Most people believe that the secret to
getting rich is all about finding new ways
of increasing their income as quickly as
possible. "If only I could make more
money," they say, "I'd be rich." Yet it
almost never works that way.
We tell ourselves we'll start saving
once we get a raise. Then the raise
comes, but instead of saving, we
increase our lifestyle and spend a little
bit more. That's why there are all kinds
of six- and seven-figure earners out
there who are broke and in debt.
The question is, how can you stop
that cycle, reverse it, and start becoming
wealthy on your current income,
without living like a hermit or depriving
yourself of the rewards you've earned?
Part of the answer is by applying the
principles of something I call the Latte
The Latte Factor started
with a real woman essentially
telling me I was "full of
it." At the time, I was teaching
a four-week class on
personal finance. After
about 10 hours of class
time, we had covered a
whole series of classic
ideas: Pay yourself first,
save some of your income
each month, et cetera.
Near the end of the final
class, a woman named Kim
raised her hand and said, "David, I've
got to tell you something. Everything
that you've taught us in this class over
four weeks is good in theory but not in
Her problem, Kim said, was that she
just didn't make enough money to put
any away. She insisted that after paying
rent and her basic living expenses,
there was nothing left over.
Looking around at the heads nodding
in agreement, I could see that this was
an issue that had to be addressed before
my class ended. So I asked Kim to verbally
"walk me through" her typical day,
noting all the times and places she spent
money along the way. On that journey,
we discovered something fascinating.
Before she even got to her lunch
hour, Kim was spending an average of
$11.20 in cash without even really thinking
about it, on daily treats like a muffin,
a fresh-squeezed juice drink, a Power
Bar and — you guessed it — a Grande
Non-Fat Latte at her local Starbucks.
$11.20. Not much, right? Wrong.
I asked Kim to imagine, for the sake
of argument, forgoing her morning latte
and muffin in favor of home-brewed
coffee, an apple, and a piece of toast.
That simple little change would give her
an extra $5.00 a day — roughly $2,000
extra dollars a year.
Kim had already told me she wasn't
contributing to her 401(k) plan at work.
"I can't afford it!" she had complained;
but without that daily latte, she could.
We did a few quick calculations based
on her age, the potential length of her
career, and her company's contribution
match. What we discovered was the
real-world effects of The Latte Factor.
If Kim took her $5.00-a-day latte
allowance and put it into her 401(k) plan
instead, by the time she turned 65 she
would have approximately $1,742,767
saved for retirement.
Almost $2 million, all from just $5.00
a day — "extra" money Kim was positively
convinced she didn't have. She
was stunned, and so was the rest of the
Since then, I've shared the concept
of the Latte Factor with millions of people
all over the world, in seminars, on
television and radio programs, in my
books and audio programs, and in
countless other ways.
Every time I do, the audience reacts
in exactly the same way my students
did. People are shocked when they
realize how much money flies out of
their pockets each day, practically
unseen, and where that money goes.
It's a realization that can and has
So ... what is your Latte Factor? Is it
bottled water? Cigarettes? Fast-food
lunches? Magazines in the grocerystore
checkout line? Is it a gym membership
you never use? How much is
your Latte Factor costing you
every day ... a few dollars?
Ten? A hundred?
The fact is, we've all got a
Latte Factor, regardless of our
income level. The sooner you
find that one little bit of cash
that you can redirect, the
sooner you'll start to build your
Of course, you need money
not just for the future, but for
the things you want to do right
now. The point of the Latte
Factor exercise is NOT to drain
all the fun out of your life. Remember,
Kim still got to enjoy her designer juice
and Power Bar every day! The point is
to get you to change your thinking
about your money.
Kim didn't think it was possible for
her to save anything at all, based on her
income and lifestyle demands. She's
not alone. People who make 10 times
the salary she was earning believe
exactly the same thing.
Yet with a small shift in thinking and a
few extremely simple actions, you can
easily, painlessly, automatically begin
creating secure lifelong wealth that will
be there when you need it most.
The Latte Factor is a registered
trademark of Finish Rich, Inc.
Learn more about David Bach and his bestselling book and audio
program The Automatic Millionaire.