
You're Not Rich, and Starbucks Is Why - nicholascolby
http://www.nickinrichland.com/starbucks-broke/
======
ssanders82
Reminds me of this old joke...

    
    
      Lady: Do you smoke?
      Guy: Yes I do.
      Lady: How many packs a day?
      Guy: 3 packs.
      Lady: How much per pack?
      Guy: $10.00 per pack.
      Lady: And how long have you been smoking?
      Guy: 15 years
      Lady: So 1 pack is $10.00 and you have been smoking 3 packs a day which puts your spending per month at $900. In 1 year, it would have been $10,800. Correct?
      Guy: Correct.
      Lady: If 1 year you spend $10,800, not accounting for inflation, the past 15 years puts your spending total at $162,000. Correct?
      Guy: Correct.
      Lady: Do you know if you hadn't smoke, that money could have been put in a step-up interest savings account and after accounting for compound interest for the past 15 years, you could have by now bought a Ferrari?
      Guy: Oh. Do you smoke?
      Lady: No.
      Guy: Then where's your fucking Ferrari?

~~~
PhantomGremlin
Over 40 years ago I was in high school, had access to a computer, and did a
simple programming exercise.

I created some tables of how much money my dad was spending on cigarettes, and
how much he would have if he invested it instead. IIRC the interest rates I
used were from 1% to 10%. The price of a pack of cigarettes was somewhere in
the neighborhood of $0.30. Maybe the tables went up to $1.00 a pack but
probably no higher.

Fast forward 40 years. Cigarettes are now about 30x as expensive as they were,
but interest rates are somewhere near 0%. Times change!

------
azakai
The math might add up, but this might still be wrong.

1\. Not spending $5 on Starbucks every day changes other things. For example,
the person might have a feeling of "I'm being good by saving $5", and that
feeling might lead to purchasing something else as a reward - dessert at
lunch, or a more expensive vacation at the end of the year.

2\. Someone that spends $5 on Starbucks every day gets something in return.
Maybe they enjoy it so much it makes them more productive, or maybe they meet
friends there which makes them happy, etc.

Regarding the math, the SP500 might not make 11.3% annually forever. It's a
relatively high-risk investment compared to other avenues. So it might not be
the most fair figure to use in the article's argument.

------
jvm
He's not counting inflation and 11.3% is a super optimistic expectation of
future S&P500 returns. A more conservative estimate for real returns would be
6.5% [1] (and internationally returns to equities actually average lower).
When I punch those numbers into a calculator [2] I get $65k which is _ahem_
not as impressive.

[1] [http://www.nickinrichland.com/starbucks-
broke/](http://www.nickinrichland.com/starbucks-broke/)

[2]
[http://www.moneychimp.com/calculator/compound_interest_calcu...](http://www.moneychimp.com/calculator/compound_interest_calculator.htm)

~~~
to3m
By that calculator, $1300/year (52 weeks/year * 5 days/week * 1 coffee/day *
$5/coffee) over 47 years (aged 18-65) assuming 6.5% gets you nearly
$400,000...

($65,000 is definitely way off! 1.065^47=19, very roughly. So let's assume you
just invest $1300/year for 3 years then go back to buying coffees. What's a
ballpark figure for how much you'll have aged 65 after that? Figure very
approximately $1300 * 3 * 19 = $74,100.)

~~~
jvm
Agh you're so right! Sorry Sunday morning biff, I had $5/week not $25.

------
carsongross
If you can get 11.3% per year on your investments forever, spending anything
on anything is going to look foolish: just wait a few hundred years and you
will have more money than the US GDP, which only grows at 2-3%.

If you do want to enjoy an espresso, I will point out that coffee is
considered "food for office" and is a 100% deductible business expense.

------
free2rhyme214
Starbucks has nothing to do with why you aren't rich.

You aren't rich because of your actions not because you spent $5 a day on
coffee.

When you build that business or invest in those assets that help you become
wealthy, you don't focus on things like coffee because they aren't important.

------
philippnagel
One does not get rich by saving money. One does get rich by earning it.

~~~
lern_too_spel
That's overly simplistic. If you consider $1 million rich, like the author
does, you can easily get rich by saving money. If you consider $1 billion
rich, your Starbucks habit doesn't matter.

~~~
thesteamboat
Pedantic grammar note: If you consider $1 million rich you almost certainly
consider $1 billion to be rich. In contrast, if you consider rich to be $1
billion, you may or may not consider $1 million to be rich.

------
vilmosi
That theory has been debunked long ago. It just isn't true.

~~~
DanAndersen
Would you be able to provide details? I don't know what has been debunked, or
how.

~~~
notacoward
The main problem I see is that he cherry-picks the number for investment
returns (arbitrarily using a 20-year average even though he's talking about a
44-year investment plan) and then fails to account for inflation. For more
realistic numbers, the amount would be more like $160K - nothing to sneeze at,
but not the click-baity "over a million" he obviously wanted.

~~~
DanAndersen
Thanks, and agreed. The point is good enough that it doesn't need exaggeration
like that.

------
aetherson
Assuming 11.3% real annual return is kind of crazy. Unless your name is Warren
Buffet, you aren't going to achieve that.

------
SpendBig
There's the way to retire rich spending a life saving big, or living a life to
retire with great menories. Some have the luck of both. Depends on the risks
you are willing to take and the right decissions you make.

~~~
DanAndersen
Properly weighing the cost and value of things is key. I try to be somewhat
frugal not out of a desire to deprive myself but because by doing so I can
move myself more quickly toward being financially independent, and because a
lot of the things I could spend money on aren't actually providing me much
value. I spent a few hours today walking to/through a local botanical garden,
paying nothing to drink in nature that I had been missing for a long time, and
I think I got more great memories out of that than I ever had from going to
Starbucks.

There's a trend of moving from "spend money on things" to "spend money on
experiences," but my concern is that that second bit of advice can let us fall
into things that we're told are experiences but are really just habits.

~~~
SpendBig
An Experience is a thing, same as saving is a thing you do. It just depends on
where your goals at. That doesn't even have to be to become happy, sticking to
your habits or do things as others say. If you like and feel enthousiastic
about what others say, just do the same your own way.

