I just finished Money: Master the Game by Tony Robbins. Great book! One part that really hit me in the book was the long-term opportunity cost of "little" splurges like regularly hitting Starbucks or eating out. Relatively small monthly expenses may not seem like a lot of money, but they can represent a huge opportunity cost from the standpoint of retirement savings. For example, let's assume a guy named Joe spends just $5 every morning at Starbucks. Assuming 30 days in the month (to keep it simple), that adds up to $150 a month spent on coffee. What if Joe trimmed his Starbucks habit back to a max of $50/month and faithfully invested the $100 savings in his IRA? Assuming just a 5% rate of return on the money, this is what his former Starbucks money would turn into decades down the line: • 20 years: $41,103.37 • 30 years: $83,225.86 • 40 years: $152,602.02 Wow. Assuming Joe is in his 20s or 30s, he could potentially add well over $100K to his retirement net worth simply by trimming back his Starbucks habit. Robbins makes the point that there's nothing wrong with spending money on things you enjoy, but keep it within reason. It's important to remember the long-term cost of overspending on little indulgences. Even if you can't give up the Starbucks or eating out habit, it's probably worth it to see if you can get a better deal on your cable package, car insurance, cell phone plan, etc., then invest the difference into your retirement savings. As you can see (and as Robbins points out), a little discipline today can go a long ways toward a better future in retirement.

@Scott Trench It is actually in the food slice. It reminds me of something I have noticed about the refugees I have helped over the last 25 years. They tend to start out with lower paid jobs than most Americans but end up with much more money in savings. It comes down to four things... 1) No smoking. 2) No drinking. 3) VERY little eating out. 4) Letting family members live with them to help with the mortgage. That is how a clerk at a convenience store saves enough money to buy a convenience store.

Absolutely do not agree. Doesn't Tony address in that book that IRAs and 401ks are some of the biggest scams? Its not a habit, its called enjoying life. Every time I see these 20 or 30 year projections, I can tell those writing that do not work in the medical field. Every day, good people get sick and die. 20 30 40 years, are you really banking on that? To answer your question: ~$150-200 a month :) If that is a problem, just increase your income. Problem solved!

Starbucks?! ... Not nearly as much as my Bourbon "hobby" or my charitable donations to dancing single mothers :) Everyone has their vices. Whats the point of doing all this if you don't spend some of it on the things you enjoy?

Sorry! Was not saying you were ridiculous. Was saying the the latte concept (which is used by many writers in many books) is ridiculous to me in the sense that many times these small purchases are not material parts of the budget. I am always frustrated when folks say that they are going to cut out their latte to save money, but drive an expensive SUV 15 miles each way to work, or live in a $750,000 house down the block from a $300,000 one. (Assume that the response is directed towards an author writing that point in a book, not at you!)

@Scott Trench No worries! :) Though small purchases are not always a material part of the budget, sometimes they are. Individually they may be small, but all together they can add up to a lot. There are a lot of people out there with expensive cable packages they don't watch, gym memberships they haven't used in months, car insurance they haven't shopped around in 10 years, etc. All those are small budget leaks that, if left unaddressed, can add up to a relatively big number that's a significant drag on the finances. Over the last two years, my wife and I managed to chop around $400 out of our monthly expenses by shopping a few things around and being a little more disciplined in a few other areas. We live in an expensive area and that's good money that can now be invested in our financial future. And the great thing is this: it had minimal impact on our lifestyle. I'm all for getting the same lifestyle for less, if possible! :) I've seen the latte concept in a few books as well, but for some reason it struck me a little more this time - probably because (being the computer nerd that I am) I actually busted out an Excel spreadsheet and ran the numbers. Again, chopping out little expenses here and there isn't the foundation of a good financial plan, but it can certainly help move your plan along a little faster. I was surprised how so little can do so much over the long term and thought I would pass it along on BP. Merry Christmas, all!

@Scott Trench Respectfully, you're obviously entitled to your opinion, but I think you missed the broader point I was trying to make here. I wasn't implying that your "latte is keeping you poor" or that buying coffee will lead to a destitute retirement. I also wasn't minimizing the importance of cutting back on big ticket expenses like housing or taxes where possible. The point I WAS making is this: overindulgence in seemingly small expenses could have a big impact on your future financial security. The whole point of my post was that a little extra financial discipline can pay off in a big way down the line. That's all. I don't know see how that point would seem "ridiculous". I thought the point I was making was a very positive one. Just very small adjustments now in your financial life can payoff huge in the future.

