Latte Factor http://www.wisebread.com/taxonomy/term/7871/all en-US Why Your Daily Latte Won't Sink Your Retirement Savings http://www.wisebread.com/why-your-daily-latte-wont-sink-your-retirement-savings <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/why-your-daily-latte-wont-sink-your-retirement-savings" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/women_friends_enjoyment_coffee_times_concept.jpg" alt="Women Friends Enjoyment Coffee Times Concept" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>If you pay attention to personal finance literature, you have undoubtedly come across some iteration of the &quot;latte factor&quot; &mdash; the idea that forgoing a daily small luxury will add up to big savings over time. Financial author David Bach coined the term over a decade ago to help consumers better understand the high costs of little luxuries. (See also: <a href="http://www.wisebread.com/9-ways-to-save-money-on-your-cup-of-coffee?ref=seealso" target="_blank">9 Ways to Save Money on Your Daily Cup of Coffee</a>)</p> <p>The personal finance sphere has taken Bach's idea and run with it. In fact, you can't swing a bag of artisan coffee on the internet without hitting an editorial, think piece, or other article explaining how the latte factor is costing you your future.</p> <p>But giving up your daily coffee will not mean the difference between enjoying a comfortable retirement and working until you're 80. There is a lot more going on than just the fact that $5 per day adds up to a great deal of money per year.</p> <p>Here's what most latte factor articles fail to take into account.</p> <h2>Financial shaming can make savers give up before they've started</h2> <p>While David Bach's original intent with the latte factor was to empower consumers to make more mindful choices with their money, his idea has often been used to <em>shame </em>people for their financial choices.</p> <p>Shaming is an unproductive way to motivate a person because it generally backfires. The constant drumbeat of the latte factor can make it sound like the only way to save for retirement (or any other big investment) is to give up daily luxuries. Individuals who feel guilty about their latte habit might decide that it's not worth trying to save for retirement if it means giving up their favorite luxury.</p> <p>The fact of the matter is that people can save money for their futures while also enjoying a daily latte. But the use of shaming language about having little luxuries can make it sound like these financial priorities are mutually exclusive.</p> <h2>Your money psychology can make it tough to see these savings</h2> <p>The latte factor math is unassailable. If you purchase a $5 latte every work day for 50 weeks out of each year, that adds up to $1,250 &mdash; which could certainly be a nice addition to your retirement account.</p> <p>The problem is that the latte factor math assumes that you can keep track of the daily $5 that you are spending. Most people's brains don't work like that. A cognitive bias known as the <em>denomination effect</em> makes people less likely to spend big bills compared to small ones. Five dollar bills can be quite difficult to hold onto, because they seem to be worth so little &mdash; even though the end result of $1,250 is quite big.</p> <p>Adding up those unspent five-spots to put them into a retirement account requires a certain type of money psychology that is exceedingly rare. For most people, refraining from buying a $5 coffee would just mean you spend the money on something else, rather than putting it aside for retirement savings.</p> <h2>It's easier to save money on big costs</h2> <p>People who actually spend $5 every single day on coffee are probably not paying close attention to where any of their money goes. If you are spending money every day on a small luxury, you are probably also spending money regularly on big luxuries &mdash; and those are a great deal easier to cut out than the small ones.</p> <p>Rather than focus on the difficult-to-track $5 holes in your budget, start with ways to reduce the bigger line items in your budget. Are you overspending on housing, food, transportation, entertainment, or utilities? Making a cut in one of those areas will not require you to keep track of small amounts of money to see a big difference, which make them a much smarter place to find extra funds to send to your retirement account.</p> <p>Even if you are a generally frugal person, you don't need to ax your beloved small luxuries to find extra money in your budget. Instead, spend some time thinking about which purchases and experiences are the most enjoyable or meaningful for you. Deciding what you want to spend your money on makes it easier to let go of the spending that doesn't matter as much to you. You'll enjoy your spending more that way, while still having savings to send to your retirement accounts.</p> <h2>Automating your savings allows you to have your latte and drink it, too</h2> <p>One aspect of David Bach's advice that often gets lost in discussions of the latte factor is the importance of automating. Bach suggests cutting out your daily indulgence and setting up an automatic transfer of the savings to your retirement or savings account &mdash; which would solve the whole problem of trying to keep track of those saved $5 bills.</p> <p>However, you don't need to give up your daily luxuries to be able to harness the power of automation. Once you have identified any spending items you're willing to cut, funnel the savings into your retirement account. If a daily latte is your favorite part of your morning ritual, then feel free to keep it and cut something else to automate that savings.</p> <h2>Daily luxuries can help keep you motivated to save</h2> <p>Living on a shoestring is exceedingly difficult. You have to say no to yourself constantly, which can lead to something called the &quot;what the hell&quot; effect. This effect describes how we tend to believe that refraining from spending money is an all or nothing proposition, so the moment we give in to temptation a little bit, we might as well throw our own guidelines out the window: &quot;What the hell, I've already bought myself a latte, I might as well go buy some new shoes!