Small changes in your daily spending habits can have a big impact on your finances!
Introduction
What are good ways to build long-term wealth? Apart from generating more income, you could also explore small changes in your daily spending habits and you’ll be amazed by the impact it has on your long-term wealth! In this blog, we’ll deep-dive on the so-called ‘Latte Factor’ and how you can implement this in your day-to-day activities. It can really help you to reach your financial goals.
Latte Factor explained
So what is this Latte Factor and how can it help you? It’s simple: the small amounts of money you spend everyday on non-essentials (e.g. a cup of coffee on your way to work) cost you a lot in the long run. Put differently, if you put those non-essential expenses in a savings or investment account instead, you’ll be blown away by what you can achieve. The Latte Factor can have a truly big impact on your financial well-being.
Latte Factor in real-life
Let’s have a look at a real-life example of Equip user Tom, who likes to have a breakfast (croissant and take-away coffee for €6) on his way to the office. Tom doesn’t think too much about this habit — but what does this actually cost him every year? We will show you step-by-step:
Tom buys breakfast on his way to work 4 days a week
Tom works 47 weeks per year, so he is buying: 47 weeks * 4 days per week = 188 take-away breakfasts per year
The annual cost of his breakfast: 188 take-away breakfasts * €6 = €1128 per year! So, Tom is spending €1128 per year on his take-away breakfast!
To put this into perspective: if Tom instead saved that money instead of spending it on breakfast on his way to work, he could buy a brand new iPhone every single year.
Putting this in a bigger perspective: if Tom would instead continue this saving habit for five years, he could actually save €1128 x 5 = €5640. With this money, Tom could go on a world trip, buy a (second-hand) car or consider another large purchase he has been dreaming of.
This is a real-life example of Equip user Tom, but you can imagine the Latte Factor could also be applied to that daily take-away coffee, that quick snack you purchase at the check-out in the supermarket, that late afternoon bite on your way from work to home. In short, there are many daily spending habits you could take a close look at from a Latte Factor perspective!
Of course, it’s up to you to consider your non-essential spending habits. These expenses can bring you happiness and comfort, however, it’s worth taking a moment to think about whether these expenses truly make you happy in the long-run. By thinking about those expenses, you may find out that some of them are worth keeping, while others can be lowered or removed without having a negative effect on your overall happiness and well-being. In fact, it could significantly improve your financial well-being over time.
