Personal Finance: What’s Your Latte Factor?
Latte Factor®, Automatic Millionaire®
Have you ever heard of the Latte Factor®? That phrase was coined and trademarked by David Bach, the author of The Automatic Millionaire®. Written in 2004, this book reveals strategies that can help average people with average incomes and no budget become millionaires automatically over a period of years.
As a former Dave Ramsey-backed financial advisor, I’ve met with thousands of people to talk about their money. Without a close second, the most common problem we face in America is spending too much. Budgets usually only work for a short period of time because they require a great deal of self-discipline.
In Chapter 2 of his book, David Bach devised the Latte Factor® to help us determine where we are wasting our money on a daily basis and how much that money would be worth if it had been redirected into an investment with an average return of 10% over a period of time . period of years. By determining that factor, we should be motivated to begin that process.
For example; if you stop and make a cup of coffee and cake at Panera or Starbucks every day, you’ll be spending about $5.00 a day on that unnecessary item. So let’s determine what that Latte Factor® is by investing that $5.00 per day ($150 per month) in an investment that returns 10% over time. This is what it would look like afterwards:
1 year = $1885
5 years = $11,616
10 years = $30,727
30 years = $339,073
40 years = $948,611
That’s the power of compound interest over time! That’s the power of Latte Factor®. I hope you enjoyed your latte!
By simply taking notes of a day’s expenses and adding items that are considered wasteful, you can use the same process to create your Latte Factor®. What if you wasted $10, $15, or even $20 a day? What would your Latte Factor® be if you invested in it instead? Numbers can be really amazing, and Bach has tables in his book to help you with the math too.
This amazing little strategy, set to work for you automatically over time, can drastically affect the outcome of your years of work and allow you to retire with dignity. The book, The Automatic Millionaire®, has many other strategies that are easy to set up and work automatically.
Apply this strategy and wait patiently to see the power it can have in your life. I wonder if it is possible to speed up this and other strategies to shorten time from 30 or 40 years to 15 or 20. 5 or 10? Keep checking in. You never know what is really possible.
injuries,
Jerry Spangler