In my last post, I showed that buying lunch is something that is contributing to your lack of available money now. I pointed out that by making your own lunch everyday, you could save money on lunch. Using the money saved, you could use that lunch money and turn it into something bigger in the future.
This is an easy change compared to another “personal finance expert”
If my strategy sounds at all familiar to Suze Orman’s “Peeing 1 Million Dollars Down the Drain By Drinking Coffee” situations. My strategy is similar – but better. Suze Orman’s solution comes from the perspective of a millionaire who doesn’t understand the common working person. Her strategy calls for you to quit coffee altogether and doesn’t give you any other solution. I know most people can’t live without any coffee. My solution gives you a cheaper alternative without much lifestyle change and bigger savings per year (which you can invest with) overtime and still drink coffee. To explain, we must understand how Suze Orman calculated her numbers.
Suze Orman’s Coffee Quote EXPLAINED.
In the past, Suze Orman has mentioned on multiple occasions how dumb wasting $100 a month of coffee is. Using that assumption, you are going to spend $3.33 every day on coffee. Instead of buying coffee you instead invest it into the stock market. Assuming a 12% market growth which is a rough estimate of the last 30 years of the S&P 500. Plug in all this information into a compound interest calculator and you end up with a million dollars and some change after 40 years.
The take-home point.
The take-home point is the power of compound interest – not stopping your coffee drinking habits. One of the few methods to access compound interest is through investing in the stock market.
Matt’s Lunch Plan for the Working People vs. Suze Orman’s Coffee Plan for Millionaires – The Difference
My plan is for the working people
The major difference between my plan is the plan of the working class – not the millionaires. They can skip the coffee. Instead, they drink all the $20 Kombucha and wake up with tons of energy with the best bowel movements. Us working-class people need our coffee. You can’t give up drinking coffee, but you can surely make your own lunch.
My plan accounts for an alternate solutionin the overall cost
If you do decide to skip buying coffee, you’ll likely need an alternate drink instead. Whether it’s soda, cheaper coffee you make yourself, or water – Suze Orman’s strategy doesn’t give you an alternative solution. Most importantly, it doesn’t account for the cost of that alternate solution. This alone makes a big difference in Suze Orman’s millionaire claim. If you assume that an alternate solution comes in the form of a Keurig K-cups, you would have about $824,000 at the end of 40 years instead. My lunch strategy accounts for the cost of still eating a cheaper lunch.
My plan gets you more money over time
I claim you will be richer than the average American at retirement. Suze Orman’s claim you will have $1 million at retirement. Obviously, her plan is better right? Wrong. Suze Orman makes a living on selling to the middle class that they will be rich easily. For that reason, Suze Orman’s Coffee Plan assumes a 12% gain in the stock market. Mine assumes a reasonable 8% in the stock market because my living isn’t made on convincing others that they can be rich. So what if my lunch plan were to assume a 12% gain over a 40 year period?
My plan would get you almost twice the amount of money compared to Suze Orman’s Coffee Plan.
Whatboth these plans aren’t
A retirement plan – which to some extent Suze Orman does suggest. In no way shape or form is either plan feasible retirement plans. My strategy is to help cut your expenses and redivert that money to a better source. That is much better than not doing anything and continually living paycheck to paycheck. Even better, divert it to a Roth IRA or a money market account. It will be more money in your pocket. To better illustrate, here is a table showing your income at the end of 10, 20, and 30 years using the Coffee Plan and Lunch Plan with 8% interest.
For your own financial interest.
Regardless of what your plan whether it is to cut coffee, stop buying lunch, or both. Saving alone isn’t enough. You have to invest your money to gain money. If you were to choose the strategy that will get you the most money – my strategy is clearly better and has better long term results.
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