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No, luxury coffee does not lead to bankruptcy

The news, media, TV shows and even movies love to blame debt on the same, small item -- a cup of coffee. Growing consumer debt is often blamed on out-of-control spenders who are intent on grabbing a cup of designer coffee multiple times a day, but most experts refute that idea. Realistically, a daily coffee or other non-essential items is not what usually leads to bankruptcy.

The daily coffee habit became popular to blame Washington's debt woes after David Bach began highlighting its cost in both his books and seminars. He contended that the money spent on coffee should instead be funneled directly into an investment account, which would in turn help virtually anyone who tried the approach become millionaires. Bach's popularity grew as more and more people latched on to his theory, but there was one problem -- he was wrong.

Where does Bach miss the point? He's mistaken in how real-life people actually spend their money. He assumed that the wealthiest individuals had accumulated their money by forgoing frivolous expenditures and other luxuries. He also blamed the poorest individuals for overspending their way into debt without ever doing any thorough investigations into how they actually lived or spent their money. In short, Bach simply imagined that he had the secret answer to solving an entire nation's debt.

Aside from being essentially wrong regarding consumer debt, Bach also fudged many of his numbers that promised the average Washington consumer millions of dollars. Experts following up on Bach's claims successfully demonstrated that consumers were not going into debt because of expensive lattes, but because of the costs associated with fixed debts. Health care, housing and education costs total three-quarters of the average household's discretionary income. When an unexpected financial emergency hits, some find that bankruptcy is the most appropriate course of action to create a more financially viable future.

Source: Slate, "The latte is a lie, and buying coffee has nothing to do with debt`", Helaine Olen, May 26, 2016

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