An incredible amount of financial and retirement planning advice at some point will give you a version of “If you just skip one $5 latte per day…” The theme is always that if you are extremely frugal to the point where you don’t even buy yourself a latte, you can instead invest that small amount of money and over time, with compounding, it will add up to a lot. Even with our best possible assumptions, perfect compliance, and over your entire working career (ages 22-65), this only adds up to $292K. At a safe withdrawal rate of 4% that’s only an additional $11.7K per year … not exactly enough to live a crazy fun lifestyle after decades of frugality. Plus, what amazing experiences did you skip out on that are no longer even possible now that you’re 65?

We think this is terrible advice for two main reasons:

  1. Most people, even if they do this, will probably spend the money on something else, instead of invest it, once it builds up in their account.
  2. Your financial goal in life shouldn’t be to live a miser’s life, in order to build up enough saving’s so that you can …. continue to live a miser’s life. Your goal should be to build enough wealth that a $5 purchase is so unbelievably trivial it doesn’t even register. This almost always means growing income, not slashing expenses to the bone.

So what to do instead?

If you want to build wealth you’re not going to be able to do it alone. So use the “coffee catch up” to build your network. As often as you can, we recommend once daily, invite someone who is as successful or more than you for coffee and pick up the tab.

This is incredibly important to do if you work in a corporate environment, since you will essentially be building an intelligence network and an information advantage. You will start to know what’s going on in the organization ahead of other people and be able to position yourself appropriately. If you want to climb the corporate ladder you will need to build a network across the organization so that you can be effective at some point anyway, so you might as well start now!

Building your network might be even more important if you’re in an entrepreneurial setting. To achieve even a little success you will need a small army of bankers, accountants, consultants, mentors, competitors (yep, even competitors, so you know what’s going on in your industry), employees, vendors, and more. Better get to work building this network, you won’t do it sitting at your desk!

Nearly every successful person we know does some version of this. In fact, we came up with this concept when we heard this: a lawyer we know who advises wealthy and rich clients (think $20M+ minimum) almost all of whom are self-made, mentioned that most of the successful people he knows average 2x meal meetings, per meal, per day. That means 2x business breakfasts, lunches, and dinners … per day! We believe this was a bit of an exaggeration, since we’re yet to see anyone maintain such a tempo, but the concept still holds. Build out your network through informal coffees and meals and your information, deal, and opportunity flow will increase proportionately. Since, for most people, the best way to build wealth is to increase your income, not slash your expenses, you will need to do this at some point anyway.

Make a habit of buying someone you want to be part of your network coffee every day and you will quickly be surprised by the immense benefits.

Give it a try this week!