Building Wealth with Howard

Much to the chagrin of anti-capitalists everywhere, I love Starbucks, that massive, publicly traded company with a store on almost every block and in almost every country. I’m enjoying a Blonde Roast right now, in fact. It’s damn good and, in my opinion, fairly priced. Especially since I’ll almost certainly get a free refill before I leave. For that I say, thank you, Howard….can I call you Howard? Well, you are a good man regardless, Mr. Schultz. A very good man, indeed.         

I mention this not for the purpose of promoting an already very successful coffee chain but because a lot has been said about the financial recklessness of buying coffee when you could simply brew it at home.         

This unsolicited advice and judgment, almost always put forth by financial advisors, is intended to drive home the point that buying coffee from a coffee shop and actually deriving even the slightest bit of pleasure in the process is the root of all financial self-destruction. Never mind the financial headwinds created by the cost of college (ridiculously overpriced with diminishing returns), healthcare (overpriced to the point of being downright obnoxious and insulting), property taxes (I live in Illinois), and in a lot of cities, rent (still cheaper than owning but I’ll save that for another post).Splurge on that cup of coffee though and you’ll never save money behaving in such an irresponsible manner, they scoff, and you’ll certainly never retire. Even worse, you will die a mere shadow of a human being, broke and alone with a non-recyclable coffee cup in your cold, rigid hands. You’re a loser.         

Enjoying, and paying for, good coffee it seems is the financial equivalent of shooting heroin in front of your grandmother at Christmas dinner and then asking her to please pass the gravy. I’ve done the math and I’ll concur, it’s considerably cheaper to brew your own. Ummm, no shit? It’s also cheaper to wash your clothes by hand with a wash board in your backyard, but most of us don’t do that either because it’s not nearly as fun as having a machine do it for you.         

The point is, just because it’s always cheaper doesn’t mean it’s always the way to go. I stand before you today as a living, breathing example of having your coffee and drinking it, too.           

My addiction to premium coffee began about 10 years ago, or put in more direct terms, “way too late”. I’m not sure exactly what I was thinking (perhaps I wasn’t thinking at all) when coffee wasn’t the very first thing on my mind when I was a sleep deprived new father. Sure would’ve made life easier. I feel somewhat jaded by it but I can only blame myself, after all. Nevertheless, I was a late bloomer to the world of liquid stimulants, but when I bloomed I went straight for the good stuff; the equivalent of a first bottle of wine being a Napa Valley Cabernet Sauvignon.         

As my fondness for coffee grew it was further fueled by a job that allowed me to work remotely from home; that and the pure coincidence and dumb luck of being within walking distance of a Starbucks. Most mornings I would wake up, put on a t-shirt and hoodie, whistle the theme song to Mr. Rogers’ Neighborhood, and make the short walk to feed my addiction. It was a chance for me to wake up and get my mind right before sitting in front of a laptop for the next 8-9 hours.           

Other days I would bring my laptop with me and set up shop at a table and enjoy the change of scenery. The world is full of interesting people to watch and be entertained by. For the most part, I loved it. Occasionally, the other guests would annoy me and I would go home after an hour and sometimes even less.         

There was the older gentleman who had the disruptive and somewhat off putting habit of clearing his throat, for example. And then there was the young man who decided it was socially acceptable to FaceTime his girlfriend without headphones, allowing everybody in his immediate vicinity the distinct pleasure of hearing how a man and woman communicate when they are “alone”. I would guess he was European by his accent, so maybe that’s acceptable over there, but here? Nobody wants to be your friend and nobody will let you join in any reindeer games if you pull that shit in a public place. For the most part though, good times were had at Starbucks on many a beautiful morn’.         

For a few years I bought coffee every morning. And when I say every morning, I really do mean every morning. During the work week. Weekends. Christmas morning. New Year’s Day (yes, Starbucks is open 365 days in a lot of locations). I didn’t even own a coffee maker. The Baristas were my coffee maker(s) and they did a fine job. They greeted me with a smile and a “good morning!” and sent me on my merry way.         

Here’s the kicker though. This entire time, I was saving. I was investing. I was advancing my career. I was cutting the cord to cable since I rarely watched TV. I drove my cars several years after they were fully paid for so I wouldn’t have a car payment. I discovered Aldi, and in no small personal feat, began to embrace the anxiety ridden checkout process. In other words, in the grand scheme of things, coffee or no coffee, I had my financial shit together.         

Building wealth and being financially successful isn’t about extreme sacrifice and torment and it’s certainly not about making your own damn coffee. What it is about is consistently and effectively allocating capital over a long period of time. That might sound a bit wonky to some, but basically all allocating capital means is that you have money (capital) coming in and money (capital) going out. The margin, or what’s left, is what you have to increase and effectively allocate if you want to have any chance of accumulating wealth over time.         

As I mentioned in my last post though, a lot of people just aren’t cut out for the long game. They want everything now and they want to impress everybody around them. Style over substance. That mindset, unfortunately, is what leads most people down the wrong path. They spend beyond their means and when I say, “beyond their means”, I’m not talking about small expenditures, like coffee or even a 6 piece McNugget. I’m talking about buying or leasing a new car every few years, accumulating credit card debt, buying a house they can’t afford, or for some, all of the above and more. They play the short game at the expense of the long game. And putting yourself in a strong financial position is all about the long game, which is why so many people fail at it.         

Part of the long game is about incremental progress over time. I first started saving when I was 16. I opened a savings account and every payday I would deposit a small amount. Over time I saved enough to buy my first car and to pay for the first 6 months of insurance. Then I set out to rebuild what I had taken out. Over the next few decades, through marriage, kids, buying homes, divorce, market crashes, recessions, and everything else life had to offer, I was able to accumulate a fairly significant sum.         

None of this happened in a year or even 10 years. It was a slow, deliberate process I employed over many years where the satisfaction wasn’t found in some specific end result but the fact that this year I had more than last year and next year I will strive to have more than I do now.         

Financial advisors, unfortunately, routinely get hung up on the final amount. They routinely ask, “How much will you need to retire?” This isn’t where the focus should be at all. It’s like asking an obese person to focus only on losing 100 pounds. It’s just too daunting of a task. What’s far more beneficial is to focus on small steps along the way. For example, first losing 5 pounds…then 10…then 20….until you reach that end goal. And just as important, celebrating and enjoying each of those smaller milestones. A lot of people severely underestimate the power of momentum. It’s a mental game.         

Same exact concept applies to accumulating wealth. If someone tells you you’re going to need $5 million to retire the way you want to retire and you’re not planning on retiring for 30 years, that amount can seem intimidating, even to the point where some people will simply give up.         

In the end you have to be honest with yourself and your financial situation. If you’re broke, have credit card debt, and are otherwise having a hard time balancing your budget, then take a hard look at your expenses (and income), including expenses related to going out. Not being honest with the reflection in the mirror will always end badly.         

For almost all of us it’s ok to have a vice or two. In fact it’s healthy, as long as you don’t have too many and you don’t have to rely on others to feed those vices. Look at your particular situation, figure out what makes you happy and then enjoy it. If you can afford it, by all means, don’t allow others to make you feel like you’re a financial failure simply by the choices you make. I mean, you might actually be a failure but it’s highly unlikely it’s the result of buying too much coffee. And I would really hope society has a slightly higher bar for the term, “failure”. Life is hard enough without denying yourself some simple pleasures, like great coffee, so the advice I like to give myself is to view this not as an expense but as a recyclable cup of mental health.

Rick

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