Please ensure Javascript is enabled for purposes of website accessibility

No, Your Daily Latte Is Not What's Holding Back Your Retirement Savings

By Motley Fool Staff – Nov 18, 2018 at 11:20PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Let’s run some numbers and debunk this myth.

It's simple enough to know you should be setting aside 10% to 15% of your income for retirement -- until your bills come in, at which point, good intentions often get put on the back burner. If this is happening to you or someone you know, it may be tempting to hunt for some budgetary scapegoats -- or, to spin it more positively, regular discretionary spending that you could cut, and reroute the money into savings. And for some reason, the popular habit of shelling out for mildly upscale cup of coffee every workday gets picked on more than most.

But as personal-finance writer Maurie Backman explains to Motley Fool Answers hosts Alison Southwick and Robert Brokamp in this segment of the podcast, we're putting way too much blame on our caffeine addictions.

A full transcript follows the video.

10 stocks we like better than Walmart
When investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, the Motley Fool Stock Advisor, has tripled the market.* 

David and Tom just revealed what they believe are the ten best stocks for investors to buy right now... and Walmart wasn't one of them! That's right -- they think these 10 stocks are even better buys.

Click here to learn about these picks!

*Stock Advisor returns as of November 14, 2018
The author(s) may have a position in any stocks mentioned.


This video was recorded on Nov. 13, 2018.

Alison Southwick: You've joined us today to share five retirement myths that you are on a crusade to debunk.

Maurie Backman: Yes, we're going to do some serious debunking today, folks.

Southwick: Let's get to it. The first one is that your daily lattes will kill your retirement.

Backman: Right. One of my favorite things is when I'm talking to people and they say, "Oh, I'm spending three bucks a day at Starbucks. I really shouldn't because if I put that money aside instead, I could retire on it." And my answer is no. No, sorry -- $15 a week, $60 a month. No. This is my take on retirement. If you're smart about saving for retirement, life's little luxuries will not get in your way from meeting your goals, so this is what I do personally. I've got a certain amount that I set aside for retirement. I aim for at least 20% of my earnings just because I know that with the way inflation is going I'm going to need some serious cash when I'm older, especially if I have health issues and all that.

So I basically put that aside from the start. And then, frankly, I don't worry about the little purchases because, hey, they're what get me through my day. My morning coffee -- you do not want to see me without my morning coffee.

Southwick: It's an investment in a happy family.

Backman: It's an investment in my ability to work and function as a human and that's the case for a lot of people, so I always say whether it's your coffee or the fact that you love buying lunch or ordering takeout -- those little things aren't going to stop you from retiring if you have an overarching goal of saving for retirement and you're actually committing to it.

So the easiest thing to do, if you work for a company that has a 401(k), is just allocate enough of your paycheck to automatically land in your 401(k) before you even touch it. Before you even see that money.

Southwick: Pay yourself first. Pay your future self first.

Backman: Exactly. Pay your old and gray self first, and then buy your coffee.

Robert Brokamp: Especially goals-based budgeting. As long as you figure out, "OK, this is what I need for college. For retirement. If I want to buy a house. If I set that all aside and get that out of my bank account, whatever is left over I can spend however I want."

Backman: Exactly. Obviously you have to keep in mind the bills that are going to come up. You've got your cable bill due at the end of the month. Don't overspend on coffee and then owe Cablevision. You're going to be in the red and you're going to have to pay interest on that silly bill. That's why I'm a big fan of automating your savings, because that way, like you said, you get it out of the way and then you don't have to worry about those little purchases.

The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Nearly 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 12/01/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.