Suze Orman’s Coffee Story Shows Why Personal Finance Gurus Should Be Ignored

In March 2019, Suze Orman made the ridiculous claim that she has never bought a cup of coffee.

“I wouldn’t buy a cup of coffee anywhere, ever — and I can afford it — because I would not insult myself by wasting money that way,”

Suze Orman, CNBC

Of course you can afford a cup of coffee, Suze. You already own a private jet and private island, what’s a cup of coffee in the grand scheme of things? We’ll get into the private jet later.

She doubles down by claiming that your daily coffee habit will cost you $1 million, and makes aggressive assumptions to arrive at this number.

Suze Orman assumes you will spend $100 per month on coffee. If that money was put into a Roth IRA instead, while having a 12 year return, you would have $1 million within 40 years.

The math pencils out thanks to the power of compounding interest. Once again, 12% is very aggressive since the US stock market returns 9% per year on average.

Funny enough, she then shows how aggressive the returns are by explaining that the savings would only be worth $250k if the stock market returns 7% per year. A few percentage points make a big difference over 40 years.

Coffee vs Private Jets

It is pretty remarkable that Suze Orman refuses to pay for a cup of coffee, but also owns a private jet. Let’s see how much money that private jet costs by using Suze’s math.

Annual costs for a private jet can range between $970k – $1.6 million. Let’s assume it costs one million dollars even.

Assuming the 12% returns Suze Orman estimates, her annual jet costs equal $2.4 billion over 40 years! It’s incredible that she’s willing to put all of that money on the sidelines, but coffee is where she draws the line.

Bottom Line on Suze Orman – Don’t Listen to These “Gurus”

Ben Carlson said it best when he described Suze Orman and other gurus as the Steven A. Smiths of personal finance. Her job is to grab eyeballs with hot takes, and a headline saying that your coffee habit costs $1 million will do exactly that.

What’s harder is giving people the blunt truth – that you need to make more money, and save a high percentage of that money to be financially independent. We recommend saving at least 20%.

Saving over 20% of your income can be painful at first, but it will make a much bigger difference than a cup of coffee.

Suze can enjoy a private jet and private island as long as she’s saving a reasonable percentage of her income, and we’re sure she is. Just like how she can enjoy a private jet, you can certainly help yourself to a cup of coffee or avocado toast if you’re saving over 20% of your income.

Save your time from Suze Orman’s show, and instead read the Richest Man in Babylon and The Millionaire Next Door. What they lack in hot takes and ease to implement are more than made up for by being pragmatic and realistic.