Popularized by the well-renowned author David Bach, the latte factor has become a big talking point.
Well, what is the latte factor then? David Bach explains that sometimes small financial decisions, like buying a latte every day, can have big affects over the long haul.
Let’s take a 19 year-old dude that just started college. He loves his Starbucks and starts every day with a seasonal latte. After reading this post, he decides to put his coffee addiction aside and save and invest that $5.50 every day.
I’m sure that most people reading this will say, “that’s nice and all, but will that really make any difference at all in the long run?” Let’s find out.
Let’s assume he invested $5.50 every day until he was 26 and then he went back to his coffee. As long as he left all that money saved in the market, he would have more than $250,000 by the time he is 65! Now imagine if would have saved a little bit more than $5.50 per day or would have continued to save after age 26! The results would have been even more impressive.
Now, I am sure some of you are thinking, “Really!, you want to take away my coffee!?!, it is the favorite part of my day!” To that I say that this example has very little to do with coffee. It is just a metaphor to show how powerful small changes can be. If coffee is your whole life then find something else that is your latte factor. Maybe it’s eating out for lunch every day or overpriced food at convenience stores.
The goal of this article is not to make life less enjoyable but to show people how simple it can be to get ahead and change their financial future.