May 17, 2022

LeadershipProfessional Development

The Happy Hour Theory

By: Patrick Nalepa

I’m sure many of you have heard of the “latte theory” but let me introduce you to its younger cousin the “happy hour theory”. For those of you who need a refresher, the “latte theory” is a personal finance strategy that compares what you spend on your morning Starbucks versus how much you could have in investments if you forgo the morning Frappuccino and instead put that money in an investment account throughout your working years. While the guiding principles are nearly the same in my “happy hour theory”, hopefully I will be able to bring the terminology and explanation more tangibly into the fast-paced world of 2022, without leaving anyone un-caffeinated!

Happy hour is a glorious time, an opportunity to get to know coworkers and strangers alike in a friendly atmosphere at the bar in an environment that is free from the stuffy office and oddly formal email signatures. And on top of all that, drinks and appetizers tend to be significantly cheaper during the happy hour window (often 5pm-7pm) than any other time of day. While these discounts and prices vary by city, I am going to use my home as an example – Washington, D.C. The average happy hour cost for 2 drinks and half an appetizer (including tax and tip) comes out to nearly $28*. This is a severe discount from $50 at the estimated full menu price, approximately $22 in savings per occasion you opt for happy hour over a normal full dinner night out. Keep this number in mind.

When I begin my relationship with my clients, I start off by telling them, I have no desire to slash their spending just for the sake of slashing it. Could it be necessary so that they can achieve their financial goals? Sure! But that is never the aim, in and of itself. The most important thing I do with all my clients, is work my hardest to ensure all of their dollars are working in the most efficient way possible. And yes, going to happy hours might be an efficiency they are missing. Whether it is building comradery with coworkers, enjoying an early date night with your significant other, or gathering with old friends, happy hour is a more efficient way to spend your dollars so that you can continue to have the enjoyment of socializing while still being financially prudent.

Now picture this: Once per week, instead of going out to drinks (post-dinner) with your friends you go to Happy Hour, saving $22 ($88/month). Say you take that $88/month, invest it in a Large Cap Index Fund and continue to put those savings into the account each month until you retire (say 40 years). That $22 per week in savings could turn into over $500,000 by the time you retire! And that is without even changing the frequency with which you are going out, but simply changing the when of going out.

A lot of people don’t want to be held accountable for their finances because they think it means they won’t be able to go out, enjoy their hobbies, or go on adventures, but that couldn’t be further from the truth. Small tweaks like shown above, will allow you to travel places you’ve never been and enjoy things you’ve never imagined because your money will work for you, not against you. If you want to see how your money can work for you, drop me a line at [email protected]

*per a 2020 SimpleTexting survey