# Latte Factor The Latte Factor I understand that I could be putting the money from a \$4 latte into retirement but I don’t get why it’s important. I would.

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Latte Factor

The Latte Factor I understand that I could be putting the money from a \$4 latte into retirement but I don’t get why it’s important. I would rather have a latte than have \$4 when I’m old.

Latte Factor You walk into a coffee shop on your 25th birthday and plunk down \$4 on a latte, that \$4 goes away. If you just took that \$4 and stuck it under your mattress for 40 years, you’d just have \$4 when you’re 65. But if you took that \$4 and put it in an investment that earns 5% (like a treasury note) for 40 years, you would have \$28.16

Latte Factor Okay, let’s say that you drink just one latte a week for just your 25th year on earth. That’s 52 lattes, a total of \$208. In that same investment, you would have \$1,464.32 when you’re 65.

Latte Factor Let’s say again that you buy a latte a week until your 65th birthday. That’s 2080 lattes, which costs a total of \$8,320 (and that assumes the price will not go up for 40 years, which means it’ll be more than that in reality). With that same investment, you’d have \$26,590.67 at age 65.

Latte Factor Let’s say that you drink three lattes a week (not unreasonable for a latte drinker). That’s 6,240 lattes, which costs a total of \$24,960 (again, with no price increase). If you just buy that same 5% investment, you would have \$79,772.01 at retirement.

Latte Factor Now, let’s say instead of buying a treasury note, you put that money in the Vanguard 500, which has earned 12.14% annually since inception in 1976. If we can expect that same return, you will have \$558,690.42 at retirement.

Latte Factor Drink a latte daily? You’re losing \$931,150.69 at retirement. A morning latte and an afternoon latte? \$1,862,301.38.

This is the power of the “latte factor.” It’s not a single choice to buy a latte that’s powerful, it’s a regular purchase of a latte combined with the power of compound interest that makes it powerful. Obviously, the huge numbers quoted here are indeed in future dollars, but even with 4% annual inflation, you’re still tossing away \$387,897 in today’s dollars just on your two lattes a day. That’s the foundation of a good retirement, tossed away on a frivolous part of a daily routine.

What’s your Latte Food Movies Senior lunch Hobby supplies Music

Latte http://www.finishrich.com/free_resources/lattecalculator.php http://www.finishrich.com/free_resources/lattecalculator.php

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