&quot;</p> <p>It's easier to go the distance while saving for retirement if you let yourself have some indulgences. You will no longer feel like the slog to retirement is going to be a daily misery that you might as well rebel against. Instead, your daily latte can make any other sacrifices easier to bear, and help you adjust to a new savings normal. Cutting out the latte on top of anything else can trigger the &quot;what the hell&quot; effect and make it even harder for you to save.</p> <h2>Enjoy your simple pleasures</h2> <p>The latte factor is an important thought exercise, but it should never become a hard-and-fast rule for how to live your life. Building daily luxuries into your life is an important part of enjoying your time, both during your career and after you retire. As long as you are willing to be mindful about your spending in general, you don't need to sacrifice small pleasures to afford retirement.</p> <h2 style="text-align: center;">Like this article? Pin it!</h2> <div align="center"><a data-pin-do="buttonPin" data-pin-count="above" data-pin-tall="true" data-pin-save="true" href="https://www.pinterest.com/pin/create/button/?url=http%3A%2F%2Fwww.wisebread.com%2Fwhy-your-daily-latte-wont-sink-your-retirement-savings&amp;media=http%3A%2F%2Fwww.wisebread.com%2Ffiles%2Ffruganomics%2Fu5180%2FWhy%2520Your%2520Daily%2520Latte%2520Wont%2520Sink%2520Your%2520Retirement%2520Savings.jpg&amp;description=Why%20Your%20Daily%20Latte%20Wont%20Sink%20Your%20Retirement%20Savings"></a></p> <script async defer src="//assets.pinterest.com/js/pinit.js"></script></div> <p style="text-align: center;">&nbsp;<img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/u5180/Why%20Your%20Daily%20Latte%20Wont%20Sink%20Your%20Retirement%20Savings.jpg" alt="Why Your Daily Latte Wont Sink Your Retirement Savings" width="250" height="374" /></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/emily-guy-birken">Emily Guy Birken</a> of <a href="http://www.wisebread.com/why-your-daily-latte-wont-sink-your-retirement-savings">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-1"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/6-ways-you-can-cut-costs-right-before-you-retire-0">6 Ways You Can Cut Costs Right Before You Retire</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/how-to-find-the-savings-strategy-that-works-for-you">How to Find the Savings Strategy That Works For You</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/how-to-save-for-retirement-while-caring-for-kids-and-parents">How to Save for Retirement While Caring for Kids and Parents</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/the-easy-way-to-save-up-a-big-travel-budget">The Easy Way to Save Up a Big Travel Budget</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/8-signs-its-time-to-retire">8 Signs It&#039;s Time to Retire</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Retirement automated savings cognitive bias cutting costs daily latte expenses Latte Factor psychology saving money shame small luxuries Fri, 15 Sep 2017 08:00:05 +0000 Emily Guy Birken 2019385 at http://www.wisebread.com Ask the Readers: What Is Your "Latte Factor"? http://www.wisebread.com/ask-the-readers-what-is-your-latte-factor <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/ask-the-readers-what-is-your-latte-factor" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/3899612784_f525e023c0_z.jpg" alt="What Is Your Latte Factor?" title="What Is Your Latte Factor?" class="imagecache imagecache-250w" width="250" height="167" /></a> </div> </div> </div> <p><em>Editor's Note: Congratulations to </em><a href="http://www.wisebread.com/ask-the-readers-what-is-your-latte-factor#comment-592990"><em>Kate</em></a><em>, Sherry, and Monica for winning this week's contest!</em></p> <p>In the world of savings, every little bit counts! Small, regular expenditures &mdash; like daily mid-afternoon lattes &mdash; will add up and can put a dent on your finances over time. Many people have chosen to cut their &quot;latte factors&quot; in exchange for the savings, but others don't mind the cost to enjoy these small luxuries.</p> <p><b>What is your latte factor?</b> Would you give it up for the savings? If you've already given something up, how much have you saved so far?</p> <p>Tell us about your latte factor and we'll enter you in a drawing to win a $20 Amazon Gift Card!</p> <h2>Win 1 of 3 $20 Amazon Gift Cards</h2> <p>We're doing three giveaways &mdash; here's how you can win!</p> <h3>Mandatory Entry:</h3> <ul> <li>Post your answer in the comments below. One commenter will win a $20 Amazon Gift Card!</li> </ul> <h3>For extra entries:</h3> <ul> <li>You can tweet about our giveaway for an extra entry. Also, our Facebook fans can get an extra entry too! Use our Rafflecopter widget for your chance to win one of the other two Amazon Gift Cards:</li> <a id="rc-79857d19" class="rafl" href="http://www.rafflecopter.com/rafl/display/79857d19/" rel="nofollow">a Rafflecopter giveaway</a> <script src="//d12vno17mo87cx.cloudfront.net/embed/rafl/cptr.js"></script> <p><strong>If you're inspired to write a whole blog post OR you have a photo on flickr to share, please link to it in the comments or tweet it.</strong></p> <h4>Giveaway Rules:</h4> <ul> <li>Contest ends Monday, February 18th at 11:59 pm Pacific. Winners will be announced after February 18th on the original post. Winners will also be contacted via email.</li> <li>You can enter all three drawings &mdash; once by leaving a comment, once by liking our Facebook update, and once by tweeting.</li> <li>This promotion is in no way sponsored, endorsed or administered, or associated with Facebook.</li> <li>You must be 18 and US resident to enter. Void where prohibited.</li> </ul> </ul> <p><strong>Good Luck!