I say buy those indulgences whenever you want to. Be it a daily Starbucks, or going out to eat once a week. Here's the caveat though - what is one doing to create the income to be able to purchase the indulgences and not have it affect them financially? There's a big difference between a W-2 employee who drives a leased car, has a house payment at the top of their budget and someone who has multiple streams of income (W-2, real estate, other business, etc). If you have your income game tight, by all means treat yourself a little!

That premise was originally in a book called, The Automatic Millionaire." I used to subscribe to that scarcity mindset too. Now, my mindset is that you can't get rich on $4 per day unless you are talking about 40 years. How about, go out there and make so much money that $4 a day is not even a consideration. Go make $500K a year. Then you won't care about the $20,000 you could have saved by never going to Starbucks. Change your mind in order to change your life.

BTW Ben, I don't think they are boycotting Israel. They opened branches here a while back, and went bankrupt almost immediately. Thier coffee is just terrible. Can't understand why anybody buys it.

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How much does that Starbucks habit REALLY cost you?

Mark F.

Investor · Orange County, CA · Member since 2009 · 230 posts · 138 votes

I just finished Money: Master the Game by Tony Robbins. Great book!

One part that really hit me in the book was the long-term opportunity cost of "little" splurges like regularly hitting Starbucks or eating out. Relatively small monthly expenses may not seem like a lot of money, but they can represent a huge opportunity cost from the standpoint of retirement savings.

For example, let's assume a guy named Joe spends just $5 every morning at Starbucks. Assuming 30 days in the month (to keep it simple), that adds up to $150 a month spent on coffee.

What if Joe trimmed his Starbucks habit back to a max of $50/month and faithfully invested the $100 savings in his IRA? Assuming just a 5% rate of return on the money, this is what his former Starbucks money would turn into decades down the line:

20 years: $41,103.37
30 years: $83,225.86
40 years: $152,602.02

Wow. Assuming Joe is in his 20s or 30s, he could potentially add well over $100K to his retirement net worth simply by trimming back his Starbucks habit.

Robbins makes the point that there's nothing wrong with spending money on things you enjoy, but keep it within reason. It's important to remember the long-term cost of overspending on little indulgences.

Even if you can't give up the Starbucks or eating out habit, it's probably worth it to see if you can get a better deal on your cable package, car insurance, cell phone plan, etc., then invest the difference into your retirement savings. As you can see (and as Robbins points out), a little discipline today can go a long ways toward a better future in retirement.

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Scott TrenchPro Member

Rental Property Investor · Denver, CO · Member since 2014 · 2k+ posts · 6k+ votes

It's my opinion that this is a ridiculous premise. Yes, any small expense, repeated regularly, can compound over time. By definition, if it is repeated frequently so as to represent a significant cumulative result, it is a large expense.

However, to claim that your latte is keeping you poor is a silly and ineffective approach to developing a plan. If you are on this site, your goal likely isn't to save an additional 1-2% of your income. It is likely that your goal is to attain financial independence with significant ($1M+?) assets and significant cash flow ($3,000 - $5,000 - $10,000+?) and to do this far earlier in life than 40 years down the line in our 60s and 70s.

To move towards that goal, a strategy of cutting out lattes is going to be laughably ineffective. Assuming that you are attempting to cut out spending, there are likely to be only three categories in which you can make a material (decades faster in achieving your goal) difference.

Note, this does not take into account what you can do on the income front.

These three categories are:

* Your Housing Costs

* Your Transportation Costs

* Your food costs

See this graph of average american household spending from the Bureau of Labor Statistics:

Where are lattes in that graph? Maybe a percentage of food? Maybe entertainment?

Ridiculous.

Obviously, if you analyze your own spending and find lattes to be a chunk large enough for it to have it's own piece of the pie, fix that personal problem.

But, the rest of us would do better to focus heavily on fixing huge problems, like cutting our housing and transportation budgets in half.

Of course, cutting out spending in general on unnecessary things like lattes does help a little bit.

I think that a smarter way to interpret the point about lattes is in thinking through every small decision of similar size, and making it a default to reject them out of hand, and plan around them. This includes coffess, snacks from vending machines, drinks or food at local restaurants when the same value could be had at home for 1/10th the cost, etc.

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