Hugo Monteiro
21st April 2025
Let’s imagine a pretty common scenario: spending 3 euros a day on coffee or a random snack. At first glance, it seems like an insignificant, almost symbolic amount. However, if we multiply that by the days in a month, we reach 90 euros. Over a year, this small habit adds up to more than 1,000 euros.
Now, let’s consider an equally common choice: having lunch every day at the nearest café, like the one at FEP, where meals exceed 5 euros. Compared to FEUP’s cafeteria, where a full menu costs just €2.70, we’re talking about a daily difference of approximately 3 euros. By the end of a school week, this choice can translate into nearly 14 euros in extra expenses. And what if this money were invested instead of spent?
This is precisely the premise of the so-called Starbucks Effect, a concept popularised by David Bach in his book The Latte Factor. The theory holds that small, daily expenses, seemingly harmless and easy to justify, actually represent a constant and silent erosion of our saving and wealth-building potential. And no, this article is not an anti-coffee manifesto, nor an attack on the FEP bar. It’s simply an invitation to look at our money with more awareness, strategy, and intention.
Let’s go back to the coffee example: 3€ a day. It doesn’t seem like much, right? But over a year, that adds up to €1,095. And what if you chose to invest that amount annually in an instrument with an average return of 6% per year (like a diversified ETF)? The result: in 20 years, you’d have €42,000 in your portfolio – instead of just €21,900 if the money had simply sat idle (and we’re only assuming 3€/day – many of us spend more than that). That’s the famous eighth wonder of the world.
This comparison may sound disproportionate and naturally provoke counterarguments: “But a coffee a day gives me pleasure, it’s a necessary break,” or “That expense isn’t what’s ruining my finances.” So let’s clarify something: this isn’t about demonising small luxuries or glorifying obsessive frugality.* It’s not about banning coffee, condemning lunch at FEP, or avoiding spontaneous dinners with friends. It’s about something more uncomfortable and structural – how we normalise consumption and allow seemingly harmless decisions to accumulate until they quietly compromise our future freedom.
Indeed, the issue rarely lies in a single isolated action, but rather in the continuous sum of unreflective choices that, without us realising it, erode our ability to act with financial freedom. Every day, we give in to impulse without measuring the impact. Every expense made out of habit rather than intention means giving something up, even if that sacrifice comes without warning. Ironically, it’s often not the lack of money that prevents us from saving or investing, but the lack of intention to use it. So no, you don’t need to live in deprivation or cut everything that brings you joy – just start distinguishing what truly serves you from what merely fills a momentary void. We’ll return to this idea later. For now, this article isn’t about coffee. It’s about you and the freedom you want to have ten, twenty, or thirty years from now.
Behavioural Economics: Why We Spend the 3€ Even When We Don’t Need To
It’s tempting to point fingers and say, simplistically, that spending money daily on unnecessary things is a serious mistake. However, it would also be a fallacy to place the entire blame on you, because, in truth, it’s not (only) your fault. The decision to buy a quality coffee, order delivery, or subscribe to three streaming services doesn’t happen in a vacuum. It happens because it’s fueled by a silent but effective army working behind the scenes: marketing. This invisible force knows the mental shortcuts that lead us to these automatic behaviours better than anyone else.
Behavioural economics has been uncovering many of the psychological mechanisms behind our daily financial decisions. One of the most powerful is loss aversion: the discomfort of giving up immediate pleasure, like the warm taste of a morning coffee or the comfort of a good movie at night, feels greater than the pain of losing three euros. Rationality gives way to emotion.
Another subtle mechanism is anchoring. When a “premium” coffee costs five euros, one priced at three seems like a bargain, even if its actual value doesn’t justify the price at all.
Social pressure and status also act as silent drivers of consumption. Today, more than ever, consumption is communication. Showing what we drink, where we dine, or what we watch on weekends builds a personal narrative, often carefully curated on social media. Thus, consumption becomes a tool for validation and belonging.
And the final result? A consumption pattern that escapes rational control, more emotional than logical, more automatic than thoughtful. Rationality, often idealised in personal finance guides, is replaced by impulses that may seem harmless but, when accumulated, have real and lasting impacts on our finances.
Being aware of these traps is undoubtedly the first step to disarming them. After all, we can only resist manipulation when we can recognise it. But knowing isn’t enough – we must act. And perhaps this is where financial minimalism emerges, not as a restriction, but as a liberation.
Financial Minimalism as an Economic Strategy
Minimalism, far from being a passing trend or a philosophy of denial, is a conscious approach to consumption and money management. It’s about maximising the utility of your spending, eliminating waste, and increasing both the emotional and financial return of your decisions. I can assure you: it’s not about spending less for the sake of it, but about spending better, with intention, clarity, and alignment with what you truly value.