</strong></p><div class="field field-type-text field-field-blog-teaser"> <div class="field-items"> <div class="field-item odd"> Tell us about your latte factor and we&#039;ll enter you in a drawing to win a $20 Amazon Gift Card! </div> </div> </div> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/ashley-jacobs">Ashley Jacobs</a> of <a href="http://www.wisebread.com/ask-the-readers-what-is-your-latte-factor">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-1"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/ask-the-readers-200-giveaway-what-does-corporate-social-responsibility-mean-to-you">Ask the Readers $200 Giveaway: What Does Corporate Social Responsibility Mean to You?</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/ask-the-readers-whats-in-your-wallet">Ask the Readers: What&#039;s In Your Wallet?</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/ask-the-readers-is-now-the-time-to-shop">Ask the Readers: Is Now the Time to Shop?</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/ask-the-readers-what-is-your-new-years-resolution">Ask the Readers: What Is Your New Year&#039;s Resolution?</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/ask-the-readers-how-did-you-spend-your-first-paycheck">Ask the Readers: How Did You Spend Your First Paycheck?</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Giveaways Ask the Readers Latte Factor little luxuries spending Tue, 12 Feb 2013 11:36:31 +0000 Ashley Jacobs 967716 at http://www.wisebread.com The Limits of Small Economies http://www.wisebread.com/the-limits-of-small-economies <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/the-limits-of-small-economies" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/coffee_with_view.jpg" alt="Coffee with a view" title="Coffee with a view" class="imagecache imagecache-250w" width="250" height="133" /></a> </div> </div> </div> <p>The first step always recommended to people whose finances are out of control is that they institute some small economies. Quit with the fancy coffee drinks. Brown bag it for lunch. Switch to generic brands at the grocery store.</p> <p>These steps are mentioned first not because they're the most important, but because they're quick, easy, and (almost) universally appropriate. But the hard truth is that small indulgences are not what ruin people's finances. (See also: <a href="http://www.wisebread.com/simple-living-through-capital">Simple Living Through Capital</a>)</p> <h2>Financial Ruination</h2> <p>People's finances are ruined two ways:</p> <ol> <li>A sudden drop in income.</li> <li>A large uninsured expense.</li> </ol> <p>I started to make separate lists of the sort of things that lead to these problems, but it turns out there's so much overlap that one list pretty much covers it: Unemployment, illness, accident, divorce, lawsuit, natural disaster, business failure, disability, etc.</p> <p>Those are the things that cause individual financial collapse, not being unable to resist the latest shiny high-tech gadget.</p> <h2>Failure to Thrive</h2> <p>Which is not to say that people shouldn't attack the small indulgences. That's still worthwhile, for two reasons.</p> <p>First, they're something that you can take action on right now.</p> <p>Attacking the big things often takes months or years of effort before there's any payoff &mdash; moving to a cheaper house, getting a better job, changing careers, settling a lawsuit. (And that's putting aside the really terrible situations like a terminal illness where there's literally nothing you can do to fix things.)</p> <p>Saving a few bucks every week won't fill the hole blown into your finances by a major disaster, but it does give you something positive to do.</p> <p>Second, although small indulgences are rarely if ever the reason for ruination, they do make it hard to get ahead.</p> <p>Back before interest rates were so low, it would have been possible to write a little parable here about how much money you could save over 10 years if you cut your expenses by $20 or $50 a week.</p> <p>At current rates, that story isn't so compelling now. But however little money small sums invested at low rates for a few years adds up to, it still leaves you way ahead of the alternative &mdash; small sums borrowed at high rates for a few years. (Go ahead and crank the numbers on that if you don't believe me.)</p> <p>However you figure it, small economies do give you the chance to accumulate a little capital, and <a href="http://www.wisebread.com/on-the-importance-of-having-capital">a little capital</a> improves your life in many ways.</p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/philip-brewer">Philip Brewer</a> of <a href="http://www.wisebread.com/the-limits-of-small-economies">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-2"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/the-retirement-latte">The Retirement Latte</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/a-money-resource-book-the-finish-rich-dictionary-book-review">A Money Resource Book: The Finish Rich Dictionary (Book Review)</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-one-size-fits-all-spending-tips-that-don-t-really-fit-everyone">5 One-Size-Fits-All Spending Tips That Don’t Really Fit Everyone</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/3-easy-ways-to-improve-your-credit-score-during-the-holidays">3 Easy Ways to Improve Your Credit Score During the Holidays</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-details-your-financial-adviser-may-be-ignoring">5 Details Your Financial Adviser May Be Ignoring</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Personal Finance Latte Factor limits spending less Wed, 23 Jan 2013 10:48:37 +0000 Philip Brewer 965731 at http://www.wisebread.com 5 One-Size-Fits-All Spending Tips That Don’t Really Fit Everyone http://www.wisebread.com/5-one-size-fits-all-spending-tips-that-don-t-really-fit-everyone <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/5-one-size-fits-all-spending-tips-that-don-t-really-fit-everyone" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/latte_spending_tips.jpg" alt="Latte" title="Latte" class="imagecache imagecache-250w" width="240" height="160" /></a> </div> </div> </div> <p>It&rsquo;s a new year, and you&rsquo;re prepared for the onslaught of financial tips aimed at helping you turn over a new leaf, form a resolution, and help your finances enter a period of recovery. But what if you&rsquo;re doing OK? Is the advice necessary, relevant, or even useful? These five tips seem to be popping up EVERYWHERE, but before you drop your current successful personal finance habits in lieu of these common suggestions, make sure they will meet your personal budget needs.