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The Latte Factor is the unconscious and routine habit of spending money on insignificant items that don’t add real value to your life. The idea behind this notion is that the very small and inexpensive purchases we think won’t make a big financial difference really do make a difference. Buying a large coffee from Starbucks every morning, for instance, may seem harmless, right? I mean, what’s $2.45 compared to your other big expenses like rent and groceries. However, if you buy a coffee every weekday for a year, you’re looking at spending $637 on coffee, and this is without tax. Not to mention, that’s for the most basic type of coffee. With a wide range of coffees varying between caramel Frappuccinos ($4.95 for a large) and Pumpkin Spice Latte’s ($5.25 for a large), it’s very easy to lose track of how much you spend. As you can see, these minor, unimportant, and relatively inexpensive charges add up quickly and become surprisingly expensive over time, which can make a huge difference in your budget and to your goals in the long run.

Interested in setting up a budget for yourself? Check out this article.

generation Z

Generation LaZy

The underlying question here is, why and how do people allow themselves to spend so much money on worthless items? Knowing you have to pay rent at the end of the month, along with a cell phone bill, contributions to your savings, maybe even student loan or credit card payments, how can you let yourself buy a five-dollar coffee, or a $40 manicure, or a $200 haircut?

The Latte Factor is often all about convenience and status. It’s super easy to drop $5 for a coffee or $20 on parking. But, it’s also way more fun and to be honest, way cooler to carry around a coffee cup that has become a status symbol or to drive your nice car into the city and pay a ridiculous amount for parking instead of being caught on the bus.

Some people may even argue that it’s a generational issue. Generation Z (the current generation that arguably has, or at least thinks it has, the most money to spend) grew up in the era of the internet and social media. They are the iGeneration, they live and breath convenience and can access whatever they want whenever they want it. And, while this may be a bit of a generalization, this ease of access has made many of them lazy or at least all too comfortable with this way of life.

Spending Spreads

This may explain why so many young adults have expensive “latte” habits, however, the rest of the population is still guilty. Even if you’re a baby boomer, you may still be tempted to spend money on valueless items just as easily as a member of Generation Z. This is another reason why we think the Latte Factor exists because it’s human nature to pick up habits that eventually become lifelong routines. Once you become used to doing something every day, it may become a natural part of your day. If you’ve always spent money on a certain item or activity you’re more likely to continue to do so without a second thought.

Spending’s Easy

With multiple credit cards, a PayPal account, more online stores than you could even visit in one day, mega-malls, and the ability to get wherever you want whenever you want, what’s really stopping you from purchasing what you want? Nothing, except for maybe your credit card limit. It’s not hard for people in today’s society to buy what they want and that’s why the Latte Factor continues to be a problem for so many people.

Let’s stick to our coffee example. There is a Starbucks on every street corner, they accept multiple forms of payment, and often you don’t even need to get out of your car, so why not pick up a drink on your way to work? Spending is so easy that most people don’t even realize they have a latte (factor) problem.

latte factor

What’s Your Latte Factor?

Keep in mind, The Latte Factor is a general term and doesn’t only apply to coffee drinkers. Everyone has his or her own spending habits, whether it’s getting your nails done or going for overpriced avocado toast for brunch every week. It’s very important to be aware of how much you’re habit is actually costing you long-term. If it fits into your monthly budget and allows you to save enough money every month in order to reach financial goals, then go ahead and enjoy your overpriced cup of coffee. Conversely, if your habit is getting in the way of paying regular expenses and achieving your financial goals, then you might have a serious problem on your hands.

7 Things You Don’t Have to Give Up to Pay Down Debt, read here.

Close The Lid On Your Latte

Like we said before if you feel as though you have your finances under control and that your Latte Factor isn’t getting in the way of your long-term goals, then who are we to tell you to cut back on something you more than likely look forward to every day. But, if you know that your “latte” problem is affecting your life and want to work toward resolving the issue, here’s what you can do.

  1. Identify what your habits are.
  2. Calculate how much each habit is costing you per year.
  3. Categorize them in order of importance and or cost.
  4. Determine which of your habits you can live without.
  5. Cut down on your allowed consumption and give yourself a limit. Whether it’s once a week or every two weeks, try to cut back your habit from daily to weekly, or weekly to monthly. For instance, if you get your nails done once every two weeks, try and go once a month. As you get used to this new routine, you could eventually try to eliminate it all together.
  6. Find cheaper alternatives. If you need coffee every morning, buy a coffee machine and make it yourself (you can put it in a to-go coffee cup and enjoy it at work too).
  7. Start a new free routine that can take over your older one. For instance, if you used to go for brunch every Sunday morning, have your friends come to your house and everyone can bring something. A potluck Sunday brunch at home is just as good, if not better than an overpriced restaurant.
  8. Keep track of how much money you’re actually saving. Doing so will help you visualize and see the difference for yourself. This will motivate you to save more and stick to your goals.

It’s important to enjoy the little things in life, as long as those things don’t negatively affect your finances. If your habit adds some value to your life, there’s no need to cut it out completely. Enjoy your “latte,” just keep in mind that if your Latte Factor is preventing you from achieving your financial goals, then it’s critical to cut it out almost entirely until you can monitor and control it properly. When it comes to treating yourself, it’s all about the balance between enjoying the present without jeopardizing your future.

Caitlin Wood avatar on Loans Canada
Caitlin Wood

Caitlin Wood is the Editor-in-Chief at Loans Canada and specializes in personal finance. She is a graduate of Dawson College and Concordia University and has been working in the personal finance industry for over eight years. Caitlin has covered various subjects such as debt, credit, and loans. Her work has been published on Zoocasa, GoDaddy, and deBanked. She believes that education and knowledge are the two most important factors in the creation of healthy financial habits. She also believes that openly discussing money and credit, and the responsibilities that come with them can lead to better decisions and a greater sense of financial security.

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