"Latte Effect" Hitting Home In Tough Times

Little Things We Spend On Add Up, But So Could $$ Saved If We Curb Those Purchases

(CBS)  The "big squeeze" is putting a big pinch in everything from lunch to lattes.

As the economy continues to spiral, many people are being forced to cut back on small discretionary purchases -- life's little indulgences -- because doing that can result in big savings, since those little buys really add up, reports CBS News correspondent Bianca Solorzano.

Items such as their daily lattes, pampering manicures, luxurious hair highlighting.

"This was coined about 10 years ago and it's called 'the latte effect' -- people who spend money on the little things every day don't realize how much it can add up over time," says BusinessWeek magazine Personal Finance Editor Lauren Young.

Illinois small business owner Cindy Eagle is cutting back on small pleasures for the first time in her life.

"I realized," Eagle explains, "the stock market was down, and the amount of money I thought I had to last me for the rest of my life was significantly less."

For more than two months now, Eagle's been consciously and creatively saving. Instead of buying cards, she makes her own on the computer. And forget fine dining.

"The best things in life for me, and probably for most Americans, are free," Eagle remarks, "like a bike ride, a movie at home with someone you love, hugging your child or your grandchild -- all of these things, they cost nothing."

Eagle is cutting back on everything from to gifts to gas to groceries and expects to save more than $2,800 dollars per month and close to $40,000 over the next year.

And Eagle's far from alone in thinking twice before buying.

"We don't go out to dinner as much," one man told CBS News. "We're going through the Sunday paper (for coupons), looking for really good deals," said another.

"Why are we in this predicament?" Newsweek's Young asked. "Well, the economy is not so good right now, and we have not really stopped spending that much."

Young says there are a lot of easy ways to save, such as bringing your lunch to work, checking DVDs out of the library instead of renting them, carpooling at least one day a week, and doing your own nails at home, rather than getting them done at a salon.

It may be tough at first to pass on life's little perks, Solorzano notes, but just remember: Small changes can add up to much bigger savings.

She adds that financial advisers suggest writing out all the things you spend money on -- that makes it easier to spot ways you can cut back.

[mnoble712]

Ditto I was enraged as well with this story. Between 2 of us we don''t bring in what she can "save" by cutting back on frivolous things!! Show me how we can cut back and I''ll do it.

[missingamerica]

Remember back when -in response to the vast sucking sound of manufacturing jobs leaving the U.S. as a result of "free trade" - Bill Clinton said (and I paraphrase):

"Don''t worry, be happy! We''re transforming into a service economy! The lost manufacturing jobs will be replaced with service jobs!"

Here''s hoping your "replacement" service job wasn''t in a hair or nail salon or as waitstaff in a latte shop or...or...or...or...

[eveun9]

I apologize with all the people who posted here their comments. I hadn''t noticed that you felt offended by the latte effect story. Since I4m from Mexico it seems that reality is not clear for me in your lifestyle in the US. BELIEVE ME!!!! I know what you mean about your money issues. I live ok with my family but I don''t get those luxuries mentioned either. I just found the story interesting but again, since I don''t live in the US you must know best. Again, my apologies.

[eveun9]

I really liked this note about the latte effect. I found it really interesting because since I4m not an American citizen I''m aware on the fact that even you guy are struggling with the economy matters nowadays. In Mexico, it has been usual for the people to deal with this for many years already. Love your show and notes... I wish in Mexico the TV programs like yours had some of your ideas.

[caldwellptr]

I''ve given up health care, prescriptions, non-work related driving, going to the grocery store until my shelves are bare and more ... where is this other world of latte''s?

[erehak]

I agree with everyone here. This report is shamefully NOT representative of anyone I know!! It''s a slap in the face to the millions of us working poor who need some real advice on how to survive these days. We don''t have money in the stock market, we don''t have any little extras to eliminate from our lives; we''re lucky if we can pay our monthly rent and utility bills and still have anything left over to buy gas or food. Let''s see some financial advice that''ll do US some good.

[niftynana]

I''m glad I wasn''t the only person offended by the "latte effect" story. I don''t get my hair professionally highlighted (a friend comes over for burgers and cuts my hair about every 6 weeks), I certainly don''t get manicures, visit Chanel, and my monthly take-home is about what she is going to save!!! Oh, poor baby. No more lattes or manicures. I buy my clothes at Wal-Mart and on sale at Stage and all my spare change goes to gifts and "spoiling" my two granddaughters. Don''t get me wrong, we have a nice life; go on a family vacation once each summer,have a pool in the back yard, and eat out every now and then, but like most ordinary folks, we always think twice before buying.
Now, since I don''t have lattes (just regular ol'' Folgers)how about some tips for the rest of us.

[tfcsd]

My heart waxed cold when I see the well off "cheaping out" and bragging as if it is a virtue. The poor are not amused. Since the poor are not allowed in their domain, they should not enter ours.

[mollydtt]

I don''t even make $40,000 a year. I''ve always brought my lunch to work, my daughter has always brought her lunch to school, and I never buy latte''s (or eat fast-food).
Come on---give me some real advice here.

[carolc241]

Yes, I have to agree with the comments of PB. Interviewing someone who makes as much money as Ms. Eagle obviously does is hardly representative of the average person. I don''t even make $40,000 per year! I already don''t drink fancy coffee drinks, dine out, go to movies, take vacations, etc. It takes every penny I make to pay my rent, utilities, and other bills. I don''t have any little things to eliminate, so how does someone like me save money? Get real!!!

[penelopevb]

I am going have to change my morning routine and not watch The Early Show anymore. Who is your audience? I almost gagged on my coffee when that woman stated how much she saved mo9nthly and annually. I assume her income is equal to yours. As "reporters" you need to look up the average salary of New Yorkers. I gather she aspires to take a round-the-world cruise annually when she retires to her Greenwich mansion. I am worried about paying my rent when I retire. You people need to take the subway or bus to work and join the real world. Do the math!! She''s saving $40,000 a year w/o her lattes! Give us all a break--PB