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Personal Finance

The Latte Factor really adds up

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Simon Moynihan

Simon Moynihan

Staff Writer

Morning coffee. I love everything about it. Which café to go to? The smell of fresh espresso; latte or americano; whether or not to get the muffin deal?

The idea of giving up my morning ritual to save a few euros seems absurd when I get so much out of it, but that's what the Latte Factor is all about. Not necessarily sacrifice we're told, but taking a look at the little things we spend our money on every day and redirecting that cash to our futures and ourselves instead.

The fist time I came across this idea, I was in my twenties and the company I was working for sent me to a seminar about saving and planning for retirement. At the time I was spending every penny I earned and more, and I had no interest in savings or planning for retirement - but the concept was so simple and so smart that it's stayed with me ever since.

David Bach, writer of the best-selling "Finish Rich" series of books came up with the phrase and the idea because (my memory may be faulty here - if so I apologise) he was talking to a couple who said they didn't save because they couldn't afford it. He asked them about their daily habits and discovered that they were stopping into Starbucks every morning on the way to work to get lattes and muffins. Sound familiar?

He pointed out that between them, they were spending about $10 (they were Americans) every morning on coffee and muffins and if they cut it out they'd have an extra $50 a week, $200 plus a month, $2600 a year. Apparently, enough to have a decent pension if you start early enough.

I know I can't quit my morning coffee, I'm too far gone for that - but I can certainly change the way I get it. My colleague was good enough to bring a Nespresso machine into the office and now the staff have more or less quit their coffee shop habits (it really does make very good coffee). Yes, we still have to pay for the pods, but we chip in and buy them in bulk. And yes, I still feel like a latte from time to time, which the machine can't manage, but I'm down to about two visits a week instead of seven or eight.

I reckon I'm saving about 25 euros a week now. It's not a lot but if David Bach is right, it can become a lot if I actually save it rather than redirecting it to something else - and the best part about it is that it's money that shouldn't be any great sacrifice to save. It's just about finding a cheaper way to get the luxuries we "need" every day!

The Latte Factor isn't just about coffee though. You could call it the Barber Factor and go back to dry cuts for a fiver rather than the outlandishly expensive head massage and haircuts we thought we should be getting; or the Diner Factor and skip a few of those nice meals out. Or the Cider Factor... ok, you can see where I'm going with this.

The point is it's not just the big things that we can save on; the little things can make a big difference too.

I went back to David Bach and checked out his Latte Factor Calculator to test his theory that saving a little can give back a lot over time. The calculator is pretty cool because it has discretionary expenses in categories like entertainment, cigarettes and music.

The calculator showed me that by saving 3 euros a day or 21 euros a week and putting it in an account earning 4 per cent interest, I'd have about 64 grand in 30 years. Not bad... not bad at all. The key is that I actually need to start saving that money and not finding somewhere else to spend it.

Last month Permo said that the number of savers on their books has increased by 162 per cent since 2008 which for my money shows that we already understand the power of the Latte Factor - we just may not know it by name.


If you're thinking of getting a regular savings habit started, Bank of Ireland is offering regular savers 4% on their Dualsaver account and Permanent TSB is offering 3.75% on their 21-Day Notice Regular Saver. Both of these rates are very strong and other banks are offering great rates too. And finally, has introduced a new savings calculator that helps you sift through all the accounts out there and find the right one for you. We're pretty proud of it, and you can try it out here: Savings Calculator

David Bach's Latte Factor Calculator


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