It’s Not About the Latte

Mar 30, 2019 by


This is not a nest egg buster.

Have you seen some version of this tiresome lecture?

Personal finance pundit: “You’re spending $3.50 a day at Starbucks. That’s $1,274 per year! Invest that in an IRA earning 7% per year and in 30 years you will have $120,000!”

The assumptions are suspect, but the arithmetic is inarguable.

Drink Your Latte, For Gawd’s Sake

So should you stop drinking those fancy coffees? Maybe, but not because doing so will have a meaningful impact on the growth of your nest egg.


Because $1,274 per year is what is technically known in the Money Counselor world as “chickenfeed,” that’s why.

Plus I’m assuming you really like your daily Starbucks. Quality of life matters. If sucking down coffee that conjures memories of burnt toast helps you feel the way you want to feel, then I say go for it. (On the other hand, if Starbucks has just become a tired habit, and you don’t get a lot out of fancy coffee anymore, then yes: follow Mr. Pundit’s advice.)

Swing for the Fences

I bet you’ve never heard of John Wesley “Boog” Powell. (You didn’t see that sentence coming, did you?) He played first base for the Baltimore Orioles from 1961-74, helped the team win the World Series in 1966 and 1970, and was American League MVP in 1970. Boog was a slugger. Once when asked for his theory of hitting Boog answered:

Swing hard in case you hit it.

I don’t think Boog invented that aphorism, but he certainly lived it on the baseball diamond.

And just what is the connection between Boog Powell and Starbucks, you’re impatiently asking? Just this: when saving for retirement, don’t devote a lot of time and energy to depriving yourself of chickenfeed (financially speaking) small luxuries you really enjoy. Instead,

Save big, in case you love Starbucks.

5 Crucial Steps to Saving Enough for Retirement

Lattes? Who cares. Do these 5 crucial steps, and caffeine load if you want:

  1. Spend A LOT Less Than You Earn, Starting Day 1  This is one standard piece of advice that’s solid. Lifestyle inflation—ratcheting up your cost of living to match your rising income—is a loser’s game, if we define winning as securing financial freedom. Instead, set monetary and calendar goals for financial freedom, then work backwards to determine how much you need to save and can spend annually to meet your goal. Set your lifestyle in accord with your goals. Otherwise, your goal is fairy dust stuff. Let’s not kid ourselves.
  2. Optimize Your Credit Score  Your credit score affects your cost of living in lots of ways (even if you have no debt!), many of which you probably never realized. But let’s focus for a minute on just the biggie: a mortgage. For almost all of us, a house is, by far, the single biggest purchase we’ll make in our lives. Ponder these numbers: Compared to a mediocre credit score, a high credit score will save you $50,000 in interest on a $150,000, 30-year mortgage. And you’ll save many thousands more over the course of your hopefully long life in interest on other debts, insurance premiums, and deals offered only to those with stellar credit ratings.
  3. Tell, Don’t Ask, Your Realtor How Much House You Can Afford  Your realtor, approximately 90 seconds into your initial meeting: “How big a mortgage have you been approved for?” Answer this question honestly, and you’ll never be shown a house listed at less than 10% more than the number you answered. And what is the relationship between 1) how much house you can afford or want, and 2) the biggest mortgage amount for which you might be approved? Nada, zip, nothing at all, no relationship, bub (and bubette). I’ve written elsewhere about how to judge what you can afford—you can look it up.
  4. Let Uncle Sam Help  The best way to save for your golden years is through tax-advantaged vehicles like 401(k)s and IRAs. Learn the rules, and max out everything you possibly can, every year. In particular, eat ramen for Sunday dinner if you must to take advantage of an employer match of your retirement plan contribution. I mean, if someone came to your door and offered you, say, $2,000 cash to eat ramen 52 meals a year, would you do it? I would. Think of an employer match the same way. Turning down free money is dumb.
  5. Tell Active Fund Managers to Eff Off  To conserve your time, I won’t go into detail here, but just say this: active mutual fund managers are ethical frauds and thieves, plain and simple. If you pay active fund management fees, you’re a sucker, period. For more, please refer to my articles “Fund Fees: Nest Egg Killer” and “Active Fund Management’s Record“.

Enjoy your guilt-free Starbucks tomorrow. But remember, we have a deal: steps 1-5.

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