This column today is written for you and your children, or younger loved ones, whatever the relationship may be, friend or family member. I want you to share it with them because I’m going to talk about habits, specifically setting the patterns of behavior in your lives that will lead to wealth, and the passing on of such habits to the next generation.
Nearly all of our clients at WTA made money the old-fashioned way, they earned it. Remember the old 1981 Smith Barney commercial with John Housman as he delivered that line from a white-clothed table at an upscale restaurant?1 If you search the recesses of your brain you might recall the 1980’s TV Show Benson and remember the aristocrat Clayton Runnymede Endicott III who once quipped: “I make money the old-fashioned way, I inherit it.” Those folks are out there for sure, but the last line really doesn’t describe our clientele. Most of you have gotten to where you are by earning it and simultaneously getting into the habit of saving and investing. The most important habit of all was likely investing consistently, from a young age, into your 401(k)s. You paid yourselves first! Nothing has changed with our advice on that, except to say that for many of you still working, contributing more potentially to your Roth 401(k) option might be a good idea with the state of the nation’s finances.
But there are other habits that we can talk about and those are ones that have to do with spending. One is obvious and that’s to set a budget and stick to it. The other is drilling down into the “extra areas” of your budget that you may or may not be counting in the official tally or spreadsheet.
I used to call Starbucks, Fourbucks. It might be because every time I went through the drive-thru that’s what it would cost. Leaning on AI here, but back in 2015 a Grande Caffe Latte costed $4.25. Now? I’m going to have to start calling it Sixbucks, because my same order now costs $5.95. If I did this, and I don’t, but if I did, a workday Starbucks habit of going 22 workdays per month x $5.95 would equal $130.90 per month. What’s the opportunity cost of that over time?
If you look at it per coffee, you’ve got $5.95 compounded annually at 10% for say 30 short years of a working career. (This is a hypothetical illustration of how the value of a cup of coffee changes over time, not a promise of a return. You know the drill, past performance is no guarantee of future results! ~ The Compliance Department.) So that cup of coffee at age 35 really just cost you $103.78 in your retirement years. That’s each and every time you make that decision. The habit itself costs you far, far more. Just one month of that $130.90 habit for your 22 working days costs you $2,284.47 years from now if you earned 10% per year. Each year of that Sixbucks habit of $1,570.80 per year would cost you $27,408.63 about 30 years from now. That’s quite an impact in retirement. A year of Sixbucks in your 30s = ~5 Caribbean cruises in your retirement for you and a significant other. There will be places you’ll never know you could have visited, if you had cut out one little thing. Of course, there will be periods of loss in markets and others of much larger gains than 10%. But you get the drift. Small financial habitual changes when you are younger = massive long-term wealth effects. This is not just for Millennials and Gen-Z though. There are big compounding effects even from your 60s to your 80s. So this message applies for everyone.
What I’d propose to everyone is a tiny rewiring of your brain. I’m not saying everyone has a Sixbucks problem (that would be an extremely wired and dangerous society). What I do believe to be true is everyone likely has their own type of Sixbucks issue. Maybe it’s simply a streaming service you are paying for but not watching (Apple TV? Hulu?). Maybe it’s more than one. Take that $130.90 per month and put it in Roth IRA if you qualify. If you are thinking of your kids, put it into a trust that one day will provide them income in the future. If you are thinking of your church, they may have a Foundation that endows their worship and arts programs or perhaps their missions abroad into which you can give more consistently.
On that subject, we’ve been speaking at churches recently to help them grow their giving. If you or your loved ones feel that your church would benefit from us speaking to the congregation let us know. We can help your congregation become aware of the numerous ways of giving in a very tax-efficient way, which may help secure the church’s future. We can help you set up a trust that can do the same thing for your children. Rewire your brains to take advantage of “The Methuselah Effect” which according to Warren Buffett is nothing more than the extreme power of longevity coupled with compound interest. And you don’t have to live 969 years!!
We all have to spend money of course. We’ve always advised our clients to put their monthly spending on credit cards, not debit cards for their own security, as long as you pay off the balance each month. If your card is compromised, let’s just say your recovery experience is going to be vastly different on a credit card versus getting money back in your bank account from debit card malfeasance. But we’ve never said which credit card to get. I would posit that whatever credit card rewards you set as your goal, your monthly dollars will drift even more in that direction. There are ways to game the system, and my wife and I have certainly taken advantage of the welcome offers of several different cards and paid for hotel stays and parts of cruises doing that. But your spending will drift with the target. If you get a Hilton card for example, trust me when I say your spending will increase in the vacation category of your budgeting. It increases even more when you realize that Hilton has devalued their points (their currency) 3 times in 2025 alone! And I thought the dollar had fallen off a cliff!!
What if instead of Delta Airline miles or Hilton points where the effect is an increase in your expenses, you set your target on paying yourself first from your spending, too! My advice herein is certainly not an effort to maximize the dollar value of credit card rewards as there are intricate and complicated ways to do that which admittedly create their own to-do lists in spending categories. I would suggest instead that you open a Charles Schwab Investor Card from American Express, the one with no annual fee and 1.5% cashback. I’m linking the info here: Charles Schwab Cards from American Express. (There’s another very expensive Platinum annual fee card on this page I would not suggest, so avoid that one). If you are a credit card enthusiast you might scoff at the notion and at the boring method of redemption, but this is about spending drift, paying yourself first and creating positive feedback loops in your life.
$2,000 in credit card spending every month is only worth $30 per month on this, but it equals $360 for the year. $5,000 in credit card spend a month is $75 per month or $900 for the year. Pay yourself first on your own spending is my advice. Open a no-fee Schwab Investor Card. (Right now you get a $300 statement credit if accepted). List your Schwab brokerage account as the recipient of the rewards and then we’ll invest it into your portfolio model at the next rebalance. (Full disclosure: we don’t receive anything from Schwab for promoting their card, but if you chose to contribute the rewards to an account we manage, we’ll charge our usual fees. Give our office a call if you have any questions! ~ The Compliance Department) Watch it compound over time (with hopefully good investment returns which of course we cannot guarantee). Turn that $900 per year potentially into something great for retirement. Tell your kids about this if you really want to see them prosper. Just make sure to not put too much monthly spend on the card that you can’t pay off the balance or the interest will quickly make this strategy fall apart and actually become detrimental to your goals. Call us if you need your taxable brokerage account number or need help setting up your Schwab portal (Keep in mind the account you link can’t be a retirement account such as an IRA or Roth IRA, only a taxable account).
Be a good steward for yourself with your budgeting at home. We’ll do the same for you in your investment accounts. The combined effects will only create more wealth for you, your family and your church or other favorite charity over time. If you want more stewardship strategies for yourself or your family members, please give us a call. Have them give us a call. We’re happy to give our time to guide your younger or older beloved ones in the right financial direction. If you listen to us, we’ll change you (and your family’s) financial world …
Sincerely,
Scott Wright
Portfolio Manager
The Wealth Training Academy
Sources:
