Sometimes you’re going to want things that you know you shouldn’t buy, or that you know you can’t buy.  And that isn’t much fun.  I know this from personal experience.  But it’s a marathon, folks.

You’re not going to get out of debt and be rich tomorrow.  Not next week, not next month, or not next year.  Maybe not even in the next ten years (though that is more than enough time to get out of debt).

What I can tell you though is that if you’re in debt, and don’t do anything about it, those ten years are going to pass, but you’re still going to find yourself in the same position, only now with less time to get out of debt and get wealthy.

That is one of the reasons I get so frustrated when I see an article like this one called “Why Ditching Your Daily Coffee Habit Isn’t The Best Savings Plan.”  I even take umbrage with the title.  Especially with the title.  If you didn’t read the article, you would think that a little step like brewing your own coffee at home isn’t going to do any good.

That’s great if the author has stock in Dunkin’ Donuts or McDonald’s.  But for the average person who needs to apply as much of their capital towards combating debt as they can, it’s at a minimum, misleading, and possibly even a lie.  But I get it.

They are plugging a book, and to do so, need to use the most inflammatory headline.

Now, I’m not even going to go into the returns they speak of, but they are admittedly high, and most investors probably won’t achieve an average return in double digits.

However, if you have a credit card debt, somebody is earning returns in the double digits… the company that owns your debt!

For someone who is trying to pay off their credit card or student loans, that $4 is going to be better spent on that than on a peppermint latte.

Another issue I have is that they present zero alternatives.  They complain about fuzzy math, but provide none of their own.  Let’s say you go to Starbucks each weekday.  Let’s say you get a grande latte, and paid $3.65 for it.

That is $949 annually.

Could you use an extra $949 this year to put towards debt?  Or into a Roth IRA?  Me too.  But that’s only one year.  Since you’re not going to Starbucks, you still need coffee.

You start brewing it at home at a cost of $149 annually.  You still have coffee, but making it yourself saves you $800 every year.

How much will you have after 30 years if every year you put $800 into a low-cost mutual fund, like the Vanguard 500 Index Fund (VFIAX)?  The S&P 500 has had a Compound Annual Growth Rate of 9.94% since 1970.

I’ll deduct 0.05% from that to account for the management fees charged.  So after 30 years?  You’ll have about $130,000.  Feel free to do the math for yourself.  Now, obviously, the S&P isn’t going to return that much each year.

And in 30 years, if inflation averages 3% per year, that $130,000 is going to have the purchasing power of about $53,000.  But still!  That’s a pretty good return for just brewing your coffee at home.

If that doesn’t get your motor going, think about it in these terms; every $3.65 you spend on a Grande Pumpkin Spice latte is $3.65 that will not be going towards your outstanding debt.

The outstanding debt that is sitting there, accruing interest for someone else.  Your debt is literally putting money in someone else’s pocket every second it sits there.  So yes, hell yes even, if you are in debt, or even if you aren’t, your money can be put to better use than a coffee.

I very much agree with the response from Dave Bach:

I take total issue….The Latte Factor is a METAPHOR for how we waste small amounts of money on small things. It’s a teaching method to get people to “re-think” how they spend money, and realize they have more than enough to start saving.

I would add trying to help people realize that they make and have more than enough money to be wealthy.  It’s not about making six figures, it’s about using the money that you have in an intelligent way.

Nobody is going to agree with everything I say, and I’m not trying to necessarily change anyone’s mind.  I’m a firm believer that everyone should decide for themselves what is right for them, in their current position and circumstances they face.

I believe everyone has a right to as much information as they desire, and I just try to be one source of that knowledge.  Sometimes I just wish that when people have access to such a large microphone, they would use it more responsibly.

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