</p> <h3>Common Tip #1: Shred Those Credit Cards</h3> <p>This is one that is really starting to bug me. I know that for those with spending problems or who can&rsquo;t pay off their debts in a responsible way, a credit card is the ultimate in temptation. (I&rsquo;ve been there. I understand.) For those who have managed to keep their credit cards as a part of a healthy financial portfolio, however, there is no need to slice and dice your plastic.</p> <p>Small business owners and the self-employed especially will find the liquidity of a line of credit to not only be necessary at times; it can actually be profitable. By putting my groceries, gas, and small business costs on my credit cards, I earn enough points each month to easily keep my printer ink and post-it notes fully stocked. (And I never pay interest.)</p> <h3>Common Tip #2: Shop Less</h3> <p>Impulse buys can kill the budget, so it makes sense that the more shopping trips you make, the more likely you could be to spend unnecessarily. Add in the cost of fuel for your vehicle (and time away from home and family), and multiple shopping trips a week can be a bad idea. But they can also be an awesome way to realize some personal finance dreams.</p> <p>My family is hoping to store up three months of non-perishables as part of an emergency planning goal, and this can only be done by faithfully hitting our local stores to purchase their loss leaders each and every time they offer them. With limits set for the 99 cent bags of flour and 25 cent canned veggies, it&rsquo;s necessary to visit the store at least once a week in order to be sure that our family of seven has enough for the next power outage, <a href="http://www.wisebread.com/15-things-you-should-do-today-to-prepare-for-a-pandemic-flu">pandemic flu</a>, tornado, or period of ridiculous inflation. If we stay on target, buying only what we came for, it can work in our favor, and by combining trips with outings we already have scheduled, we aren&rsquo;t spending more than a few pennies for the extra fuel to drive around the parking lot.</p> <h3>Common Tip #3: Skip the Latte</h3> <p>I will never follow the &quot;<a href="http://www.wisebread.com/3-reasons-why-keeping-your-latte-factor-will-help-you-save-money">latte factor</a>&quot; &mdash; not in a million years.&nbsp;This mom of five rarely indulges in anything.&nbsp;(In fact, I&rsquo;ve never even had a manicure.) By choosing a simple lifestyle void of a single pair of designer shoes and less than two dinners out per year, you can&rsquo;t possibly deny me the right to make my own Starbucks lattes at home (via my Tassimo brewer) or to drive through the Scooter&rsquo;s Java lane on my way home from grocery shopping.&nbsp;We all have our little indulgences, and as long as my bills are paid, I&rsquo;ll continue to drink my coffee.</p> <h3>Common Tip #4: Cut the Land Line</h3> <p>This is another cliché money-saving tip that drives me to insanity. Living 10 miles from the nearest anything leaves me feeling a bit vulnerable out in the middle of rural Nebraska. My cell phone works sometimes, and my internet works less often. By asking me to cut my land line, you&rsquo;re suggesting that I&rsquo;m OK with having my access to an ambulance or police officer limited by the weather or my internet provider&rsquo;s whims. At $19 a month for a line, it&rsquo;s well worth the cost to keep it (and possibly save someone&rsquo;s life, if needed).</p> <h3>Common Tip #5: Take a Staycation</h3> <p>It think it&rsquo;s great that some people have found a way to enjoy their summer or winter break in the comfort and privacy of their own homes, without the cost of travel and with their loved ones surrounding them. When it comes to my <a href="http://www.wisebread.com/america-is-the-no-vacation-nation">vacation</a>, however, I&rsquo;m getting the heck out of town. I work from home with my husband and homeschool my five kids. There is no way I am going to fool myself into thinking that camping in the backyard or playing board games is the same as going somewhere warm and letting the kids swim while I sit down for longer than 10 minutes. I know that I&rsquo;ll pay a premium for this privilege, but I feel like it&rsquo;s worth it. For less than $1,500, I can rent a van, drive across the country, and stay in a nice family hotel with an indoor water park and buffet meals. I&rsquo;m definitely budgeting this in!</p> <p>I love that people are individuals, uniquely made to have their own gifts, passions, and personalities. I think our personal finance choices will (and should) reflect that. We&rsquo;ve already covered some of your pet-peevey <a href="http://www.wisebread.com/ask-the-readers-what-money-advice-are-you-sick-of-chance-to-win-20">financial advice that you&rsquo;re tired of hearing</a>. <em>Do you have any others?</em></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/linsey-knerl">Linsey Knerl</a> of <a href="http://www.wisebread.com/5-one-size-fits-all-spending-tips-that-don-t-really-fit-everyone">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-5"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/a-money-resource-book-the-finish-rich-dictionary-book-review">A Money Resource Book: The Finish Rich Dictionary (Book Review)</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/the-limits-of-small-economies">The Limits of Small Economies</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/the-retirement-latte">The Retirement Latte</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/3-easy-ways-to-improve-your-credit-score-during-the-holidays">3 Easy Ways to Improve Your Credit Score During the Holidays</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-details-your-financial-adviser-may-be-ignoring">5 Details Your Financial Adviser May Be