Don’t Give Up Your “Latte Factor”

by Sean Bryant on June 7, 2012

A few years ago I was reading a book by David Bach titled, “The Automatic Millionaire“. In this book, the author refers to something called “The Latte Factor”. This means that most individuals are more concerned about how much they make and not on how much they spend. If you cut out one thing in your life that you find yourself always purchasing, a latte for example, then you will be able to save enough money each month to ensure you are not living paycheck to paycheck.

The more I thought about this whole concept, the less I really liked it. The one thing that most of us pick out would probably be the thing that really makes us happy. Maybe for you it’s stopping at the local coffee shop in the morning or it’s treating yourself to a smoothie after a workout. If you cut that out of your life, you have also reduced your happiness.

What I would suggest instead is to minimize how often you purchase your “Latte Factor” and find something else to cut back. Instead of stopping at the coffee shop every morning on the way to work, stop only three mornings each week. If you really want to cut back, then you can stop on Fridays and make it your special treat to end the week. By doing this you will not only save money, but you will also continue to allow yourself to enjoy your guilty pleasure.

Now, just because you let yourself splurge on this one thing that makes you happy doesn’t mean that you need to get greedy. Don’t let it be your excuse to spend money on other frivolous items. If you allow yourself to enjoy this one item, cut back on something else that doesn’t make you nearly as happy. Let’s say, for example, you have satellite radio in your car. If you love your morning coffee more than your radio, maybe you could give up the radio. Right there you would save $10 each month.

I realize that $10 is not a lot of money, but this is more about principal. You don’t need to give up something you love. All you need to do is minimize how much you indulge in it and find something else to cut your spending on.

What is your Latte Factor?

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Sean Bryant

Sean Bryant created in 2011 to help pass along his knowledge of finance and economics to others. After graduating from the University of Iowa with a degree in economics he worked as a construction superintendent before jumping into the world of finance. Sean has worked on the trade desk for a commodities brokerage firm, he was a project manager for an investment research company and was a CDO analyst at a big bank. That being said he brings a good understanding of the finance field to the One Smart Dollar community. When not working Sean and he wife are avid world travelers. He enjoys spending time with his daughter Colette and dog Charlie.
  • I would say that my latte factor is golf. I love to go golfing! A few years ago I was able to take clients out for golfing on a weekly basis and my company would pay for it. However, when I switched jobs I quickly realize a weekly golf outing couldn’t fit into my budget.

    So, these days I may go once a month at best and maybe once every other month.

  • Thankfully I’m not a coffee drinker, otherwise I’d be all over those daily coffees. The problem with the $4 coffees is that people are just regularly getting it out of habit. Sure they really enjoy it, but they’d likely get almost the same enjoyment out of some cheap coffee. Also since it’s such a habit, they are treating themselves more than they really need to.

  • I agree! I like to save Starbucks for one day a week, and I just use the coffee at work and buy my own creamer. $3 for creamer that lasts for 2 weeks or more. That’s cheap!

    I also like to get fro-yo once every few weeks. I like to look at it like a treat…if I just kept saying no, I’d feel depressed. That’s not what life is about.

  • Grabbing lunch out at work is my latte factor. I’ve never been able to drop the spending, but I have been able to cut back so that I don’t spend much. It’s hard to give up leaving the office so that you feel like you actually escaped work for an hour. What price do you put on that feeling.

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