Returning to the “latte Factor” and the Strength of the Daily Routine
One of the most talked about concepts in personal finance is the latte factor, an idea first popularized by personal finance writer and speaker David Bach. In short, the idea is that you can be very successful in personal finance by finding the little things to cut back on in your life, and he gave an example of a daily latte that you can buy at a coffee shop, hence the name Factor Latte.
This post was originally published on The Simple Dollar .
The big controversy surrounding the idea of the “latte factor” boils down to how effective it actually is. On the one hand, there are people in the debate who look at the savings from slicing a latte – say $ 8 or something – and think it’s probably not worth doing if it diminishes the quality of your day in any way. significant amount. On the other hand, there are people in this discussion who point out that the value lies not in just cutting a latte once, but in cutting it out every single day. For example, if you get a $ 8 latte and bagel every weekday for fifty weeks of the year, that’s 250 purchases for a total of $ 2,000.
Looking at things from this perspective changes the discussion. The question becomes not whether it is worth doing something once, but whether it makes sense to do it every single day as part of a routine. Spending $ 8 on a latte and bagel might be a good one-off option if you’re out with friends or something, but spending $ 2,500 a year on a latte and bagel every morning is a very different value proposition.
You might spend $ 2,500 a year on your daily latte and bagel, but when you start looking at things from a consistent perspective, it really makes a big difference to your idea of a daily routine. Let’s take a closer look at this idea.
Daily routine
Let’s start by looking at what my typical day was like before I started my financial well-being. More often than not, I got up and went to work. On the way, I often stopped for some kind of breakfast, almost every day – it was commonplace. I went to work and went to lunch with colleagues for many days, usually at one of the nearby food stalls. After work I went home, but often stopped at a bookstore or electronic store, which I walked by (and sometimes bought things), and about twice a week I stopped to buy groceries, pack my things. unscheduled meals for the next few days. These activities made up a large part of my daily routine.
On the other hand, my routine is very different today. I usually wake up and get ready for my morning letter in my home office. Breakfast and lunch are usually collected from the fridge or freezer, often leftovers, but sometimes they are frozen food already cooked. About once a week I go to the library and dine outside, and on these trips I stop for groceries most of the weeks, although this stop is usually carefully planned and includes a grocery list, and I also stop at the play store for about half the time. It’s kind of like what my daily routine looks like.
Both of these routines involve things that cost money, but many changes in my routine result in me spending less today than I used to. I eat probably 10% of breakfasts outside the home and maybe 10% of dinners, whereas I used to eat about 75% of breakfasts and dinners outside the home. I used to go to the grocery store twice a week and often had poor planning; today I stop once a week and spend about the same amount. I no longer stop at bookstores or gadget stores, although I do occasionally stop at my local board game store.
Basically, I consider something a part of my daily routine if I do it once a week or more. I consider grocery shopping as part of my daily routine. I consider weekly game nights a part of my daily routine. You get the idea.
Why do I consider weekly activities to be part of my daily routine? This is because some things depend on the schedules of others and are beyond my control, which prevents me from doing them every single day. I want to include those routine events that do not necessarily happen on a daily basis, but happen often enough to pay attention to.
I believe that streamlining your daily routine is the most powerful tool a person has to maximize the value of their money, time, energy, and joy in life. Note that I did not say “cost minimization” there.
Figuring out your daily routine
The first step, of course, is to understand what your daily routine is. So how do you actually find out what constitutes a part of their “daily life”?
The simplest method I know of is to simply use a time diary. For one week, every fifteen minutes or half an hour, write down what you did in the previous fifteen minutes or half an hour. You can do this on your smartphone or in your pocket notebook. I find it pretty easy to do this with the smartphone’s repeating alarm.
After about a week – or better yet – after a couple of weeks – all you have to do is sit down and look at all of the activities listed in this diary. How many of these things do you usually repeat weekly or more often? This is what you should consider to be a part of your daily life.
Improving your daily routine
The best way to improve your daily routine is to go through it point by point and ask yourself a few questions about each point.
What is the reason that I do this so often? Is it worth doing this? Should I be doing this less? More about this? For example, one thing that is part of my daily life is just browsing the websites. I do this for a variety of reasons, but from a purely recreational use point of view, I wish I had less. On the other hand, exercise is what I do, I want to do more. I usually enjoy moderate-intensity exercise and it certainly improves my health and well-being, but getting started is never an easy task.
Is this the most expedient way to use your time / money / energy to achieve my goal? Eventually, you will realize that most of your actions serve to achieve several goals in life. Even your free time is like this – you strive for quality leisure and meaningful experiences. Once you understand this, you can start going over everything that you spend your time on and ask yourself how much value you get from each of the ways that you regularly spend your money, time, and energy.
For example, I enjoy reading books and playing board games because of the entertaining value, the mental problems I have, and in the case of board games, also for social interaction. The question is, is the time spent going to the board game store or bookstore and the money spent in those stores contributing to what I want out of these hobbies? Of course, but in such cases I exchange a significant amount of money and some time just to buy more books and games. It’s not about reading or playing a game.
In what alternative ways could I try to use my time / money / energy to achieve my goal? Are they more effective at achieving the same result? Are they getting better results without using additional resources? On the other hand, going to the library allows me to purchase books for almost free. I can get any book I want from the library, either on the shelves or on request. When it comes to board games, I do have reasons to have several games, but mostly my wife plays; I have no real reason to own a lot of multiplayer games because I play them on community evenings when others are bringing in a lot of games too.
In other words, if I really enjoy reading books and not buying them, I have no reason to go to bookstores. Likewise, when it comes to playing board games rather than purchasing them, I have no particular reason to go to play stores. I can simply replace any normal bookstore visit with a library visit or normal playstore visit with a real game. In both cases, I either get to the point or get closer to it, spending less money, making the choice better.
Another example: morning latte. Let’s say you buy a morning latte and a bagel at a coffee shop every day. What are the alternatives for this? You can stop doing this, but you might really want your morning coffee. Maybe you could grab a coffee grinder and a simple French press and make coffee before you leave, and buy bagels at home to roast. This will save you money – it might take a little longer depending on the speed of your shop, or it might even be faster to prepare it yourself.
The bottom line is simple: Think through the options for everything in your daily routine. What is the “best” way of doing something, the one that gives you the most “bang for your buck” for what you want out of every thing in your day to day? Of course, sometimes you won’t make the cheapest, but you will find that if you seriously consider your choice, you will often end up choosing the less expensive (in terms of money, time, or energy) option.
If you do this in most of your day to day activities, you will end up saving a lot of money (and time) without losing quality.
Final thoughts
The purpose of all of this can be summed up in two words: to maximize value . Your goal is to maximize the value of every part of your routine, but it’s important to remember that “value” isn’t just money. It is simply wise use of your time, money and energy to achieve the results you want.
Over the past few years, applying this mindset in my daily life has saved me tons of money, but it has also helped me find a lot of time and energy for my hobbies. I ruled out some things that weren’t very good in terms of using my time, money and energy, because I realized that they didn’t really give me any value in terms of what I wanted out of life – watching TV. The Evening is a great example, as is reading a few distracting websites.
For me, this is the value of the latte factor. It’s not about giving up the things you love. It’s about getting the most out of your day to day activities.
Good luck!
Returning to the Latte Factor: The Power of Daily Routines | Simple dollar