This financial mindset is grounded in core economic concepts (perhaps already familiar to the reader) that help structure more rational decisions aligned with individual well-being. One of the central pillars is diminishing marginal utility – the idea that the satisfaction gained from an additional unit of consumption decreases. That second coffee of the day just doesn’t hit the same. So why keep spending if satisfaction doesn’t match the cost?
Another key concept is opportunity cost. Every euro spent now on something with little value is a euro that isn’t working for you, whether in an emergency fund, a meaningful experience, or an investment generating future returns. Recognising this invisible cost forces us to rethink priorities and distinguish between what is urgent and what is important.
Finally, instead of sticking to a rigid and punitive budget, financial minimalism proposes creating a value-based budget. That means a plan that not only controls spending but reflects your priorities, promoting a balance between present enjoyment and future security. The focus shifts from cutting for the sake of it to choosing wisely: spending less where it matters less, so you can spend more (and without guilt) where it truly matters.
Ultimately, financial minimalism is not a path of deprivation, but of clarity. It’s not about saying “no” to consumption. It’s about saying “yes” to what makes sense, and reclaiming the control and freedom we often lose when impulses take the reins of our financial lives, something I’ll emphasise again later. And that, let’s face it, is an investment truly worth making.
Portugal and the Reality of Saving
It would be easy to present your recommendations and theories without first acknowledging the context we live in, but doing so would risk offering nothing more than pretty words disconnected from the real lives of the Portuguese. That’s why it’s essential to look inward and understand the ground on which our financial habits and decisions are built.
Portugal’s financial landscape reflects a reality that, while complex, reveals structural and cultural challenges in our relationship with money. According to data from the National Statistics Institute (INE), the household saving rate in Portugal hovers between 6% and 8%, well below the European average of 12% to 14%. This gap highlights a concerning fact: proportionally, Portuguese families set aside much less of their income for the future than many of their European counterparts.
This trend is even more pronounced among young people. Recent studies by DECO and the Portuguese Securities Market Commission (CMVM) reveal that about 60% of young people do not track their expenses. In a context where immediate consumption is encouraged, both by cultural factors and amplified social pressure via networks, young people’s financial management tends to be undervalued. The result is predictable: a generation often disconnected from the impact of its financial choices, without established saving habits, and frequently without an emergency fund. And this lack of a “financial cushion” makes any unforeseen event – a car breakdown, a medical expense, or a sudden life change – a source of financial stress, forcing reliance on credit or harsh cutbacks in other life areas. In this sense, the Starbucks Effect that David Bach introduced is not just about coffee: it’s a symptom of a careless approach to financial management.
Overcoming this effect isn’t about giving up small daily pleasures, but rather about transforming the way we think about and relate to money – a change that must rest on a solid foundation of financial literacy. Financial discipline, often seen as a limitation or sacrifice, should be understood as a higher form of personal freedom – the kind that allows us to make informed decisions aligned with what we truly value.
With that being said, Portuguese youth can (and should) adopt practical strategies to regain control over their money, such as:
- Track expenses: Simple, right? Use a budgeting app or (even simpler) a piece of paper to spot consumption patterns and areas for improvement.
- Set clear goals: Establish realistic goals, like building an emergency fund covering three to six months of expenses, to give your savings tangible meaning.
- Practice intentional spending: Before every purchase, ask yourself: “Is this necessary? Does it align with my goals?” This brief moment of reflection can prevent many impulse buys.
- Find cost-effective alternatives: Cook at home, make your coffee, or plan low-cost leisure activities. These small changes reduce expenses without compromising well-being.
The key point is this: these measures aren’t about eliminating life’s small pleasures. An occasional coffee, a dinner with friends, or a spontaneous purchase won’t ruin anyone’s finances. The issue lies in the unconscious repetition of those habits, which, over time, undermine financial stability. And in a country where the saving rate remains below the European average, and where young people face clear obstacles in building financial security, ignoring this phenomenon is a luxury few can afford. The difference between a 6% and a 12% saving rate may seem like just a statistic, but in practice, it means more security, more opportunities, and greater resilience when life throws the unexpected at you.
Coffee Isn’t the Problem. Lack of Awareness Is.
Finally, it would be dishonest to end this reflection with just finger-pointing. What’s at stake isn’t just budgeting, it’s life management. Maybe a coffee isn’t just a coffee. Maybe a dinner with friends, or a movie night, represents small moments of well-being that, for many, are truly priceless. The solution, therefore, is not to cut without thinking, but to think before spending.
In a world where, headline after headline, we realise financial stability is far from guaranteed, conscious management of small expenses can be the difference between freedom and future dependence. We must regain balance between immediate pleasure and future well-being, but above all, reclaim control – so that it’s us making the decisions, not the invisible shortcuts nudging us toward them. So go ahead, buy the coffee – but do it because you chose to, not because the routine pushed you into it.
“It’s not how much money you make, but how much money you keep, how hard it works for you, and how many generations you keep it for.”
– Robert Kiyosaki, in “Rich Dad, Poor Dad”