How To Spend $1 Million at Starbucks

The Financial Crossroads In the News:

• AARP Bulletin - March 24, 2010
• New York Times - March 22, 2010
• New York Times - March 19, 2010

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This week’s Conversation includes another excerpt from the book’s third chapter that answers the question, “How could you really spend a million bucks at Starbucks?” This chapter is a study in running your household finances with the same level of responsibility that a business should. And, as my co-author, Jim Stovall, puts it in this chapter’s Timeless Truth, “…it’s simple to manage household cash flow. Anyone can do it. It’s agonizingly hard, however, to manage ourselves.” The following true story gives you a glimpse of what is possible—for better and for worse—when we take the time to actively manage our household finances.

From the third chapter - How to Spend $1 million at Starbucks:

My good friend (Scott, we'll call him) is, by any standards, wealthy. His net worth is in the multi-millions. In early 2008, he decided to do a complete analysis of his cash flow. What he learned so shocked him that he now tracks his monthly cash flow with religious fervor. He realized that in the calendar year of 2007, he had spent over $12,000——at Starbucks alone! You're probably thinking, “I know Starbucks is a little pricey, but it's impossible to spend $12,000 at a coffee store in one year!” Here's how it happened:

Scott lives in an affluent neighborhood in one of the most expensive cities in the world, where there is a Starbucks less than a block from his residence. In the morning, afternoon and evening, Scott would treat himself and his wife to a Ventimochalattesoychaifrappacino (or something like that) at the bargain price of $5.50 per. That means that he spends $33 every day. Anyone who appreciates Starbucks knows that an addiction of that nature can simply not be broken once it is well established, so after 365 days of that, Scott spent $12,045 in 2007!

If Scott was willing to break with his addiction and put the $12,045 into an investment account that earned 7% per year, in thirty years, his account would be worth $1,137,780! Yeah, tracking your cash flow is important, and it is possible to spend a million dollars at Starbucks!