Coffee? I thought this was a blog about finances!
Latte Factor is a clever term that someone coined describing the high cost of marginal periodic spending, amplified over time. I know that our group at Harvest Investment Strategies enjoys their coffee as much as the next person: but what happens if we consider how much money we are spending over time, and the opportunity cost of those funds had they been put to better use as an investment over time?
Clearly not all spending can realistically be cut to zero. Certain spending from time to time may help deepen relationships or give you a needed pick me up to tackle another task and these are hard to quantify. However, performing a latte factor calculation can reveal what has become habitual and is no longer a treat or exception in your spending habits, and how dollars can be utilized over time. This goes hand in hand with goal setting and planning for financial security. Whatever you can delay today, can be used to help you tomorrow.
So think with us for a minute. What spending could be reduced? Is there a less expensive caffeine fix solution? Can you stand to listen to commercials or ads and forgo the premium streaming options? Can you make or take your lunch more often? Would walking further to your destination really hurt? Once you begin to ask these questions, let some numbers help in the final decision.
We performed our own analysis on coffee and various other expenditures and figured a few astonishing scenarios!
Check out this cool calculator we found to hypothesize your different ‘Latte Factors’ in life: