Ask Brad: The Math Problem Brokers Can't Solve
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This is the latest installment of a new, regular column to answer questions from advisors who are considering transitioning to an RIA model. To see Brad’s previous articles, click here. To submit your question, please email Brad here.
One of the oft-spoken traditions in financial planning circles is to tout the financial benefits of skipping the daily Starbucks and investing the difference instead.
Skip the daily $7 double-chocolate, nutty caramel, easy on the whip, extra tall latte, and you too can retire rich!
Perhaps entirely overplayed, there is some rationale to this advice. The $7 per day, for 20+ years, earning a reasonable rate of return, will add up to a significant part of an investor’s nest egg.
Remember that $7 a day is touted as a meaningful enough dollar amount that it should cause an investor to adjust their behavior.
Even though the 20+ year math will add up to a meaningful return for the investor, some folks will still scoff at the idea that a “mere” $7 a day is enough to cause them to change course in life.
What if instead, though, that fancy latte cost $986?