A couple of years ago I read a book called “The Automatic Millionaire” by David Bach which I think is an awesome book for anyone who wants to learn some easy ways to save money and retire rich. Most of the concepts are very simple but everyone can benefit from them. One of the most basic concepts that Bach talks about in his book is “the latte factor”. He coined the term latte factor because buying something small like a latte and a muffin each day can make a huge difference in your savings. He tries to show you how much money you could save if you skipped buying that latte and muffin every morning and invested it. Here is his example:
5$ per day(the average cost of a latte and a muffin) x 7 days= $35 per week
$35/ week=$150 per month
$150 per month invested at an annual rate of return of 10%
1 year= $18852years= $3,967
5 years= $11,616
10 years= $30,727
15 years= $62,171
30 years= $339,073
40 years= $948,611
Not everyone's "latte factor" includes buying latte's. Your latte factor could be buying a new DVD or two every week(you know will probably only watch it once or twice) or maybe its buying a newspaper from the newsstand every day instead of getting a subscription. I'm not saying you can spend money on some of these things, but I am saying that you should step back and reevaluate some of your purchases and see if there are little things you can cut back on or eliminate in order for you to give yourself a better life in the long run. A little saving can go a long way.
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