At the beginning of every year, it’s always the same mind frame – try not to over spend; it’s about time I spent wisely. It never works, or rather is works for a short while and then not, and then again for a while and then again not. A friend of mine recently brought to light ‘the latte factor’. I immediately assumed this had to do with cups of coffee but how daft was I.
According to Modesty Money, the latte factor is unconscious spending on the little everyday things that do not add value to our lives. This got me thinking. I mean, who doesn’t unconsciously spend on a cup of coffee in the morning, or a chunky moist brownie in the evening, or a new stylish pair of shoes on whim? There’s also the weekly stash of snacks you buy just to munch on while you watch your favourite tv shows, the soft gummy candy, the luscious scented handmade soap, a new journal with a funky cover that all adds up to little everyday things that really don’t add much value to yours or my life.
How does this little spendings every now and then cause a dent in your bank account? Here’s an example – a weekly cup of coffee from a decent café in town could cost you say Rs. 500. For a month, that’s you spending Rs. 2,000 and for a year that’s Rs. 24,000. The number may seem to surprise you, but this is just assuming it’s one cup of regular coffee a week. Say you have twice that amount a week? That’s Rs. 48,000 a year spent on cups of coffee alone. Bet you didn’t imagine that!
I’m someone who loves to eat out. My best friend and I tend to try out new restaurants and cafes so we bust quite a bit of cash on food and drinks. It’s something we love to do so I feel it doesn’t really fall into the category of the latte factor but here’s an example of how overspending can really cause a dent in your bank account if you aren’t mindful about it. Let’s said a single meal costs you Rs. 1,500 at a decent restaurant, this may include a regular drink or iced beverage. Twice a week? That’s Rs. 3,000. For a month that’s Rs. 12,000 and for a year? A whooping Rs. 144,000. I’ll let that settle in before you read further.
What the latte factor does is shed light on the dangers of habitual yet unconscious spending. Rs 500 here and there won’t look like much but with a bird’s eye view of your every day or every other day spendings, it presents a clear and yet scary image of your financial habits.
Recognizing the latte factor and changing a few habits isn’t going to make you rich. What it’ll do is, regulate or somewhat discipline your everyday spending habits in the long run. In reality, putting a complete stop to our habits and things we enjoy buying is extremely hard. I’ve been trying for a week and well, I feel like a cheap dud but I know I’m just cutting down on unnecessary spending so I tell myself it’s okay. The occasional cup of coffee or new book is alright. You deserve it. You see, the latte factor isn’t about holding on to every last cent or rupee until you’re old and wrinkly; it just sheds light on the unnecessary parts of literally throwing away money for no good measure or with no meaning.
According to Modesty Money, the latte factor is about looking at everyday spendings and cutting down on what does not bring you joy or has no proper value to you. That is what needs to be eliminated. Cancel that gym membership you’ve had forever because you’ve not been going. Don’t give it to the temptation of a sale just because the prices would be reduced. Don’t turn your home cooked meal away and run to the nearest best café in town just because you feel like it. Think about it. This is about curbing unnecessary spendings, saving your hard earned money and possibly even investing wisely.