Worried about retirement? Make your own damn coffee.
According to financial celeb Suze Orman, perhaps the only thing standing between millennial caffeine addicts and millionaire status is that daily latte macchiato.
‘You are peeing $1 million down the drain as you are drinking that coffee. Do you really want to do that? No.’
Orman, the best-selling author of “Women and Money,” explained to CNBC[1] that $100 a month — a little more than $3 on coffee a day — would turn into $1 million after 40 years in a Roth IRA. That’s assuming a healthy 12% return, but even at 7%, that’d give you an extra $250,000 for your golden years.
“I wouldn’t buy a cup of coffee anywhere, ever — and I can afford it,” Orman said. “I would not insult myself by wasting money that way.”
Read: Retire early? Orman says you need at least $5 million[2]
It’s a matter of needs vs. wants, she said. If you focus on the former “you would find the money to invest in your retirement accounts... you would find the money to get yourself out of credit card debt.” Here, let her explain it:
Obviously, Orman isn’t the first to identify the downside of a Starbucks SBUX, +1.32%[3] habit.
In David Bach’s book “The Automatic Millionaire,” he mentions “The Latte Factor[4].” His website has a calculator showing what such a ritual costs over time.
“Putting aside as little as a few dollars a day for your future rather than spending it on little purchases such as lattes, bottled water, fast food, cigarettes, magazines and so on, can really make a difference between accumulating wealth and living paycheck to paycheck,” Bach says.
And it is, indeed, a problem, according to a 2017 survey from investing app Acorns[5], which found that almost half (45%) of younger millennials put more money toward coffee than retirement savings.
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References
- ^ explained to CNBC (www.cnbc.com)
- ^ Retire early? Orman says you need at least $5 million (www.marketwatch.com)
- ^ SBUX, +1.32% (www.marketwatch.com)
- ^ The Latte Factor (davidbach.com)
- ^ a 2017 survey from investing app Acorns (www.usatoday.com)
- ^ Sign up here. (www.marketwatch.com)