The following excerpt is adapted from
by Helaine Olen by arrangement withPortfolio, a member of Penguin Group (USA), Inc., Copyright (c) Helaine Olen,2013.
The Latté is a Lie: Selling the Myth of the Fiscally PromiscuousAmerican
A quick cup of coffee, a few moments of pleasure. What could be wrong withthat? If you ask David Bach, a lot. According to him, the Starbucks latté is one of the leading sources of our money woes. A former Morgan Stanley money manager, Bach parlayed hisexperience into multiple book contracts, a nationwide seminar, and ultimately,a regular gig on the
.Bach believes we can all become millionaires by the time we retire if wearrange to make our savings automatic by having money deducted from everypaycheck we receive and funneled into an investment account. It’s not a badinsight as far as savings strategies go. But first people need to find money toinvest, and that’s a challenge for Americans. Just under half of us are livingpaycheck-to paycheck existences at least some of the time, with nary a pennyleft over for savings.That’s where Starbucks enters the picture.Bach calculated that eschewing a $5 daily bill at Starbucks— because who,after all, really needs anything at Starbucks?—for a double nonfat latté andbiscotti with chocolate could net a prospective saver $150 a month, or $2,000a year. If she then took that money and put it all in stocks which, ever anoptimist, Bach assumed would grow at an average annual rate of 11 percent ayear, “chances are that by the time she reached sixty-five, she would havemore than $2 million sitting in her account,” he wrote in his first book,
Smart Women Finish Rich,
published in 1999. “Are you latté-ing away your financialfuture?” Bach asked his readers.People couldn’t get enough of the Latté Factor. It seemed to explain all our woes, all our lack of financial discipline. Give up that latté, and save a six-month emergency fund! It was a simple solution to a long-term problem.“Extraordinary,” said Lester Holt on NBC. An Australian mutual fund companydebuted the "Latté Challenge” to get savers to put aside money for retirement(in their funds, of course). The Bank of Nova Scotia announced a deal with