The Latte Factor: How to Save Money

The Latte Factor: How to Save Money

January 24, 2018

Michael ListBy Michael List
Portfolio Manager

Skip the Latte.  Financial experts have long recommended Americans need to save more money.  (If it were up to them, we would all be living in a one-room apartment and saving 90% of our income).  A frequent recommendation and a more manageable beginning is the Latte Factor.  The idea is simple, small amounts of money spent on a regular basis cost us far more than we can imagine.  $5 does not seem like a lot.  However, if that $5.00 a day is invested and earns 3% the balance after 30 years grows to $87,000.

Last week, I found a couple of articles highlighting a survey conducted by Acorn, a micro-investing app.  According to the survey 45% of 18 to 23-year-olds and 35% of 24 to 35-year-olds spent more on coffee than they saved for retirement.  The same can be said for vacations and holiday gifts, as 37% and 44% respectively of those surveyed admit spending more on these than they invested. 

There is no doubt structural problems make it difficult to save money.  Student loan debt is approaching $1.5 trillion and real median household income has been flat for almost 20 years.  But, it appears behavior may be just as much to blame (I wonder if those four cookies I ate this afternoon were on the diet plan).

Here is my spin on the Latte Factor.  I know waking up in the winter is tough and many of us need an extra shot of caffeine to think straight.  Replace the daily latte with a can of Mello Yellow or Mountain Dew.  A can of pop is available in many vending machines for $1.00.  Then set up an automatic withdrawal from a paycheck or savings account.  If that $4.00 a day earns 3% the balance after 30 years will be $69,000.  It’s beautiful.  Not only does pop taste better, this saves 7 grams of fat, you get to keep the sugar and caffeine, and $70,000 more money.  If cookies are also a behavior problem I might suggest to defer investing for one month and buy a Kitchen Safe: Time Locking Container. 

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About the Author

Michael List, CFA, CFP®

Michael List is an Investment Management Officer within Security National's Wealth Management Division. Michael earned his Bachelor of Science in Business Administration with a concentration in Finance and Economics from Creighton University and holds the esteemed Certified Financial Planner, CFP® certification. List helps execute investment strategy, transactional execution and overall portfolio management. Having dedicated 14 years to the field of Wealth Management, Michael List brings a wealth of experience to his role, contributing to the success and growth of Security National Bank since 2008.