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Will giving up your Latte really make you a millionaire?

May 18, 2023

Will giving up your $5 a day latte or specialty drink addiction really help you to retire as a millionaire?

I think the answer is maybe and then again maybe not.

It's fairly simple math to figure out that if you skip several $5+ specialty drinks a month and actually invest the money you can multiply the savings, times a given investment increase rate times the number of years to retirement that you can estimate how much new money might be added to your retirement savings.

It is certainly a benefit to your long-term financial stability to avoid spending money now that doesn't have to be spent. But I think a much bigger concept is the awareness that it creates.

As you become more aware of not spending on impulse buying and other immediate gratification purchases you become more aware of your cash outflow uses. 

Maybe that $5 specialty drink isn’t so much, but add that to the various subscription fees you pay a little for each month for this or that shiny new thing but now several of those added up is a lot each month. 

Perhaps saving $15 a month in drinks isn’t that much, but throw in some unnecessary subscriptions, add in a few nights of cooking dinner at home instead of take out and maybe you’re now saving $100 to $200 per month or $1,200 to $2,400 per year times 10, 20 or 30 years and that’s a fair amount of new savings.

Maybe instead of that new Lexus you settle for a new Toyota and keep that extra $20,000 in your bank account instead of the car dealer’s account.

As you become more aware of your cash outflow uses that awareness leads to understanding and evaluating your cash inflow sources.

Are your cash inflows limited to just one source, your paycheck?  Or are you cultivating multiple sources of cash inflows, maybe some active income and some passive income?  Maybe a side gig can help provide extra funds for your retirement savings while your paycheck takes care of your daily needs?

Perhaps you don’t want to have a side gig, but are your skills improving such that if your present job isn’t providing much of a financial long-term future that you have the skills and training to pack up and go to another employer? The best job security is having transferrable skills.

Did you know that self-employed people can access additional retirement savings besides the personal IRA accounts?  That’s where being a financial advisor and CPA work together to help with both the tax and financial planning to set up those accounts and explain the long-term tax consequences of different choices.

The recent covid years taught many people that they were very unprepared for an emergency whether it was a large-scale societal event or them individually.

A vast number of people had only one source of income, their paycheck, and very little in savings and when that paycheck dried up, many had to tap into retirement savings if they even had any.

Now as people get back to work, are they replenishing those retirement savings or going back to old spending habits?  One day we all quit work, whether we walk out or are carried out.  Is your retirement planning on track for both situations?

Money is not the most important thing and in fact the Bible says that the love of money is the root of all evil.  But money is a resource to be tended to and cared for and learn the proper use of legally and morally generating more and the judicious use of it once you have it.

Perhaps you have enough to live on, but you could help fund your favorite charities.  You could help fund someone’s education that might otherwise have not gotten one or at least give them better tools to study more and work fewer side jobs while getting that education. 

If you are ready to start looking at both your outflows and inflows or considering starting a business or get your retirement planning moving let’s set up a call using the link below.

Do you remember a past article but don’t remember the date it came out?  Many articles are also posted on my Blog site so visit there.   More are being added over time.  While you are there visit the resources tab and sign up for the downloadable resources available to you.

The information in this and other articles is intended to be educational in nature only.  Not tax, legal or investment guidance for you specifically.  Each person’s situation is unique and you must seek appropriate professional guidance that can address your unique situation.

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