Don’t Blame the Coffee!

Don’t Blame the Coffee!

August 01, 2019

Don’t Blame the Coffee!

LFG Marketing |August 2019

You see them in half-hour informercials, as guests on the business or news channels, and in the self-help aisle of your local bookstore. They are what might be called “financial entertainers,” people who have found a niche as personalities dispensing financial advice to the masses. Since their message is directed to a broad cross-section of America, their prescriptions for financial success are relatively vague and vanilla – get rid of credit card debt, save consistently, invest for the long term, etc. To counter the blandness of their message, most of these gurus of personal finance have some schtick to get your attention and make their message stand out; it’s a catch-phrase, a branded plan for success, or maybe a stream of outrageous and provocative comments that makes you say “What?”

A Call for Austerity – and the Blowback

A frequent topic for these provocative outbursts: the frivolous spending habits of American households. According to their narrative, many Americans, particularly Millennials, aren’t making financial progress because they spend too much money on “non-essentials.” If they would just embrace a little austerity, they could have a wonderful retirement.

Two years ago, the poster child for non-essential spending was avocado toast, and this eyebrow-raising comment:

“Stop buying avocado toast if you want to buy a home.”

Earlier this year, barista-prepared caffeinated drinks were in the crosshairs:

“Your Coffee-Buying Habit Could Hamper Your Retirement.”

And finally, one columnist just went for the whole enchilada, declaring:

“You don’t need that: The average adult in the USA spends $1,497 a month on nonessential items.”

This statement came complete with a list of non-essential expenses that could be redirected to retirement savings, including gym memberships, Netflix accounts, meals at restaurants, rideshares, personal grooming (i.e., haircuts, manicures, etc.) and a catch-all category, “impulse purchases.”

All of these comments are variations on the concept of opportunity costs – this is what might have been accumulated if it wasn’t spent on something else. But every dollar spent today incurs an opportunity cost. What makes a dollar spent on avocado toast a bad decision? Who determines what’s essential?

Intended as sound bites for social media, the lack of nuance in these statements also makes them ripe for sarcastic responses. In Hamlet, Shakespeare wrote “Brevity is the soul of wit.” With an average tweet of just 34 characters, The Bard would have loved Twitter. Here is a sampling of tweets about the savings that could be realized if you decided to get serious about cutting out non-essentials and redirecting it to retirement.

- Do you know how much beer costs? And tickets to ball games? And sneakers? Underwear? You could live like a retired king if you sat inside all day nude for 40 of your adult years.

- I pay almost $100 every month for water service to my home when there’s a perfectly good golf course lake down the street for bathing and drinking, smdh

- I already don’t drink coffee. Can someone cut me a check for my $1 million?

It appears a lot of Americans don’t respond well to being shamed about their supposedly “indulgent” lifestyles. But is it really the case that these non-essentials are the reason they aren’t saving for retirement?

What the Gurus are Missing

These personal finance entertainers aren’t wrong. Little stuff does add up. But the reason their comments seem tone-deaf is because they make it sound like every financial decision in your life is about having enough money for retirement. That’s not true.

It is prudent to save for the future. It is also reasonable – some might say necessary – to maintain a balance between saving for tomorrow and enjoying today. But rants about coffee make it sound like any expenditure that isn’t “essential” is a crime against your future and your personal integrity. As far as they are concerned, until you have established a retirement plan, and funded it, you have no right to enjoy any material pleasures, not even a $4.00 coffee.

This prescription of extreme delayed gratification is de-motivating. And it ignores the two realities of life: You might not live to enjoy retirement, and even if you do, there may be some things that your age and health will preclude you from being able to enjoy.

Furthermore, for Americans who could be saving more but aren’t, their problem isn’t the little stuff. It’s poor decisions about big things, and it usually involves debt. Their mortgage is too big, their car is too expensive, they can’t pay their credit cards off each month, and their student loans aren’t going to be repaid until they start collecting Social Security. Self-denial in the little things isn’t going to fix those issues.

 Hope Deferred or Desire Fulfilled?

Instead of nitpicking the little things, or obsessing over retirement, why not focus on some intermediate financial goals, some steps in the right direction? For example:

A generation ago, saving for a down payment was a financial starter project. The target was probably more than the family had ever saved before. It was also something to achieve in two to five years, close enough to be real.

This combination often compelled the family to get their financial house in order, to zero in on saving. And it frequently laid the foundation for a lifelong habit. Instead of borrowing, the household learned how to enjoy the present, and feel confident about tomorrow, by saving.

A Jewish proverb says, “Hope deferred makes the heart sick, but a desire fulfilled is a tree of life.” In personal finance, little victories can create momentum. If your financial plans don’t include a few desires fulfilled, you ought to consider making different plans.

Lifetime Financial Growth, LLC is an Agency of The Guardian Life Insurance Company of America® (Guardian), New York, NY. Securities products and advisory services offered through Park Avenue Securities LLC (PAS), member FINRA, SIPC. OSJ: 244 Blvd of the Allies, Pittsburgh, PA 15222 (412) 391-6700. PAS is an indirect, wholly-owned subsidiary of Guardian. This firm is not an affiliate or subsidiary of PAS. 2019-83746 EXP. 08/2021