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Is Never Buying Coffee Really the Key to Financial Independence?

All financial advisors apparently have a script they are given when they start in their career. In the event you ever make an appearance on television or the radio, you must demonize peoples’ love of coffee. And then we wonder why people immediately tune out when financial advice is the topic of conversation. Why is this tired trope so persistent and what should you really be thinking about?

Where does this come from?

It is largely born out of the desire to explain compounding to people. The more you save early on in your life, the faster you will accumulate wealth. That is great advice. The most common example is if you save $2,000 a year from age 25 to 45 and then stop you will have roughly a million dollars at age 65 (assuming a 10% rate of return). However, if you delay beginning to save until age 35, you will have to put away $4,750 per year until age 65 to get the same result. The person who starts early saves less than a third the amount and gets the same result by letting compounding work its magic.

The coffee advice is driven by the desire to help people save so compounding can help them achieve their long-term goals. Well intentioned, but what about the people who love their coffee?!  

What to do instead

Focus on living and spending intentionally and always pay yourself first.


Instead of focusing on something like not drinking coffee or never going out to eat, add up what you spend on these items each month. Then project that cost out over one year and then five years. If you spend $5 each morning at your favorite coffee spot and $10 on lunch you are allocating $1,300 to coffee and $2,600 to lunches*. Over five years, that is $6,500 to coffee and $13,000 on lunches.

If you look at those numbers and say, “100% worth it!”, then you are living intentionally. That type of spending is in line with what you value. If, however, one or both of those numbers makes you uncomfortable, you have identified a disconnect between your spending behaviors and your values. Alternately, if you find yourself thinking, “I should have more left over given my income” it is likely a result of small daily spending habits that add up. That does not mean all or nothing. Perhaps it means a modification of how often you do different things. For some people it is cable, for others it is eating out, and for some it will mean dropping their coffee habit. Everyone has something they spend more on than they actually intend to.


For most people, budgets are like diets. They are good conceptually but rarely lead to good long-term outcomes or lifestyle changes. Instead, set a savings goal and meet that target before you spend anything else. Ultimately, paying yourself first frees up your mental energy to focus on what matters versus weighing each and every spending decision. Did you address your savings goal and pay your expenses? Great – spend the rest.

At the end of the day, life is short and you should enjoy it – coffee included. Just make sure you are being intentional with your spending, and pay yourself first (i.e., save before anything else) to make your spending decisions easier and to ensure you reach your long-term goals.

*assumes 260 working days per year

This is not a recommendation and is not intended to be taken as a recommendation. This material was prepared for general distribution and is not directed to a specific individual.

LPWM LLC does not provide tax, legal or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal and accounting advisers.