Frequently Asked Questions
What is the latte factor?
The latte factor is a term popularized by personal finance author David Bach for the idea that small, recurring purchases like a daily coffee add up to large sums over time. His suggestion is to redirect that money into automatic savings and investing so it compounds. The article argues the concept is useful for awareness but is often exaggerated when it is used to shame people over coffee.
How much would $100 a month grow to over 40 years?
It depends heavily on the return you assume. Invested monthly for 40 years, $100 a month grows to roughly $174,000 at a 5.5% annual return, but to about $1.18 million at 12%. That gap is why the article says the popular claim that lattes cost you $1 million relies on an unrealistically high 12% return assumption.
Is it bad to spend money on coffee every day?
Not if it fits inside a plan you are already following. If you are saving enough for retirement, have an emergency fund and are on track with debt, a daily coffee you enjoy is a reasonable choice. If you are living paycheck to paycheck or carrying high-interest debt, cutting discretionary spending like coffee is one of the first places to look.
What matters more than cutting small expenses like lattes?
Having a formal financial plan and knowing where your money goes. Large costs such as housing, cars and food, plus gaps like thin emergency savings, too little retirement saving, or no will or adequate insurance, usually have a far bigger impact than a daily coffee. Tracking your spending shows you which of those levers matter most for you.
About the author
Contributing Writer, Wealthtender
Ben Le Fort is a personal finance writer and creator of the online publication “Making of a Millionaire.” He has been passionate about personal finance ever since graduating University with $50,000+ in debt.
In the eight years following graduation, he paid off all of the debt and built a seven-figure net worth. Ben holds a Bachelor’s degree in economics from Acadia University and a Master’s degree in Economics & Finance from The University of Guelph.
Ben lives in Waterloo, Ontario, with his wife, son, and cat named Trixie.