Friday, April 26, 2019

Short Takes: Million Dollar Lattes edition

I didn’t write any posts since my last set of Short Takes, so I thought I’d start by weighing in on the furor Suze Orman stirred up when she said buying expensive coffee is “peeing $1 million down the drain.” In an effort to annoy everyone, I’m going to drive down the middle of the road.

Orman’s example using a 12% rate of return for 40 years is just plain silly. She also ignores the time value of money that makes $1 million 40 years from now much less valuable than $1 million today. But she’s not wrong that small amounts of money add up and can undermine your saving efforts.

There’s nothing wrong with buying coffee or other small things if you’re doing it thoughtfully, understanding their full cost over time. But that’s not how most people think. They just can’t imagine that such small amounts can make much difference. But they do.

Orman’s critics are right when they say that the big things in life, like houses and cars, matter the most. But they’re wrong when they say that little things can’t make a meaningful difference to your retirement.

There is no one answer to the latte question that applies to everyone. If you’ve got the money, and you want your coffee, go ahead. If you’re holding an expensive coffee and complaining that life is so expensive now and you’re not sure what you’re going to do, then the money wasted on coffee is a problem.

Here are some short takes and some weekend reading:

Robb Engen at Boomer and Echo explains why he isn’t paying off his mortgage any faster. My take on whether to pay off a mortgage faster comes down to a single question: if stocks drop 40% and you lose your job at the same time, will you be OK? I suspect Robb would hold out fine financially until he found another job. Too many people would be wiped out by that scenario.

Canadian Couch Potato answers several listener questions in his latest podcast.

Big Cajun Man is having some income tax hassles that illustrate how the extremely long delays at CRA complicate taxes even further.


  1. Your link to CCP is broken, it's missing a letter (the d in podcast).
    Feel free to delete this comment after fixing.

    1. @Anonymous: Thanks for the heads up. I appreciate it when people point out mistakes to help keep up the quality of the blog.

  2. The CRA claims they don't have a "red flag" list, I beg to differ. Have a great rainy weekend!

  3. Once you have a few mills in the account, the coffee argument is kinda moot. Life's too short to squawk about a latte any day of the week.

    1. @Anonymous: Yup, once you're set, you can spend as you please. But for those who complain about being short of money, it's a different story.