for the reasons you mention. But he's right to observe that people shouldn't waste money on small things if they have better uses for their money.

      None of my son's transactions were with a credit card, but thanks for steering the subject away from the topic of this post and toward one of your favourite subjects.

      Let's see. Most of us have some mild hoarding tendencies and a small fraction of us have a compulsive hoarding mental disorder. Most of us have a tendency to make occasional foolish purchases and a small fraction of us have a compulsive shopping mental disorder. Seems like a good analogy to me.