Ignoring</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Personal Finance bulk shopping credit card cancellation Latte Factor staycations Tue, 11 Jan 2011 13:00:10 +0000 Linsey Knerl 447995 at http://www.wisebread.com How to Save $1,500 on Coffee http://www.wisebread.com/how-to-save-1500-on-coffee <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/how-to-save-1500-on-coffee" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/4675028010_9428e69db5.jpg" alt="coffee" title="coffee" class="imagecache imagecache-250w" width="250" height="167" /></a> </div> </div> </div> <p>By now, many of us are familiar with <a href="http://www.wisebread.com/the-retirement-latte">The Latte Factor</a>, the idea that if you put aside a little bit each day (equivalent to the cost of your morning coffee and a pastry), you can save a lot. But have you ever actually added up how much you spend at your favorite coffee shop? It's probably a lot more than you thought&nbsp;&mdash; if you buy lattes, easily as much as $1,500 a year per household. (See also: <a href="http://www.wisebread.com/diy-coffee-roasting">DIY Coffee Roasting</a>)</p> <p>Think it couldn't possibly be that much? Here are the numbers:</p> <p>Let's say two of us (my husband and I) stop for coffee 200 times a year (4 visits a week, 50 weeks a year). A latte is, let's say, $3.50 plus tax &mdash; so $3.75 a cup. That means we're spending $1,500 (3.75 x 200 visits x 2 people) a year for coffee!</p> <p>What's the solution? Why, make your own, of course.</p> <p>It might seem like you won't actually save that much over the coffee shop, considering that you have to buy an espresso machine and beans. The savings are, however, substantial. A good machine is about $600 (ours is a Saeco, $549 at Amazon, and it's lasted four years so far) and espresso beans are $10-20 a pound (we buy three pounds of French Roast at Costco for $13). We spend $40 a month for coffee and milk, or $480 a year. Thus, over a two-year period, we spent $550 for the machine and $960 for the drinks. That's $1,510 spent in the same period we'd have otherwise given $3,000 to the coffee shop.</p> <p>There's a <a href="http://www.wisebread.com/3-reasons-why-keeping-your-latte-factor-will-help-you-save-money">flip side to this argument</a>, but we don't feel like we're missing out on anything; the machine makes great coffee two shots at a time, and the steamer creates creamy, smooth, steamed milk in nothing flat. And not only has this method saved us almost $1,500 over two years, it's also saved us from gaining extra&nbsp;pounds eating coffee shop pastries.</p> <p>&nbsp;</p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/kate-lister">Kate Lister</a> of <a href="http://www.wisebread.com/how-to-save-1500-on-coffee">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-4"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/better-brewing-12-ways-to-make-coffee-at-home">Better Brewing: 12 Ways to Make Coffee at Home</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/french-press-coffee">French Press Coffee: Step-by-Step Guide to Handcrafted Coffee</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/4-starbucks-drinks-you-can-easily-make-yourself">4 Starbucks Drinks You Can Easily Make Yourself</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/cheapest-ways-to-get-your-caffeine-fix">Cheapest Ways to Get Your Caffeine Fix</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/the-5-best-milk-frothers">The 5 Best Milk Frothers</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Food and Drink coffee espresso Latte Factor Sat, 23 Oct 2010 17:00:10 +0000 Kate Lister 240933 at http://www.wisebread.com 3 Reasons Why Keeping Your "Latte Factor" Will Help You Save Money http://www.wisebread.com/3-reasons-why-keeping-your-latte-factor-will-help-you-save-money <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/3-reasons-why-keeping-your-latte-factor-will-help-you-save-money" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/2439677581_3a4846e610.jpg" alt="" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>&quot;The Latte Factor&quot; is a term referring to the small expenditures that you make every day that could add up to huge savings over time. This concept was popularized by David Bach in his book <a href="http://www.amazon.com/gp/product/0385660308?ie=UTF8&amp;tag=stuffies-20&amp;linkCode=as2&amp;camp=1789&amp;creative=390957&amp;creativeASIN=0385660308">The Automatic Millionaire</a> (affiliate link) and now there are many articles that tell you that saving just $5 a day on coffee will make you a millionaire. The math behind these articles is sound, but should you give up your little indulgences? Here are a few reasons why keeping your &quot;latte factor&quot; will help you save.</p> <h3>It is a small price to pay for happiness.</h3> <p>My husband's latte factor is bubble milk tea. Every week he gets one because it makes him happy. When I started dating him I actually told him that his milk tea fix is costing him hundreds of dollars a year. Needless to say he was not pleased and argued that he saves enough money to justify such a small expenditure. After I thought about it, I actually agreed with him.</p> <p>He works hard for his money and he deserves to get this one small thing that costs less than $5 a week. I believe that saving money should not be a punishment, so when you deprive yourself of a tiny expense that makes you happy, the whole exercise of saving money will become a negative experience. When we experience negative emotions we are more likely to give up on an endeavor, so if your latte factor gives you a cheap dose of happiness then it is worth keeping.</p> <h3>You can save more elsewhere.</h3> <p>If my husband did cut out his milk tea habit then we would have a few hundred dollars more a year, but that pales in comparison to how much we saved when we <a href="http://www.wisebread.com/should-you-try-to-reduce-your-rent">asked for a rent reduction</a> and refinanced our mortgage. If you really want to keep your small indulgences then you should try to <a href="http://www.wisebread.com/how-to-save-big">save on the big things</a>. How many lattes can you buy if you <a href="http://www.wisebread.com/five-calls-you-can-make-now-to-save-hundreds-to-thousands-of-dollars">cut out cable TV</a> and watched shows online instead? There are many ways you can save without sacrificing anything in your lifestyle, and I think those things should be done before you stop going to Starbucks.</p> <h3>Reward yourself for saving.</h3> <p>Ultimately, <a href="http://www.wisebread.com/should-you-spend-your-money-while-you-can">money is meant to be spent</a>. I think it is a good idea to keep your latte factor as a reward for saving money. For example, if you hit your savings goal for the month then there is no reason not to enjoy a little bit of your money. If you keep your small luxuries as a reminder to save money, then they will work out to be positive reinforcement.</p> <p>The concept that saving a little every day will add up to a lot over time is definitely sound. However, the fallacy in the idea that &quot;eliminating the latte factor will make you a millionaire&quot; is that those who cut out their morning coffee or newspaper usually do not save that money at all. More often than not I have seen people who stopped spending on little things blow the &quot;savings&quot; on something bigger. As long as you are committed to saving consistently, you can build up your nest egg and still keep the small expenditures that enhance your life.</p> <p><em>What is your &quot;latte factor&quot;? Have you attempted to cut it out to save money?</em></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/xin-lu">Xin Lu</a> of <a href="http://www.wisebread.com/3-reasons-why-keeping-your-latte-factor-will-help-you-save-money">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-5"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/seven-monthly-expenses-we-dont-realize-we-dont-need">7 Monthly Expenses We Don&#039;t Realize We Don&#039;t Need</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/the-4-most-common-unnecessary-needs">The 4 Most Common Unnecessary &quot;Needs&quot;</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/beyond-debt-free-getting-by-in-the-new-economy">Beyond Debt-Free: Getting By in the New Economy</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/10-monthly-bills-you-can-slash">10 Monthly Bills You Can Slash</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/how-to-travel-full-time-for-17000-a-year-or-less">How to Travel Full-Time for $17,000 a Year (or Less!)</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Budgeting Lifestyle cutting expenses Latte Factor Fri, 16 Apr 2010 14:00:03 +0000 Xin Lu 23406 at http://www.wisebread.com A Money Resource Book: The Finish Rich Dictionary (Book Review) http://www.wisebread.com/a-money-resource-book-the-finish-rich-dictionary-book-review <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/a-money-resource-book-the-finish-rich-dictionary-book-review" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/finish rich dictionary pic.jpg" alt="The Finish Rich Dictionary" title="The Finish Rich Dictionary" class="imagecache imagecache-250w" width="115" height="115" /></a> </div> </div> </div> <p></p> <p class="MsoNormal"><a href="&lt;a href=&quot;http://www.amazon.com/gp/product/0195375580?ie=UTF8&amp;tag=wisbre09-20&amp;linkCode=as2&amp;camp=1789&amp;creative=9325&amp;creativeASIN=0195375580&quot;&gt;The Finish Rich Dictionary: 1001 Financial Words You Need to Know&lt;/a&gt;&lt;img src=&quot;http://www.assoc-amazon.com/e/ir?t=wisbre09-20&amp;l=as2&amp;o=1&amp;a=0195375580&quot; width=&quot;1&quot; height=&quot;1&quot; border=&quot;0&quot; alt=&quot;&quot; style=&quot;border:none !important; margin:0px !important;&quot; /&gt;" target="_blank">The Finish Rich Dictionary: 1001 Financial Words You Need to Know</a> by David Bach, is a resource that could sit on my bookshelf and not get dusty. The wealth of go-to information in this book makes it a must-have for anybody wishing to increase their financial IQ.</p> <p class="MsoNormal"><o:p>&nbsp;</o:p></p> <p class="MsoNormal">David Bach is not a new financial guru to the markets, with over 5 million books in print. One of his first hits, <a href="&lt;a href=&quot;http://www.amazon.com/gp/product/0767923820?ie=UTF8&amp;tag=wisbre09-20&amp;linkCode=as2&amp;camp=1789&amp;creative=9325&amp;creativeASIN=0767923820&quot;&gt;The Automatic Millionaire&lt;/a&gt;&lt;img src=&quot;http://www.assoc-amazon.com/e/ir?t=wisbre09-20&amp;l=as2&amp;o=1&amp;a=0767923820&quot; width=&quot;1&quot; height=&quot;1&quot; border=&quot;0&quot; alt=&quot;&quot; style=&quot;border:none !important; margin:0px !important;&quot; /&gt;" target="_blank">The Automatic Millionaire</a>, showed people how easy it is to save money, and to actually become millionaires. Simple concepts like the <a href="http://www.wisebread.com/the-retirement-latte" target="_blank">Latte Factor</a> catapulted him into practical financial planning fame.</p> <p class="MsoNormal"><o:p>&nbsp;</o:p></p> <p class="MsoNormal"><a href="&lt;a href=&quot;http://www.amazon.com/gp/product/0195375580?ie=UTF8&amp;tag=wisbre09-20&amp;linkCode=as2&amp;camp=1789&amp;creative=9325&amp;creativeASIN=0195375580&quot;&gt;The Finish Rich Dictionary&lt;/a&gt;&lt;img src=&quot;http://www.assoc-amazon.com/e/ir?t=wisbre09-20&amp;l=as2&amp;o=1&amp;a=0195375580&quot; width=&quot;1&quot; height=&quot;1&quot; border=&quot;0&quot; alt=&quot;&quot; style=&quot;border:none !important; margin:0px !important;&quot; /&gt;" target="_blank">The Finish Rich Dictionary </a>differentiates itself from many of Bach&rsquo;s other works in that it is a resource more than a sit-down-and-read-it-from-cover-to-cover sort of book. It truly is a financial dictionary, alphabetically describing financial terms, many of which I (as a former financial planner no less) found to be educational and informative.</p> <p class="MsoNormal"><o:p>&nbsp;</o:p></p> <p class="MsoNormal">There is also a collection of essays disbursed throughout such as <em>&ldquo;What you Need to Know about Insurance&rdquo;, &ldquo;How to Buy a Home&rdquo;, and Understanding Your Credit Score&rdquo; </em>that round out the dictionary nicely, along with an Interest Rate Calculation Table (very useful) and a list of Common Financial Equations that continue to make this book a useful resource.