David Bach is a personal finance teacher who brought us the concept of The Latte Factor®. Bach asked that people look at their spending and see where their money is going. For example, if you have a habit of going to a coffee shop every work day and spending $5 on a latte, you’re spending $100 on morning specialty coffees every month, $1,200 every year.
Often, people on personal finance blogs or other forums complain that Bach was telling people they had to give up luxuries or simple pleasures and live like a miser. But seriously, if you do not have an emergency fund for 6-9 months of basic expenses (housing, food and medical) and you are out buying designer coffee every day, then you are living a ridiculous life with blinders on. The odd thing is, no one has to give up lattes. It’s rather inexpensive to make coffee and lattes at home.
But you feel you need — no deserve to spoil yourself? Well, then spoil yourself with income-producing assets. When you can retire a decade or two before your co-workers, who will feel spoiled then? When lay-offs come around and you are set with a steady side income from your investments and enough in emergency funds to cover all your bills, will that make you feel amazing and pampered?
If you are irritated when you hear about wasting money on lattes or other extravagances, ask yourself why? Is it because you know at your core you need to step up and start being responsible with your time and money?