First off, what is a Latte Factor? David Bach founder of FinishRich.com defines it as those unnecessary “little” expenditures that we waste our money on, without realizing how much they add up to. Whether it’s a coffee every morning, buying records, attending the latest concerts or going out to eat, our Latte Factor can really start to add up.
So instead of me telling you to stop indulging altogether, I’m going to give you the tools to help you to manage it!
1. Figure out what your Latte Factor is
We all have things that we love to buy, but sometimes there are things that we don’t even think twice about when we pull out our wallets. When you start to spend your hard-earned cash on stuff without even giving it a second thought, that is your Latte Factor.
For me it’s comic books and movies. I can’t justify spending 70.00 on shoes that I desperately need, but I will drop 100.00 on movies and comics without batting an eye.
2. Figure out how much you spend on it in a month
Yes, this will require you to give your finances a good hard look. This means looking at your receipts, looking at your bank statements and highlight how often and how much you drop on your latte factor in one month.
Sure it may vary occasionally, but when it comes to your latte factor it usually is pretty consistent. For example if your factor is coffee there is a good chance you buy at least one cup a day from the same place. It shouldn’t be that tough to track.
If you want to kick it up a notch check out David Bach’s Latte Factor Calculator. He’s even created an app so you can manage your finances on the go!
3. Cut the cash in half
This was one of the hardest things I did when it came to managing my Latte Factor. I would go to HMV and comic book stores daily and always walk out with an armful of things. When I figured out how much I was spending I knew I had to cut it in half and it wasn’t easy. Your Latte Factor becomes a habit. Breaking a habit is very difficult, but if you want your wallet you thank you, cutting the cash in half is necessary.
For you coffee drinkers this could be as simple as making your coffee at home and bringing it to work in a thermos. For me I decided that I would only buy comics once a month and would only buy movies that really meant something to me (instead of buying tons of campy 80s action movies because I just HAD to have them).
4. Put your saved moolah in a savings account
Now that you’ve made the conscious decision to cut down on your Latte Factor spending, put that money somewhere safe. Just letting it sit in your chequing account is just too tempting and so easy to get at. Put it in your savings account instead where you can watch it grow and eventually use it on something special like a trip or a golden statue of yourself (okay, maybe not the statue, but you get what I mean).
The reason diets don’t work is that you cut yourself off from all the things you like and when you do allow yourself to indulge you go off the deep end and set yourself back. Managing your latte factor doesn’t mean completely stop.
After cutting the spending in half and watching your bank account smile because of it, allow yourself to indulge. This could mean going to see your favourite musician in concert or going to the fancy cafe for their famous orange mocha frappuccino.
Enjoy your Latte Factor, but don’t let it run your life. Indulge but be smart about it.