Think on the margin.

Earlier this month CNBC generated an outrage cycle about money advice by tweeting this story, in which the personal finance professional Suze Orman claimed that buying coffee means “you are peeing $1 million down the drain as you are drinking that coffee.” (Even the legendary writer Susan Orlean weighed in.) Earlier this summer, USA Today generated a similar negative buzz when it published an article from the money website The Motley Fool that claimed Americans waste an average of $18,000 a year on “nonessential items,” which they said included personal grooming, gym memberships, restaurants, coffee and lunch. These are all on top of similarly shaming articles that tell us we’re not rich because we sleep in and travel; because we buy shoes and jeans; and, of course, because we buy too much coffee.

While it is true that every one of us — including yours truly — can and should be smarter about spending, these small, sometimes necessary purchases are a just a sliver of a much wider story about our struggles with money that, in large part, can be traced back to the Great Recession, the debt load for younger Americans and broader trends about wage stagnation.

This is from Tim Herrera, “Here’s Some Money Advice: Just Buy the Coffee,” New York Times, June 23, 2019.

Herrera then writes:

So, no, your coffee habit is not the reason you aren’t a millionaire,nor are the haircuts you get or the gym membership you have. But how can we improve our financial situation when we’re being shamed for enjoying a latte? Who can we trust? Is the advice we’re reading truly advice or is it meant to sell us something? It’s a mess!

He’s almost certainly right. It’s not the reason; nor are expensive haircuts and gym memberships the reason. But together they add up to an important part of the reason, and it’s an important part of the reason, not that you aren’t a millionaire, but that you’re substantially less likely than otherwise to become a millionaire. Follow those habits–daily Starbuck’s and sometime twice-daily Starbuck’s plus expensive haircuts every month plus expensive gym memberships (notice that all of these are almost certainly not tax-deductible)–and you’ll make it harder for yourself to become a millionaire if you’re 30 now and want to be a millionaire by the time you’re 60.

Herrera then reports on an interview he did with Tara Siegel Bernard, a personal finance reporter with the New York Times. Here’s part of it:

Tim Herrera: So I feel like we’re in this weird bubble where a lot of personal finance advice is centered around tiny expenses, like coffee, snacks, occasional lunches or other small indulges. I hate it! Those are usually the things that make life worth living! So I’ll start with the question we’re all wondering: Will skipping coffee make me a millionaire?

Tara Siegel Bernard: The short answer: no. 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!

It’s not silly at all. Moreover, although some people may be talking about blame but when I talked to my students about this, I was trying to help them think through their finances: there was not a hint of blame.

Interestingly also, Ms. Bernard then goes on to list some of the things she thinks people can’t control. Let’s look at those one by one. Her first example is of wages not keeping pace with the cost of living. There are two sides to this. First, wages. Lots of people, if they think about it, can do something about wages, certainly in the long run. The cost of living is something one can do a lot about. And it’s weird to see her list it in this context. Aren’t expenditures on coffee part of the high cost of living?  Score one for her on the high cost of health insurance. (And, for many people, we can thank President Obama and a Democratic Congress for that.) On child care, once you have children, you’re stuck with the issue, but, especially in this era of easily available contraceptives and legality of abortion, the choice to have a child is, for the vast majority of people, a choice. Housing? Governments, by restricting supply, especially on the two U.S. coasts, have made it much more expensive, but it’s still possible to move–or to get a roommate. And paying for college? You have lots of choices. You can get your Associate’s degree at a community college in 2 years by paying a fairly low tuition and then go to a state school for 2 or 2.5 years to finish the degree.

To her credit, Ms. Bernard does go on to admit that we have choices about two of these things, namely housing and cars:

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.

Notice, though, how she exaggerates about coffee with her idea of “agonizing over lattes.” Who was advocating that we agonize?

A better approach is to think on the margin. Let’s say you buy 10 grande lattes a week at Starbuck’s. At a price of $4 including tips (which is why a friend calls it “Fourbucks), that’s $40 a week. For 50 weeks that’s $2,000.

You love your lattes. But you could do what I did when I discovered the Starbuck’s mocha. You could make it a treat that you indulge in twice a week. You then save $32 a week. Over 50 weeks, that’s $1,600. (I know that there are 52 weeks in a year; I’m allowing for times when you might want to indulge a little more.)

Do that for 10 years and invest the savings in Vanguard Total Market Index and the odds are high that at the end you won’t have just $16,000. The odds are quite good that you’ll have about $25,000.

Then maybe you’re in better shape financially at the of 10 years and you can have 4 lattes a week. Then you save $1,200 a year compared to following your 10 latte a week habit. Moreover, you’re letting that first $25,000 ride for another decade or two. Compounding, dontcha know?

I’ve written about how to become a millionaire here.