Financial advice is everywhere these days. You can find it with a few clicks online or hire someone to advise you. However, not everything you hear is beneficial — especially when it comes to absolutes. That’s why “don’t buy that latte” could be considered some of the worst financial advice out there. Here’s why you shouldn’t have to worry about buying a daily coffee — plus, the financial advice that can really make a difference for you.
How Much Does Buying a Latte Each Day Impact Your Wallet?
It’s an interesting question — and one that should be asked.
“Nowadays, a latte is around $5, so you could be spending $1,300 for a daily latte in a year by math,” said Alejandra Rojas, finance professional and money coach.
And if you keep doing the math, your daily latte habit could equal $6,500 over five years. But Rojas points out that instead of focusing so much on the cost of your daily latte, you should ask yourself these significant questions:
Are you budgeting your latte expenses? By budgeting for daily lattes, you will be forced to realize how much you are spending each month and year on them and be able to make financial decisions based on that knowledge.
How many lattes have you mindlessly bought out of habit? Are you benefitting in some way from buying a daily latte, or is it more of a routine and sometimes you don’t even drink the whole thing?
Is there something else that you want to do with the money that you spend yearly on daily lattes? If you don’t really need or necessarily want a daily latte, how could you spend this money more wisely?
If a Daily Latte Motivates You To Work, Should You Buy It?
Of course, you may truly look forward to and enjoy every sip of your daily latte, and that’s understandable. So should you continue to buy it if that’s the case?
“For many people, they love their morning coffee so why would we want to take that away?” asked L.J. Jones, financial planner and founder of Developing Financial, LLC. “Money is important, but it is just a tool for us to live a better life. I believe that people who enjoy the small things in life today live a happier life. That is the real goal of money.
“Instead of removing the latte, people should consider if the latte adds to their daily life. If it does then they should keep buying them. If they decide there are other ways to spend their money to increase their happiness then they might want to cut out some lattes to spend on other more important things.”
Why Is ‘Don’t Buy That Latte’ Bad Financial Advice?
“I think the cliche surrounding lattes preventing financial security is overblown,” said Riley Adams, CPA, senior financial analyst for Google and owner of personal finance site Young and the Invested. “For effective management of money, think of everything in terms of the value it adds to your life, and in this case, your bottom line.
“For example, while a latte might cost a few bucks (or more), the happiness it brings might spill over into your professional life at just the right moment, sparking a brilliant thought or idea that leads to greater financial well-being. This isn’t to say you should drink lattes simply for the off chance you come up with the next big thing, rather that you should invest in items or services which help you become your best (and financially-speaking, productive) person.”
What Financial Advice Should You Consider Instead?
“My advice to anyone who buys a daily latte or something else is to keep doing it as long as they are also saving money for the future,” Jones said. “Spending isn’t supposed to be an extreme thing. Saving every penny for the future doesn’t make someone’s current life that enjoyable. Someone who spends everything on lattes or something else may make their future life less enjoyable because they don’t have enough money to spend later. Spend your money to enjoy today while also saving for tomorrow to enjoy that as well.
“If someone is contributing to their employer’s retirement plan or they are saving and investing their savings, this will be much more important. I recommend people increase their annual savings rate by 1% each year. Typically people receive an annual raise of at least 2%-3%. If only 1% of that goes towards increasing their savings, this will still give them a raise to spend on lattes and other items.
“Sure you could not buy the $5 latte and invest it each day, but that won’t make a big difference over the long-term financial wellness of someone. Cutting out this spending also reduces their current enjoyment in life. There are other, much more impactful financial decisions people can make to improve their future financial life.”
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This article originally appeared on GOBankingRates.com: Why ‘Don’t Buy That Latte’ Is Some of the Worst Financial Advice