Reason 1: It’s a Broad, Applicable Marketing Hook#

It’s simple: blaming coffee is a statement that applies to a huge audience. Most market research suggests about three-quarters of people drink coffee daily. If you’re writing a book or trying to build an audience by giving general financial advice, it makes total sense to target an obvious expense that, for many, is their one little daily luxury to power through the week.

It’s a super effective strategy because:

• It immediately shifts the blame directly onto the person watching or reading.
• It gives them an easily actionable strategy they can start tomorrow.
• Something so simple and easy to begin with is a great marketing hook. It grabs attention to get video watch time, sell a book, or promote a seminar.

This attention-grabbing hook – “A coffee a day is costing you your financial future!” – works especially well when they combine it with a calculation using compounded interest that looks impressive but is, well, dubious.

Critiquing the Compounding Coffee Math

They’ll show you the math:

• A $5 coffee every day is$35 a week.
• If you invested that for 40 years in a portfolio making 10% returns…
• …in 40 years, you’d have almost a million dollars.

The math itself checks out; you can plug it into any compound interest calculator online. BUT… it makes a lot of terrible assumptions that a real financial professional would never make looking that far ahead.

Here’s why that calculation falls apart:

• Unrealistic Returns: 10% is roughly the S&P 500’s return over the past 50 years, which has been an exceptionally good run. It’s highly likely returns will be lower in the future. A good professional would factor this likelihood into projections.
• Average Investor Performance: Even if market returns did stay the same, the average investor typically makes less than half of these returns. A study by investment research firm Dalbar Inc. found the average retail investor made just 4.25% return.
• Why Average Investors Lag: Investors fall far behind simple “buy stocks regularly and do nothing else” strategies because:
  • They move in and out of the market too often, thinking they can predict short-term movements (spoiler: they can’t).
  • They need money held in investment accounts to cover shortfalls in their everyday budget. If someone is so financially strapped that $5 for coffee is their only potential savings for retirement, they are likely to pull that money out for unexpected expenses before it grows significantly.
• Missing Factors (Inflation & Taxes): The calculation doesn’t include inflation or taxes, which would eat into that figure considerably.

Using a more realistic compounding factor, maybe three percent, giving up the daily coffee and putting all that money into stocks would net you just under $140,000 after taxes, hidden/direct trading fees, inflation, and realistic portfolio management.

$140,000 is still a lot of money, yes, but it’s not funding anyone’s retirement in 40 years. It might even struggle to make a down payment on a basic home in many areas. So, you need to learn how money really works to understand why your daily coffee didn’t cost you your financial future.

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(Back to the reasons!)

Reason 2: It’s Relatable and Easy to Pick On#

People like blaming coffee and other minor expenses because, well, it’s easy to see and relate to. We see someone with a Starbucks cup complaining about being poor, and it’s easy to feel annoyed, without realizing that cutting the coffee won’t actually make a difference. This leads us to Reason 3…

Reason 3: It’s Outdated Advice for Today’s Economy#

Cutting minor expenses to hit major financial goals used to be decent financial advice. But it’s way less relevant now. Why? Because the costs of the big stuff – a house, a car, education, retirement – have all shot up and outpaced the cost of regular expenses like a cup of coffee considerably.

People on lower incomes could once make small sacrifices and still save for major purchases. Now, those same goals are simply out of reach, no matter how many coffees they make at home.

Consider this harsh reality: Someone working a full-time minimum wage job can no longer afford to rent a two-bedroom apartment in any county in the entire country. They can only afford a one-bedroom apartment in just seven percent of counties – and these are typically counties with the lowest job opportunities and worst access to community services. And honestly, it feels like we’re heading towards another housing crash, possibly worse than 2008.

Buying a house can sometimes be cheaper than renting, but saving the deposit or building credit worthiness is next to impossible for people who can’t even afford basic rent.

The news isn’t much better for high-income earners, though it’s harder to feel sorry for them. The reason one-third of people earning over $250k a year (and a staggering 65% of millennials earning that much) are living paycheck to paycheck is complex:

• They’re paying off massive student debt required for their high-paying careers.
• They’re often forced to live in High Cost of Living (HCOL) cities like New York, Seattle, or San Francisco to access the highest paying jobs.
• They often succumb to Lifestyle Inflation. This happens when income grows, and living expenses increase right along with it.

Often, lifestyle inflation is caused by running on the hedonic treadmill – the human tendency to quickly return to a relatively stable level of happiness despite major life changes, positive or negative. In non-fancy speak, when you’re making $30k/year, a$50k car feels like a dreamy luxury. When you’re earning $250k/year in an office where everyone else makes the same or more, a$50k car is… just a car. Nothing special.

While it’s hard to feel too bad about this, sometimes lifestyle inflation isn’t purely voluntary. It can be the result of trying to maintain appearances with colleagues earning similar amounts, or simply the costs involved in maintaining these high-end careers.

I don’t mention it much, but I used to work in Investment Banking. Even at a small boutique firm, there were expectations:

• Have a wardrobe of nice suits.
• Live close to the office.
• Be able to pay for child care or a live-in nanny so looking after kids was never an excuse to miss a client deadline.
• (Heavily encouraged, though not mandatory) Invest heavily in networking opportunities by paying for memberships at expensive clubs.

For people living this kind of life, cutting out a coffee is not going to change their finances at all.

Reason 4: It’s an Effective Sales Tool#

Influencers often pick on coffee because it’s a super effective way to lead into pitching whatever they’re selling – be it courses, programs, coaching, etc. Some of these programs might be genuinely fantastic; others can be outright scams. I’d need a whole other video to cover everything finfluencers pitch, but the key point here is: They know telling you to cut coffee won’t fix your finances, but it might just convince you to sign up for their course.

Reason 5: Everyone Else is Doing It (The Hive Mind)#

The fifth reason every personal finance personality picks on the daily cup of Starbucks is simply because every other personal finance personality does the same. Most big names in this space don’t have professional training in the topics they discuss. While it’s fine to talk about personal finance without a certification, this lack of practical experience means they often struggle to challenge the traditional “hive mind” of what personal finance advice should be.