Personal-finance gurus have a certain playbook. They take a representative middle-class family. They pinch their pennies, encouraging them to clip coupons and give up life’s little luxuries, like those $4 Starbucks lattes. Save the money, watch it grow, and end up with hundreds of thousands for a secure retirement, they say. Suze Orman, the snazzy-jacketed grande dame of money advice, once calculated that giving up a daily coffee could net you $165,000 over three decades.
But it is one big, caffeinated misdirection, exposed by Helaine Olen, the author of Pound Foolish, in an epic Twitter rant in honor of National Coffee Day.
Here’s the short version: The price of health care, child care, gas, electricity, and other necessities has risen, forcing many working families to spend more on those goods and services. But those families are not earning much more, putting a damper on their ability to save. At the same time, they are actually spending less on food, clothes, and many other household goods.
But it’s easy to tell someone to stop buying $4 coffees, and to promise them that they will be rewarded for their abstemiousness in retirement. To really fix their finances, you would have to tell them to pay a reasonable rent, reduce the cost of gas, access decent child care at an affordable price, maintain full-time work, and get a raise every year — to do the impossible.