# What is the Latte Factor?

David Bach made the term "the latte factor." His calculator can help you see how much money you are actually spending each day, month or year on so called frivolous expenses.  Frivolous expenses are purchasing little things everyday that can add up quickly.  Coffee, lunches, fast food, magazines and cigarettes are all examples.

It is true that all of these items add up quickly with little notice from day to day.  Buying a four dollar latte everyday will cost you around \$1460 a year, add a croissant and it's around \$2375 a year .  A package of cigarettes twice a week could cost close to \$1000 a year.  If your family of four eats out at a fast food restaurant once a week that could be around \$1600 a year.  Add a few of these items together and you could be spending \$4000-\$6000 a year.  This could be money that could be invested, saved or even used for a memorable vacation.  Invest that \$4 a day latte habit at 3% and you will have \$17,239.38 in 10 years. Add in the croissant as well at 3%?  That is a total of \$25000 in 10 years and \$60000 in 20 years.

There are more ways people spend money that is often overlooked.  What about eating out at a nice restaurant, monthly gym expenses, going to the movies?  These can rack up between \$1500-\$4000 a year.  Why not buy a pair of running shoes and join a free Meetup running or exercise group?  Develop an exercise plan with a specific goal in mind, think summer shorts and tank top season.  What about buying a nice cut of meat and making your own dinner?  Or watching a movie at home with homemade popcorn?  Imagine if this broke down this savings to \$12 a day?  If you invest this money at 3% that is \$51,718.15 in 10 years.

Now let's add those frivolous and overlooked expenses together and you could have a total close to \$10,000 a year. Even if this broke down to saving \$20 a day and investing at 3%, it could give you \$86,196.91 in 10 years.  Even if you were to invest part of it,  save some for an emergency fund or take your family for a memorable vacation, it would be money worth spending.  Of course, tackling your biggest debts first is the best movement towards your financial goals.  Yet the latte factor should not be overlooked!   Carefully consider and rethink your expenditures today.