A Critique of the Latte Factor

A Critique of the Latte Factor

Look at any list of savings tips or hacks and you’re bound to come across the Latte Factor.

It goes something like this:

Did you know that your daily latte could be costing you thousands?? Let’s say you buy a coffee on your way to work every day for $5. If you pay for a coffee every weekday for a year that’s $1300! If you invest that $1300 every year for 10 years, and we assume a compound interest rate of 8%, you’re drinking down $21,639! Think about that next time you’re craving for your morning caffeine hit!”

Wipe out the word ‘latte’ and replace it with another small recurring purchase (smashed avocado, buying lunch at work). You’ll see the same tip mentioned over and over again.

I hate this tip.


I’ll get a couple of rebuttals out of the way first. Yeah, little costs do add up over time. And if you’re knee deep in consumer debts (read: credit cards, car loans, finance for your massive yacht), you’re probably better off putting off the coffee for the cash. These little costs are also a killer if you’re struggling just to pay the basic bills. Which is a horrible situation to be in.

But for the rest of us, we probably indulge in the Latte Factor for a reason. Yeah, there’s probably a reason you’re scoffing down your coffee, or equivalent daily indulgence (or vice) of choice. You might be spending mindlessly, but chances are your mind is involved in some way.

What the Latte Factor means

For me, coffee means getting away from my desk, breathing some fresh air, enjoying the aroma of brewing beans, and sipping my version of the nectar of the gods. It means a moment of peace in an otherwise hectic day, a smile from the barista, an improved mood, and energy to continue thinking. In other words, it contributes to my well-being and happiness.

Coffee doesn’t do that for everyone. But something will. Whether it’s the weekly donut, the takeaway fish and chips on Fridays, buying lunch with a colleague, having smashed avocados on toast at the cafe on a weekend even though you can have it for half the price at home – something about that item means something to you. Increased time, quality of life, time with family and friends, silence, noise, peace, chaos, joy – you’re getting something from it.

I’m not suggesting that everything you buy has a meaning. Insurance can be an essential item, but few people will obtain a glow from purchasing it. But some things you buy do mean something. For me, that $5 coffee means that I’ll enjoy every morning over the next 10 years just a little bit more. Which is worth far more to me than an extra $21,639.

Think for yourself!

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