The So-Called "Avocado" Effect
The latest ripple to flow through the personal finance industry has to do with the superfood: the avocado. For many the avocado is central to one’s lifestyle - we eat it in the morning, put in our sushi (which is a personal favorite of mine) or put it on fancy toast. According to self-made Australian millionaire Tim Gurner- the reasons why millennials will never enjoy a successful financial future is due to our preference for purchasing expensive avocado toast on multi-grain bread for 19$ and enjoying multiple coffees outside daily at around 4$ a pop.
Here’s a small excerpt from his interview:
“When I was trying to buy my first home, I wasn’t buying smashed avocado for $19 and four coffees at $4 each,” he said. “We’re at a point now where the expectations of younger people are very, very high.”
He added: “We are coming into a new reality where … a lot of people won’t own a house in their lifetime. That is just the reality.” Asked if he believes young people will never own a home, he responded: “Absolutely, when you’re spending $40 a day on smashed avocados and coffees and not working. Of course.”
Catch the interview here: : https://www.theguardian.com/lifeandstyle/2017/may/15/australian-millionaire-millennials-avocado-toast-house
Is there an element of truth to this? Does purchasing fancy avocado sandwiches mean I will never be financially independent?
Here’s the problem today and I think many people (myself included) are guilty of it. One of the largest portions of a young professionals money is spent on what we call “food dollars”. Now this does include groceries but mostly eating outside. We all want to try the newest thing - whether it’s Shisha with an ice pipe, starbucks unicorn frappucino and this list can go on. The problem with eating out and indulging is that there is always a premium to what you pay. It is these premiums that one has to worry about - if your goal is true financial success.
Now if fancy avocado toast is the only thing you are paying a markup for then you probably do not have a problem with it - the question lies with, what are all the other things you are paying a premium for? Just like it is better to invest for a longer period of time because of the compounding effect - the financial problems that arise when you always pay huge premiums compound over time and set your financial goals back.
Everyone has heard the story of: if you cut out your morning trip to the coffee shop and save 5$ over time it builds up to this amount and you could’ve saved this much money. While that is true - people like to do the things they enjoy with their money. The biggest secret to building wealth over time is truly to keep your expenses low - but at the same time not to be frugal.
One of the best ways I find I try to use in my daily life is take an object and tell myself “ how long does it take me to earn it? And am I willing to work x number of hours to offset the costs. For some items its no and for some its yes but I always have a balance.
Disclaimer: All of the above information is my own personal opinion - it should not be used as financial advice. Please consult with a licensed representative for any financial decision. Avocado effect coined by Tim Gurner in his interview with 60 minutes Australia.
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