Go Ahead, Have a Latte

Earlier this summer, the Twittersphere was ablaze when CNBC tweeted out a video in which Suze Orman, the tough-love personal finance guru, excoriates millennials who buy coffee every morning. She claims that the daily ritual of going to Starbucks or Peet’s or wherever they get their caffeine fix and paying $1 to $3 a pop endangers their retirement. It is the equivalent of “peeing a million dollars down the drain,” she says. (You can watch the video at CNBC’s “Make It” YouTube channel.)

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Suze’s style is in-your-face, preachy and prescriptive. In the video, she says coffee you don’t brew at home is a “want,” not a “need”—which is true, but she taunts her audience. “I would not insult myself by wasting money that way,” she shouts at the camera. “And I can afford it … and chances are you can’t.”

Worse, she is guilty of some fuzzy math. To get to $1 million, Orman rounds up “$1 to $3 a day” to $100 a month, then assumes you’d earn an annualized 12% on that money in a Roth IRA over 40 years. (Taking the lower end of her range—a dollar a day—and applying a more realistic 7% annualized return over the same 40 years, you’d pee only about $78,000 down the drain.)

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I scrolled through the comments left by skeptical viewers, and some of them were hilarious. Marea tweeted, “I won’t be lectured on unnecessary luxuries by a bourgeois white woman in a gold leather coat.” Caroline wrote, “I started making my coffee at home, but I still have $78,000 in student debt. Any ideas how to fix this?” And a commenter going by It’s My Country weighed in with “There’s something to be said about spending money on things that give us pleasure and make life enjoyable. And where that’s concerned, coffee is a pretty good bargain.”

Suze wasn’t the first to accuse millennials (and the rest of us) of sabotaging a secure retirement by spending on items that give us pleasure. A couple of years ago, an Australian real estate mogul told his country’s version of 60 Minutes that the villain was avocado toast—and spending on avocados may be one reason some young people can’t afford a house. The original latte diatribe came from personal finance author David Bach, who calculated in his 1998 book Smart Women Finish Rich that a Starbucks habit was worth $2 million in forgone retirement savings. And that assumed a mere 11% return.

Pay yourself first. At Kiplinger’s, our mission is to help you save for retirement and other major goals, but we take a gentler approach. The best way to free up the money for retirement savings, of course, is to spend less than you earn—and to minimize debt by not stretching to buy a house or luxury car or spending your retirement money on a pricey college for your kids (see our best college values story and our top picks for the safest used vehicles). You can address the uncertainty about how to save and still enjoy life a little by following the old chestnut to pay yourself first (by automatically transferring money from your paycheck to savings) and creating a budget to allocate what’s left.

The planner my wife and I see has a system that helps deal with the uncertainty and anxiety. One line item in our budget is the monthly amount each of us allots for nonessential expenses, such as lattes, lunches and dinners at restaurants, and clothes. If we hit our cap, we stop spending.

It’s also essential to adopt an approach to your finances that doesn’t complexify them and freeze you into inaction. Our cover story, Simplify Your Finances, can help. In addition to tips for making budgeting less daunting, we have strategies to simplify your portfolio, manage and pay down debt, and more.

Mark was the editor of Kiplinger's Personal Finance magazine from July 2017 to June 2023. Prior to becoming editor, he was the Money and Living sections editor and, before that, the automotive writer. He has also been editor of Kiplinger.com as well as the magazine's managing editor, assistant managing editor and chief copy editor. Mark has also served as president of the Washington Automotive Press Association. In 1990 he was nominated for a National Magazine Award. Mark earned a B.A. from University of Virginia and an M.A. in Writing from Johns Hopkins University. Mark lives in Washington, D.C., with his wife, and they spend as much time as possible in their Glen Arbor, Mich., vacation home.