Defending the Latte Factor: What the Naysayers are Missing

Can you actually get rich by skipping your daily coffee? Many say "no." I think they're wrong. Here's why discovering your latte factor really does matter to your money.

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Let’s talk about the “latte factor.”

Recently, I’ve been reading a lot of commentary from other finance bloggers and personalities ragging on this simple but brilliant idea. They argue that saving small amounts of money will never make you rich.

They’re right, of course.

Saving $4 a day on coffee won’t make you ultra rich…

…but it can sure as heck keep you out of the poor house!

What is the Latte Factor?

So, what is the latte factor?

I first read about this idea in David Bach’s classic personal finance book The Automatic Millionaire. It was the first money book that I ever read, and it had a profound impact on the way we’ve handled our finances throughout our life. If you haven’t read it, I highly recommend you pick up a copy.

Anyway, the latte factor is Bach’s way of teaching people that saving small amounts of money really matters. By saving on the small things and using that money to pay yourself first, over time, you’ll be able to build considerably more wealth than if you hadn’t.

In essence, he’s saying that – by using the money you have more efficiently – you’re bound to come out ahead. Sound familiar?

The Latte Factor – What They’re Missing

So, here’s where I think some of my friends are missing the point: The latte factor isn’t a magic pill that will make you stupid rich. It’s not intended to be.

Instead, it’s a starting point to help the average person get ahead.

The latte factor is a device that encourages you to become more deliberate with your spending. It’s a call to action. It’s supposed to get you thinking about how you are spending your money.

In short, the latte factor plants a seed that will (hopefully) lead to tracking your spending and starting a monthly budget. And, in my opinion, these are still the building blocks to long-term financial success.

The Biggest Thing Holding People Back

You see, it isn’t that most people make too little. The majority of us make enough to meet our needs and still have plenty to save. The problem is that we spend too damn much!

We can’t tell ourselves “no.”

We finance new cars, buy more house than we can afford, and go out to eat 4 times a week. Then, we complain that we don’t have enough money to get by.

Unfortunately, if we still want something, we just throw it on a credit card and vow to pay it off later. Because we want it. We deserve it. And yes, we must have it now.

No, cutting out a daily $4 coffee isn’t going to make you rich. But, it can keep you from feeling (and being) poor.

Getting Back to Basics

Think about it this way: You don’t become a professional baseball player without learning how to swing a bat or field a ball. You can’t become an expert pianist if you don’t learn how to play your scales. Meryl Streep wouldn’t be Meryl Streep if she didn’t know how to hit her mark.

There is no shortcut to greatness. Sure, the pros always make it look easy, but they never would have succeeded without conquering the basics fist.

It’s the same thing with money. You must master the fundamentals to get ahead.

If you don’t learn to take care of the money you already have, making extra money rarely helps. It only papers over the problems that are already there. Sure, you’ll be able to buy more crap, but you still won’t be rich. Unless you build some crazy beaucoup bucks, you’re still almost certain to overspend.

Using the latte factor as your guide can help overcome this. It’s a great tactic for cutting the waste, saving more, and avoiding additional credit card debt.

Practical Applications of the Latte Factor

Here’s an example of the latte factor in action.

Let’s say you start tracking your finances and find you’re spending a total of $7.50 each day on a cup of coffee and a muffin while heading to work. That’s $37.50 a week, or roughly $150 a month.

That may not seem like an outrageous amount, but – if you spread that out over the whole year – you’re spending about $1,800 a year on your daily coffee and muffin.


If you make $50,000 a year, eliminating that daily coffee and muffin is the equivalent of getting a 3.6% pay raise. I don’t know about you, but I’d be pretty happy if my boss offered that to me.

And, that’s just by cutting out one extra expense!

The truth is, most of us have more than one latte factor. Maybe you spend $50 a week (or more) eating out. Perhaps you spend $100 a month getting your nails done. Maybe you’re leaking money by going to the movies, or golfing, or getting a weekly massage. Who knows?

When you find a few of these latte factors, it’s easy to see how the savings can add up quickly. That’s money which goes right back into your pocket. If you end up investing it, the savings benefits are even greater!

Final Thoughts

So, is eliminating your latte factor the magic ticket to becoming ridiculously rich? Probably not. But, when you use it in conjunction with other measures, you might see some ridiculously positive progress.

Learning to handle the money you already have provides a solid foundation for building long-term wealth. Once you’ve mastered the basics, you’ll carry these skills with you for the rest of your life, no matter your income level. Discovering and changing your spending habits is part of that process.

If you’re like most people, your goal isn’t to become filthy stinking rich anyway. You just want to live a comfortable life, build wealth slowly, and enjoy a comfortable retirement once you get there.

Sound familiar? If so, don’t discount the effects of your latte factors. By eliminating a few small but wasteful expenses, you could be well on your way to making your financial goals a reality.

What do you think about the latte factor? Is it a waste of time and energy? Let us know in the comments below!Can you actually get rich by skipping your daily coffee? Many say "no." I think they're wrong. Here's why discovering your latte factor really does matter to your money.


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  1. “If you don’t learn to take care of the money you already have, making extra money rarely helps.”

    Yes! This is very true. I just did a post on my blog about how I live in the richest area in America – the Washington DC area. We have the highest median incomes in the whole country yet people are still in debt and most will never be financially independent. Spending less matters.

    1. It definitely does. Of course, nobody else makes money if you take care of your own and very few people want to change their ways. They’d rather just make more to buy more stuff. I think that’s why you rarely hear “experts” talk about it.

  2. Agreed! As adults it’s hard because no one is there to give us discipline; we have to be the ones to provide it, and that’s hard. I think the latte factor is an easy way to make FIRE accessible to newbies. I remember being enamored by it when I first started paying off debt, and it’s been really useful. We just can’t take it so freakin’ literally or act like Starbucks is the devil.

    1. That’s probably where a lot of people get hung up – taking it literally. Personally, I see it as a call to action. It’s like, “Hey, if I’m blowing this much money on just coffee (or candy bars, or doughnust, or whatever), how much money am I wasting on other small purchases?” Once you start thinking like that, you’re bound to find out the answers and get on a real budget.

  3. Stephanie says:

    I absolutely agree with this! We have started reducing how much we spend on things like coffee, take-out, etc and since January we have saved $350. I didn’t think we were spending that much on those types of things, it’s definitely an eye-opener. Thanks for your posts!

    1. That’s awesome Stephanie! Congrats!!! It’s amazing how quickly the little things add up. And that is essentially a tax-free raise for you 🙂 Great job!!!

  4. Excellent post, very well said. Couldn’t have said it better myself. It’s about making a positive start somewhere. Your analogy of pro athletes is right on the mark. You start with the basics. No one starts out as a pro. I have made many positive changes in my life over the years. It always started with taking that first small step and building on it.

    1. Thanks Suzie! You really do have to start somewhere. By thinking about that one little expense, you start to change the way you think about money. Hopefully, that will eventually blossom into a brand new relationship with it. Thanks for reading!

  5. I agree with all of this. I started with the latte factor. At the time, I could only afford a few dollars every week. BUT, it did plant a seed. Now I’m saving more, investing more, and knocking out debt. I know that saving a little here and there won’t make you rich, but it’s a great starting point, especially in our consumerism filled society. Love this!

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