</p> <p class="MsoNormal"><o:p>&nbsp;</o:p></p> <p class="MsoNormal">I&rsquo;ll admit, some of the &ldquo;financial&rdquo; terms in the book are a stretch for me. &ldquo;<em>Brand name</em>&rdquo;, &ldquo;<em>megastore</em>&rdquo;, and &ldquo;<em>weak</em>&rdquo; as examples, had &ldquo;weak&rdquo; definitions in relation to all things financial.</p> <p class="MsoNormal"><o:p>&nbsp;</o:p></p> <p class="MsoNormal">But at the same time, I had no idea what &ldquo;<em>poison pill</em>&rdquo;, &ldquo;<em>countervailing duty</em>&rdquo;, nor &ldquo;<em>cheabol</em>&rdquo; meant, and am now all the wiser for it. Couple the definitions with some explanations of their origin and usage (I bet you&rsquo;ll never guess the origin and usage of the word &ldquo;<em>average</em>&rdquo; according to Bach) and you will know some interesting facts that you can stump a room with at a boring party.</p> <p class="MsoNormal"><o:p>&nbsp;</o:p></p> <p class="MsoNormal">I am also pleased to report that this dictionary illustrates both Canadian and <st1:country-region><st1:place>US</st1:place></st1:country-region> financial terms, so this is a practical guide for any North American looking to increase their knowledge of financial jargon.</p> <p class="MsoNormal"><o:p>&nbsp;</o:p><o:p>&nbsp;</o:p></p> <p class="MsoNormal">Here are a few of David Bach&rsquo;s other books that might be of interest to you:</p> <p class="MsoNormal"><a href="&lt;a href=&quot;http://www.amazon.com/gp/product/0767904842?ie=UTF8&amp;tag=wisbre09-20&amp;linkCode=as2&amp;camp=1789&amp;creative=9325&amp;creativeASIN=0767904842&quot;&gt;Smart Couples Finish Rich: 9 Steps to Creating a Rich Future for You and Your Partner&lt;/a&gt;&lt;img src=&quot;http://www.assoc-amazon.com/e/ir?t=wisbre09-20&amp;l=as2&amp;o=1&amp;a=0767904842&quot; width=&quot;1&quot; height=&quot;1&quot; border=&quot;0&quot; alt=&quot;&quot; style=&quot;border:none !important; margin:0px !important;&quot; /&gt;" target="_blank">Smart Couples Finish Rich: 9 Steps to Creating a Rich Future for You and Your Partner</a></p> <p class="MsoNormal"><a href="&lt;a href=&quot;http://www.amazon.com/gp/product/076791029X?ie=UTF8&amp;tag=wisbre09-20&amp;linkCode=as2&amp;camp=1789&amp;creative=9325&amp;creativeASIN=076791029X&quot;&gt;Smart Women Finish Rich&lt;/a&gt;&lt;img src=&quot;http://www.assoc-amazon.com/e/ir?t=wisbre09-20&amp;l=as2&amp;o=1&amp;a=076791029X&quot; width=&quot;1&quot; height=&quot;1&quot; border=&quot;0&quot; alt=&quot;&quot; style=&quot;border:none !important; margin:0px !important;&quot; /&gt;" target="_blank">Smart Women Finish Rich</a></p> <p class="MsoNormal"><a href="&lt;a href=&quot;http://www.amazon.com/gp/product/0767919475?ie=UTF8&amp;tag=wisbre09-20&amp;linkCode=as2&amp;camp=1789&amp;creative=9325&amp;creativeASIN=0767919475&quot;&gt;Start Late, Finish Rich: A No-Fail Plan for Achieving Financial Freedom at Any Age&lt;/a&gt;&lt;img src=&quot;http://www.assoc-amazon.com/e/ir?t=wisbre09-20&amp;l=as2&amp;o=1&amp;a=0767919475&quot; width=&quot;1&quot; height=&quot;1&quot; border=&quot;0&quot; alt=&quot;&quot; style=&quot;border:none !important; margin:0px !important;&quot; /&gt;" target="_blank">Start Late, Finish Rich: A No-Fail Plan for Achieving Financial Freedom at Any Age</a></p> <p class="MsoNormal"><a href="&lt;a href=&quot;http://www.amazon.com/gp/product/076792973X?ie=UTF8&amp;tag=wisbre09-20&amp;linkCode=as2&amp;camp=1789&amp;creative=9325&amp;creativeASIN=076792973X&quot;&gt;Go Green, Live Rich: 50 Simple Ways to Save the Earth and Get Rich Trying&lt;/a&gt;&lt;img src=&quot;http://www.assoc-amazon.com/e/ir?t=wisbre09-20&amp;l=as2&amp;o=1&amp;a=076792973X&quot; width=&quot;1&quot; height=&quot;1&quot; border=&quot;0&quot; alt=&quot;&quot; style=&quot;border:none !important; margin:0px !important;&quot; /&gt;" target="_blank">Go Green, Live Rich: 50 Simple Ways to Save the Earth and Get Rich Trying</a></p> <p class="MsoNormal"><o:p>&nbsp;</o:p></p> <p class="MsoNormal"><i>(Note: The author received a free copy of the book in exchange for this review). <o:p></o:p></i></p> <p>&nbsp;</p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/nora-dunn">Nora Dunn</a> of <a href="http://www.wisebread.com/a-money-resource-book-the-finish-rich-dictionary-book-review">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-1"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/the-retirement-latte">The Retirement Latte</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/the-limits-of-small-economies">The Limits of Small Economies</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-one-size-fits-all-spending-tips-that-don-t-really-fit-everyone">5 One-Size-Fits-All Spending Tips That Don’t Really Fit Everyone</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/3-easy-ways-to-improve-your-credit-score-during-the-holidays">3 Easy Ways to Improve Your Credit Score During the Holidays</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-details-your-financial-adviser-may-be-ignoring">5 Details Your Financial Adviser May Be Ignoring</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Personal Finance Automatic Millionaire David Bach financial resource books Finish Rich Dictionary Go Green Get Rich Latte Factor Smart Couples Finish Rich Smart Women Finish Rich Fri, 13 Mar 2009 02:40:27 +0000 Nora Dunn 2923 at http://www.wisebread.com The Retirement Latte http://www.wisebread.com/the-retirement-latte <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/the-retirement-latte" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/latte.JPG" alt="latte" title="The Retirement Latte" class="imagecache imagecache-250w" width="250" height="167" /></a> </div> </div> </div> <p class="MsoPlainText"><span>My introduction to <a href="http://www.finishrich.com/pages/home.php" target="_blank">David Bach</a> was when I saw him speak at a financial conference a few years ago. He told an interesting story about a couple who came in for a consultation with him when he first worked in personal finance. They were in their mid 50s, had two children who were fully put through college, had two properties fully paid off, and were ready to retire with over $1 million in savings. The impressive factor was that they had managed to build and sustain this comfortable financial position with a relatively small family income.