Financial advice includes some broad ideas that apply to a lot of people. Nuggets of wisdom like “pay yourself first” or “diversify your portfolio” are time-tested and never go out of style. However, there are certain financial lessons that can backfire if the teacher, including you, is not careful. For Financial Literacy Month 2022, we are sharing financial literacy lessons that can do more harm than good if you’re not careful, as well as advice for teaching the core concept.
One Million Cups or One Millions Bucks?
Financial advice about lattes has long since become a meme. The idea sounds like this: some people enjoy buying coffee each morning. Each cup costs roughly $5 apiece. At roughly 261 weekday mornings per year, those coffees total around $1,300 per year. If the money spent on this habit was put to work invested in the S&P 500 instead, that money would grow to hundreds of thousands of dollars over the course of decades!
“What’s wrong with saving money and investing over time?” you might ask. “Aren’t you all about the power of compounding?” Yes! But this is about budgeting.
Budgeting For Happiness
Spending money intentionally is the key to budgeting. That includes questioning whether a $5 latte (or $19 avocado toast) is truly worth it when you are also saving for goals and necessities. But the reasoning should be less binary than, “if I never spend anything I could be a millionaire when I turn 65.” There are more ways to handle money than just ant or grasshopper. Instead, track your expenses, and when you find a habit such as a morning latte, ask yourself how much it means to you.
If you truly enjoy drinking that latte each morning, if you look forward to it and it motivates you throughout the day, then keep it. That money is being spent with purpose. But if you just buy a latte each morning out of habit and drink it on autopilot without any enjoyment or reward, then it’s probably worth cutting from your budget. You might experiment with making cheaper coffee at home or taking a week off from coffee and seeing if you have the morning energy you need anyway. You might even try a low-cost but energizing replacement.
This goes for any expense you enjoy in life. Yes, you could live like a monk and save every penny, but there is another popular phrase about money: