Latte Factor – how to plan your budget?
You make a decent living, and still, you never saved enough to invest and multiply your capital? Or maybe your budget doesn’t allow you to buy your dream vacation? In this entry, you’ll learn about The Latte Factor, which might be the reason you lose control over your finance.
What is The Latte Factor?
The Latte Factor is a term, invented by an american author, David Bach, who wrote a book about it, under the same title (The Latte Factor, 2019). But what does coffee have to do with planning your personal budget? Let me explain: this is all about small everyday purchases, we sometimes don’t even realize we make, and combined, they can add up to huge amount of money. Bach uses overpriced coffee, bought in an expensive cafe, as an example of an unnecessary purchase you make on the go without putting much thought into it. Such decisions can ruin your budget. If you regularly eat out, instead of cooking, smoke a lot of cigarettes, or buy snacks on gas stations, maybe it’s time to look closer to what you spend money on.
Sit for a moment and think about such small everyday expenses. Let’s assume that everyday, before work, you buy yourself a cup of takeaway coffee in your favorite cafe and pay $6. It is the price of the biggest latte with double espresso and vanilla syrup. After a week, assuming that you work for 5 days, it adds up to $30. After a month, you would have $120 in your pocket, if you didn’t buy that one cup of coffee everyday. If we keep multiplying, that could be a great deal of money. And, let’s be real, coffee is not your only unnecessary expense.
What can you do about it?
Think if you have any bad spending habits, and if you can limit or stop them. Every time you catch yourself buying something you don’t really need, or a branded item, instead of something cheaper, put that money in your savings account. Do it immediately, because if you don’t, you’ll probably spend it on something else.
What to do when you already saved money?
Of course, when you have savings, there will always be something you can spend that money on. Dream car? No problem! Vacation abroad? Sure! And what if you invested that money? We already wrote about it on the blog, so if you’re interested, I strongly recommend you to check them out:
3. Real estate
4. Stock market
5. Forex market
Those are only a few ideas on what you can do to multiply your wealth. But remember to always use common sense and don’t invest in things you know little about. Some investments are connected with high risk, so don’t forget about it, when you will locate your capital.
Let’s talk about coffee again
Do you think that avoiding all “unnecessary” expenses is worth it, if we save for the undefined future? If you’re not a compulsive shopper, and you allow yourself to buy some extra things in a month, then your budget should be fine. But if you limit your extra spending to a minimum, you can improve it dramatically and discover that saving is possible. My advice is to find a balance and don’t freak out if you buy one coffee too much.