Is The ‘Latte Factor’ Hindering Your Journey to Financial Freedom?

‘Beware of little expenses. A small leak will sink a great ship.’ This was a warning given by former US President Benjamin Franklin.

During my recent study for yet more financial planning exams (It never ends), I reached a chapter that talked about establishing a budget and establishing whether there was a surplus or deficit in your monthly finances. While going through this section to understand why there could be a deficit in someone’s finances, I came across the term the ‘Latte Factor.’

The Latte Factor is a concept described by David Bach which refers to the long-term financial cost of spending money on things such as coffee, soft drinks and fast food. Although the daily amount spent on these may seem small and trivial, the accumulated effect can be enormous. In Songs of Solomon 2:15 (ESV) it says:

‘Catch the foxes for us, the little foxes that spoil the vineyards, for our vineyards are in blossom.’

The message here is that these ‘little foxes’ could be the major factor hindering us in achieving our financial goals.

I have previously been guilty of such daily micro-indulgences. In my first forays working in the City, I would start my day with a bacon roll and orange juice from Greggs, at about 11am I would head to Starbucks for a white chocolate mocha and a croissant and finally at lunch I would go to Wasabi for a delightful sweet chilli chicken and rice. There would probably be pounded yam at home too 😊.

Clearly this routine was unsustainable due to damage to my wallet (and waistline). My solution was to try and limit daily expenditure to £5 per day, but even this adds up. If you spend £5 a day every working day of the year that adds up £1,200 for the year! What could you do if you had an extra £1,200 per year? But wait there’s more. If you invested this £1,200 per year over 30 years and achieved a 7% return, you would end up with almost £120,000!! That’s a big chunk o’ financial freedom right there.

It doesn’t have to be coffee for something to be a Latte Factor in our lives. Let’s look at a few examples of the ‘little foxes’ nibbling away at the vineyard of our future wealth.

• Eating Out
• Bottled Water
• Gambling/Lottery Tickets
• Unused Gym Membership
• Bank charges
• Sky/Virgin Media TV Packages
• Overpaying for utilities (Gas, Electricity, Broadband etc)
• Not being on the best mortgage deal

I could go on but by now you get the point. Hopefully I have stirred you into the action of performing an audit of your finances to find out where money might be leaking out of your budget.

A great resource on how you can save money is the website Money Saving Expert. There is wealth of information on there on how to use your money as efficiently as possible.

As with most things in life, the key is to find a healthy balance between enjoying today but being prudent in planning for your tomorrow as well. In Proverbs 21:5 (ESV) it says:

‘The plans of the diligent lead surely to abundance, but everyone who is hasty comes only to poverty.’

By establishing a proper budget plan, you give yourself permission to spend a pre-determined amount on treats each month guilt-free, knowing that it is factored into your plan to build wealth in the long term.

What are your Latte Factors? Let me know in the comment section and please like and share if you found this useful.

God Bless

Ten Talents