Regular readers of TFR know how passionate (‘obsessed’ is apparently the right word, as my friends have helpfully suggested) I am about my morning cafe latte. The few minutes of liquid companionship I get with its characteristic warmth and aroma and its complex, rich taste intertwined with steamed milk – in a marriage made in heaven officiated by your barista – are one of the few simple pleasures in life I look forward to. It has perked me up on many a cold and depressing morning. ‘Cold’, of course, is due to weather god and ‘depressing’ is due to the gods at work. The latte has been my faithful companion on many such days.
My article on sensible frugality explains the flawed Latte math that mainstream financial papers and magazines continue to propagate. I wanted to share with you all a refreshing change in that thinking. Naturally, my I-told-you-so feeling was rather strong after seeing a mainstream newspaper agreeing with my premise.
USA Today has published a video explaining their re-thinking. The video starts off in the usual way about how a $5 Starbucks latte can pay for a bottle of Champagne (in 10 days), the latest iPhone 7 (in 8 months), and how sacrificing it is worth $46,000 over 10 years in your 401(k). This part was predictable and it got my Latte sensibilities up wanting to write to their Money section editor. Then comes the interesting admission. The video later acknowledges that the daily latte doesn’t necessarily have to destroy your finances. They mention hospital bills, job loss or divorce can ruin your finances. That is all true, but latte is the last of your worries should any of these calamities come to pass. That’s not the trade-off decision a person is faced with on a daily basis!
If they had consulted with me, I would have told them instead of scaring people about unknown health risks or divorce (which may not happen if you followed simple money rules), why not be straight with the public about the new cars and over-leveraged house purchases as much more likely causes of financial ruin? Some people become millionaires and still don’t buy a house, or likely because of it!
Everybody knows health care costs can be a bomb and so, have insurance. For most people, if planned well, the real nasty healthcare bills are covered to a large part either by insurance or by government (Medicare/Medicaid programs in U.S. and nationalized health care systems in many other countries). Well, job loss is unlikely if you are a career-conscious renter, and even if it does happen, there is unemployment insurance to tide you over or better yet, your finances will be in great shape to handle it as an early retirement opportunity, especially after negotiating a severance package. They should not be driving your latte decision.
I guess the truth about new cars and expensive houses would hurt their advertising revenues. After all, most of what we see in the papers are ads for new cars and car dealerships, not to be outdone by the real estate listings and zero down/low downpayment mortgages.
USA Today’s famous tagline is Economy of Words, Wealth of Information. They got the first part right with the video, but the second part is missing by a mile. By not presenting the true information about the major financial risks in common decisions about cars and houses, they are doing a disservice to the underlying message. The only reason you are now told to continue your latte is that you don’t know if you will get sick, split up and possibly lose your job – all are good reasons to actually enjoy the latte!
To me, the math is as obvious as this.
So, go ahead, enjoy your latte – guilt free! Its frothy texture and soothing company suddenly feel vindicated in my mouth as I savor it now. I feel you, my liquid friend!
Raman Venkatesh is the founder of Ten Factorial Rocks. Raman is a ‘Gen X’ corporate executive in his mid 40’s. In addition to having a Ph.D. in engineering, he has worked in almost all continents of the world. Ten Factorial Rocks (TFR) was created to chronicle his journey towards retirement while sharing his views on the absurdities and pitfalls along the way. The name was taken from the mathematical function 10! (ten factorial) which is equal to 10 x 9 x 8 x 7 x 6 x 5 x 4 x 3 x 2 x 1 = 3,628,800.