I wish that I had come up with the “Latte Factor” because it is pretty amazing, but it was thought up by David Bach, author of The Automatic Millionaire. The “latte factor” basically states that if you purchase a latte a day you’re probably spending…
$3.50 a day $105.00 a month $1250.00 a year $12,600 in ten years
If that money were invested and compounding for 20 to 30 years you would have a pretty large sum of money come retirement time. The point is we don’t save enough money. If we cut out the latte’s everyday, as well as our other wasteful spending we would have more money to invest.
Essentially, every time you order your Venti Non-Fat Soy Carmel Macchiato you are spending money that you could be investing. Unfortunately, our wasteful spending doesn’t end with just a cup of coffee in the morning. Many of us go out to lunch, order fast food, go to the vending machines at work, and make other unnecessary purchases of material things we don’t need. We spend, we don’t save, and we don’t invest.
Most people believe that in order to gain wealth they need to make more money, when in reality, most people’s wealth is built over time. They just need to stop wasting their money on the “lattes” and start investing.
Bach drives the point home with this quote from his book…
“Most people believe that the secret to getting rich is all about finding ways of increasing their income as quickly as possible. “If only I could make more money,” they declare, “I’d be rich.” How many times have you heard somebody say that? How many times have you said it yourself? Well, it simply isn’t true. Ask anyone who got a raise last year if their savings increased. In almost every case, the answer will be no. Why? Because more often than not, the more we make, the more we spend.”
So if you want to invest in your financial future stop buying so many cups of coffee, don’t go to the vending machine, or stop for lunch at McDonald’s everyday. Start saving and investing the money…20 to 30 years from now you will be glad you did.