</span></p> <p class="MsoPlainText"><span>Bach simply didn&#39;t understand how this couple had managed to do so well for themselves, so he asked them. Their response: A lifetime of prudent saving and investing, paying themselves first each month. </span></p> <p class="MsoPlainText"><span> </span></p> <p class="MsoPlainText"><span>As most of us know by now, budgeting, saving money and accumulating for retirement or major purchases doesn&#39;t have to be a soul-sucking life-altering commitment that means years of total sacrifice. But neither does it mean spending on our every whim. There is a wonderful balance between enjoying what today has to offer, and making sure that tomorrow will be taken care of as well. </span></p> <p class="MsoPlainText"><span> </span></p> <p class="MsoPlainText"><span>I was impressed enough with David Bach that I read his book <a href="&lt;a mce_thref=&quot;http://www.amazon.com/gp/search?ie=UTF8&amp;keywords=Automatic%20Millionaire&amp;tag=wisbre09-20&amp;index=books&amp;linkCode=ur2&amp;camp=1789&amp;creative=9325&quot;&gt;The Automatic Millionaire&lt;/a&gt;&lt;img mce_tsrc=&quot;http://www.assoc-amazon.com/e/ir?t=wisbre09-20&amp;amp;l=ur2&amp;amp;o=1&quot; width=&quot;1&quot; height=&quot;1&quot; border=&quot;0&quot; alt=&quot;&quot; style=&quot;border:none !important; margin:0px !important;&quot; /&gt;" target="_blank">The Automatic Millionaire</a> , and continued to enjoy his message and clean style. </span></p> <p class="MsoPlainText"><span>Both in his book and on his speaking circuit, Bach mentions encounters with people who understand his advice, but find some reason why they can&#39;t start saving money now. They argue that sometimes it&#39;s impossible to get ahead and stop living from hand to mouth. </span></p> <p class="MsoPlainText"><span> </span></p> <p class="MsoPlainText"><span>In answer to this Bach starts to dissect their daily routines with them. He discovers that rarely do they eat breakfast at home; they instead get a muffin and latte at Starbucks on their way to work. They might pick up a mid-morning booster juice of sorts, and half the time end up buying lunch too. That quickly adds up to at least $15/day spent on things that arguably didn&#39;t enrich their lives so much that they couldn&#39;t see their way to altering at least a few of these habits. </span></p> <p class="MsoPlainText"><span> </span></p> <p class="MsoPlainText"><span>Bach has nicely summed this concept up into <a href="http://www.finishrich.com/free_resources/fr_lattefactor.php" target="_blank">The Latte Factor</a>. He argues that if you take the cost of a latte and muffin each day ($5 x 7 = $35/week, $150/month) and invest this money at a 10% rate of return, after 40 years you would have a whopping $948,611. (Interestingly when I plugged these numbers into his personal <a href="http://www.finishrich.com/free_resources/lattecalculator.php" target="_blank">latte factor calculator </a>, the number instead came to around $880,000). </span></p> <p class="MsoPlainText"><span>Prudent investors might balk at a 10% annual average rate of return. The same strategy at a more modest 8% annual average rate of return would accumulate just less than $500,000. That&#39;s significantly less than what Bach&#39;s Latte Factor would have for us at the end of the day, but still a heck of a lot more than what we&#39;d have if we just had consumed that latte and muffin every day instead! </span></p> <p class="MsoPlainText"><span> </span></p> <p class="MsoPlainText"><span>In any case, I found Bach to have a great style both on stage and in his books. His writing is fairly casual, informative, entertaining, and his <a href="http://www.finishrich.com/shop/shop.php" target="_blank">series of books</a> are extensive enough to apply to just about anybody. </span></p> <p class="MsoPlainText"><span>And for our Canadian readers, he has <a href="http://www.chapters.indigo.ca/books/Automatic-Millionaire-Canadian-Edition-Powerful-David-Bach/9780385660303-item.html?ref=Search+Books%3a+%2527David+Bach%2527" target="_blank">adapted many of his books</a> to include the finer points of Canadian tax laws and investments into his material. </span></p> <p class="MsoPlainText"><span> </span></p> <p class="MsoPlainText"><span>Some people will find his suggestions to be common knowledge or nothing new, while others will see their finances in a new light. As with any financial advice, it is always best to do your research, understand advice coming from the source (in this case a book) for what it is, and get a second opinion. </span></p> <p class="MsoPlainText"><span> </span></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/nora-dunn">Nora Dunn</a> of <a href="http://www.wisebread.com/the-retirement-latte">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-3"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/first-rule-of-financial-wins-avoid-losses">First Rule of Financial Wins: Avoid Losses</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/are-you-putting-off-these-9-adult-money-moves">Are You Putting Off These 9 Adult Money Moves?</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/15-personal-finance-rules-you-should-be-breaking">15 Personal Finance Rules You Should Be Breaking</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/10-money-goals-all-30-somethings-should-have">10 Money Goals All 30-Somethings Should Have</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/buying-shiny-new-things-without-the-guilt">Buying Shiny New Things Without The Guilt</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Personal Finance Budgeting Retirement budgeting David Bach investing Latte Factor saving Wed, 26 Sep 2007 23:10:33 +0000 Nora Dunn 1218 at http://www.wisebread.com