I recently overheard a young professional discussing the high cost of living. He asked his colleague how it would ever be possible to save enough money to make a down payment on a house. The young man’s spending habits were observed over the course of a few hours. During that time, he consumed a bottle of water and a designer cup of coffee from a highly profitable purveyor of coffee drinks, and excused himself to smoke a cigarette afterwards. He also discussed the upcoming lottery prize, and chatted about a tony place where he was meeting his friends for drinks and dinner after work. Unsurprisingly, I overheard his conversation while he was talking on the latest version of a $1,000 smartphone.

This is a very ripe place for me to make some suggestions. Within a very short period of time, this young man did almost every thing on most lists of the most wasteful spending habits.

Bottled Water:

Tap water is roughly a penny per gallon, filtered water works out to about 20 cents, and bottled water averages about $5 per gallon.  This will work out to $1,825 per year.


Coffee can be made easily from filtered water for about 25 cents per cup. At a national chain coffee shop that same cup is at least $3.25 including taxes.  A two-cup-a-day drinker can save $2,190 per year or more, depending on additives.


Depending on the part of the country, a pack of cigarettes can set you back from $5 to $11.  A pack-a-day smoker can therefore kick the habit and save between $2,000 and $4,000 per year.

Lottery Tickets:

These are seriously nothing but a fool’s errand.  People have a higher probability of being attacked by a mountain lion than winning the Powerball. Whatever this youngster is spending on lottery tickets should just be stopped. Lotteries also feed the mindset that life is all about luck as opposed to diligently following a plan for success.

Drinks and Dinner Out:

See discussions on bottled water and coffee above.  It is a good metric to consider that whatever is spent is roughly triple what it could have been consumed for at home.  Someone who spends $150 per week on such activities would save $100 per week ($5,200 per year) by having a gathering at the house.

Cell Phone:

I won’t make an argument that anyone should give up their cell phone.  The question is, what do you do with it? If that answer is talk, email, and texting, it can all be done with an inexpensive phone and plan.  Do this and you can save at least $500 per year as compared to owning the most fashionable gadget.

The Down Payment:

Doing all of the above will save between $11,000 and $15,000 per year in pretax dollars. Nearly anywhere in America outside of San Francisco or Manhattan, including most parts of Greater Palm Springs, this is enough for a down payment on a starter home, especially with the numerous first-time buyer programs available.