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The often regurgitated financial advice goes something like this: You are spending too much money on the small things. That latte you buy every morning before work that costs $5? It’s preventing you from reaching your financial goals singlehandedly. Per Suze Orman, if you buy a daily coffee, it’s like “peeing $1 million down the drain.”
Hold up a second? Is this true?
Finally a few personal financial experts are starting to break apart this myth. It’s about time.
Tara Siegel Bernard, a personal finance reporter at The New York Times, had this to say about this regularly shared advice recently:
“It’s silly. It’s a superficial way to get at the ‘needs’ versus wants; question, but it’s not a particularly smart one. Or maybe it’s just easier to blame people for overspending on coffee because it’s a lot more difficult to give advice on the many things they cannot control: wages not keeping pace with the cost of living, the high cost of health insurance, housing, child care, paying for college, etc. But … coffee! You can control the coffee!
All of that said, we should try to be thoughtful about spending. We’re constantly making choices and trade-offs that affect our financial and emotional well-being. Should I pay more for housing so I can live closer to work and spend less time on the train and more time with family and friends? Or should I pay less for a home but increase my commuting stress? Those types of financial decisions — how much house to buy, for example, or buying a more economical car — will go a lot further than agonizing over lattes.”
One thing that Bernard does think is getting consumers is all of those subscriptions that people are signing-up for.
“It has become much easier to be an unconscious spender. Within a relatively short period of time, subscription-based businesses are everywhere, and they’re probably betting that most of us will forget to turn off these services when we don’t need them anymore. Unsubscribing to something is a quick little win. It’s not going to make you a millionaire, but you can comfortably buy a cup of coffee with the proceeds.”
Editor’s note: One of our favorite hacks for dealing with this exact issue is an app called Truebill which combs through all of your financial statements to alert you to all of the subscriptions you are paying for, so you can cancel things really easily and not get stuck paying for subscriptions accidentally.
As for the financial decision that is going to make a major difference in your financial life? Per Bernard, it’s not coffee, it’s investing.
“Buy a collection of low-cost investments like index funds, which will track different certain segments of the stock and bond markets, that provide exposure to businesses around the world,” she advises. “The most important factor is coming up with the right mix of aggressive investments (stocks) and conservative ones (bonds) that you can stomach.”
Feature Image: Twenty20
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