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Reducing Your "Latte Factor" Easily

I was shopping for some laundry detergent at a local super center over the weekend, and stopped in the book section. I picked up Automatic Millionaire, by David Bach, and read the first chapter. I must say, I was hooked. First off, let me say, nothing in the book was really new. It is an aggregate of all the things you have heard people say, but combined and automated with things like direct deposit and online bill pay.

The next day, I was at my in-law's home and read the first chapter aloud to everyone who would listed. It was inspiring. Everyone loved the story of the McIntires. So, at that moment we all opened up HSBC Online Savings Accounts with the promotional code, "start," and deposited $1, and had a nice head start of $26 to our new millionaire status.

There are a few themes in the book that seem like a beaten horse, but they are made anew by Bach. First, paying yourself first... Bach says, as have many others, that you should pay yourself first (even before Uncle Sam). Further, you should do this automatically, so you do not have to make a conscious effort to make it happen. You should pay yourself about 10% of your pay. The easiest way to get started is by contributed to an employer sponsored 401(k). I absolutely agree, and you should Contribute Early, Contribute Often; however, you should only contribute to the extent that you receive a match from your employer, because you could have more freedom with your money in a self-directed IRA, if you wanted to set aside more pre-tax savings.

David Bach is a financial advisor, by trade, and shared experiences of his job and explaining to people that the need to save. He shared how one young woman said that is is all great, but... I live paycheck-to-paycheck, how can I save anything? Well, Bach discuess the "Latte Factor." The basic idea is that we all have frequent, but small, expenses that add up to a lot over our lifetimes. The young woman actually spent $25 per day, by 10 AM without hardly getting anything (a latte, a muffin, a smoothy with some ginko biloba, and a power bar). This could be nearly anything though, so do not think you do not have a "Latte Factor."

Essentially, I started thinking about my "Latte Factor." This is, again, not something new, and I had been thinking about this for a long time. I am certainly a coffee drinker, and more specifically, I like a triple (sometimes quadruple) vente, non-fat, with whip, mocha. That is about $5. And, not to mention, my new house is right next to a Starbucks! Talk about a self-disciple nightmare. What was I to do? Well, instead of spending $10 a week (I was able to curb it to that with disciple), I bought a cheap little, steam driven, espresso machine for my home for $20! Now, the normal price was $50, but it was a return that was opened, and I got it on sale. Plus, I paid $15 for a decent little conical burr grinder. Now I have about five drinks a week, get more entertainment by learning to make them myself, and get a better drink... all for about $2 per week.

Another aspect to my "Latte Factor" was soda. I would get one or two sodas a day, from the vending machine. This came out to an even $1 per day (luckily, these vending machines still sell soda for $.50). Well, that is another $5 per week. What to do there... by a two liter, and bring it in to work. I buy one generic two liter of soda for $.58. That is about the same soda in 5 1/2 cans. If I drink it all, I drink water for the rest of the week. So, I save over $4 per week there.

It is also pretty easy for me to eat out for lunch every day of the week. This is the one that adds up quickly. Not only does it cost a small fortune, each year, but it takes a lot of time, as well. So, instead of always eating out, I bring lunch. However, I do not bring a typical lunch, either. I keep a couple of snacks around, like some wheat crackers and some small bits of chocolate, and then I bring a banana or other fruit, and a sandwich for lunch. I do not do this every day, though. Occassionally I eat out. It is a nice reward, and it is certainly better than doing it more often than not, let alone, every day. Luckily, my employer likes to do lunch quite often, as well. So, once a week, we have a "lunch and learn" where they have lunch brought in, and we learn about new developments with our products. So, I do that nearly every time. Also, we celebrate birthdays at work, with lunch and cake, and do this once a month, for everyone whose birthday is within that month. So, there are five or six lunches per month that I don't worry about. Beyond that, I try to limit my lunches as much as possible. Occassionally, I will get a mystery shop that I can do and actually get paid to have lunch. These are great. Beyond that, I like to use my lunch time for reading the newspapers, studying for an upcoming exam (I am finishing my BS, hopefully by May), walk up and down the stairs, or run some errands. If I can get some errands completed during lunch, that is great, because I do not have to take personal time to do it.

What could your "Latte Factor" be? Could it be cigarettes, which will also cost you in healthcare? Could it be McDonald's on the way to work? Could it be a newspaper? There are plenty of things that you may be able to either do without, or find a less expensive way to do. I do not like cutting things out entirely, but finding a way to to it for much less is usually available.

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Anonymous Anonymous Says:

January 04, 2006 11:23 AM 

Great article. I'm inspired to analyze my life for my latte factor. I don't drink coffee, but then there's the cigarrettes ($~30/week), soda (~$10/week) right from the get go. That's $1000/year right there!

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