The Latte Factor® is a euphemistic label for all that extra money we spend daily on nonessentials such as candy, bottled water, doughnuts, muffins, soda, cigarettes, magazines, newspapers, and yes, lattes. Author and financial advisor David Bach coined the term to reference the inordinate amount of money people waste on a daily basis, that when saved can literally make you a millionaire. The Latte Factor® came out of observing a majority of Americans who live paycheck to paycheck, who are wasting their opportunity to become self made millionaires. The phrase “latte factor®” has become part of the American lexicon to describe how consumers fall into the trap of wasteful spending.
Your own Latte Factor— can be anything — daily lunches out, weekly manicures, even unneeded cable services. By trimming the “fat,” people can sock away money in more easily digestible chunks. Bach first recognized the Latte Factor® when advising a woman who felt that she couldn’t afford to save money. after doing a daily assessment of her spending habits, he determined that her Latte Factor® was costing her hundreds of dollars a year.
Calculating the Latte Factor— is simple: $5 US Dollars (USD) per day, multiplied by seven days a week adds up to $35 USD. Multiply that weekly, which adds up to $150 USD per month (based on 30 days). That adds up to $1,855 USD per year, which, although a nice chunk of change, is relatively unimpressive. Now, if you invest that same $5 USD per day at an average 10% return, you will have saved $948,611 USD in 40 years. If you start in your twenties, by retirement, you’ll have a nice nest egg stashed away.
David Bach has built an empire on advising normal people of modest financial means on how to make themselves rich with the mantra, “Live Rich. Finish Rich.” There is nothing complicated or fancy about his advice, just simple, doable steps that anyone can take to improve their financial outlook. He has authored seven bestsellers including The Automatic Millionaire Homeowner, Start Late, Finish Rich Smart Women Finish Rich and Smart Couples Finish Rich. He has appeared on many television shows encouraging people to identify and calculate their own individual Latte Factor®. “The Great American Homeowner Challenge” is a campaign launched by Bach to encourage people to buy a home and increase their wealth by investing in rental property.