If there is one investment I suggest over and over again, it’s this: invest in yourself. Of course, bonds and mutual funds can be great ways to grow your money over time. But few investments will pay dividends down the road like investing in you.
And that’s why I make the case for your morning latte. You’re welcome!
Most other “financial experts” will tell you to give up your daily coffee shop run and save more than $1,500 per year. But I say: think of yourself as having billable hours, like a lawyer. Whatever it is—$20/hour or $500 like a lawyer—your time is extremely valuable. So go ahead, buy your $5 morning latte. You can even buy it every morning, if you want to. Let’s go on the low end and say that you value your time at $20/hour; that’s one- quarter of an hour, or 15 minutes. To save that $5, you could waste more time and aggravation by messing with the filter and making your coffee at home. Whereas, if you just stop on your way to work, you’ll get into the office earlier, plus you’ll have more energy which gives you a leg up on productivity, so you’ll work harder and then—hey!—you might just get a bonus at the end of the year that is even bigger than the $1,500 you could have saved.
I hear it all the time: $5 a day for 40 years will earn you close to $1 million if you manage to get a return of 10%. But remember: not drinking coffee doesn’t mean you will become a millionaire automatically. Cutting it out doesn’t mean you won’t spend that money elsewhere.
I try to save wherever I can: I’ve sold my old clothes and haggled for better rates on bills. But I also know the value of investing in myself wherever I can: I’ve subscribed to trade magazines to keep a pulse on what was going on in media as an industry and, yes, bought my morning latte every day on my way to work. Because I understood that while there certainly were areas in my life to cut back and negotiate, self-betterment and career enrichment were not those areas.
Keep in mind, in the end, money is there to enjoy. It’s not worth your valuable time to get overly bogged down in the small expenses. So instead of stressing about your daily coffee purchases, set your sights on making sure you have 3-6 months’ of expenses in the bank at all times for an emergency fund; and 15% of your paycheck going toward retirement savings each month. Those are the financial decisions worth losing sleep over.
A financial diet is like a regular diet: crash-dieting rarely works, and only leads to binging. Allow yourself the small indulgences— lattes, lipstick, a Netflix subscription—while keeping an eye on the bigger picture. Also — HELLO, Captain Obvious: If you earn more money, you don’t have to penny pinch! Change your mindset to coming from a place of aspiration not deprivation and your finances will follow.