Comments on: The Automatic Millionaire: The Latte Factor http://www.thesimpledollar.com/2007/01/31/the-automatic-millionaire-the-latte-factor/ Simple, applicable personal finance advice for the modern world Sat, 21 Nov 2009 23:44:30 -0800 http://wordpress.org/?v=2.8.4 hourly 1 By: Boris http://www.thesimpledollar.com/2007/01/31/the-automatic-millionaire-the-latte-factor/comment-page-1/#comment-4780 Boris Thu, 01 Feb 2007 22:00:15 +0000 http://www.thesimpledollar.com/2007/01/31/the-automatic-millionaire-the-latte-factor/#comment-4780 I think this only pertains to people who are quite privelaged. I work at a coffee shop and I can tell you that most latte-drinkers drive a Lexus or a BMW, park in the fire lane, and think they rule the world. Most people whose living expenses exceed their income do not spend a penny without thinking about it, therefore, the "latte factor" does not really apply to them. It's a good though however, if you have the will to strip yourself of your everyday comforts. I think this only pertains to people who are quite privelaged. I work at a coffee shop and I can tell you that most latte-drinkers drive a Lexus or a BMW, park in the fire lane, and think they rule the world. Most people whose living expenses exceed their income do not spend a penny without thinking about it, therefore, the “latte factor” does not really apply to them. It’s a good though however, if you have the will to strip yourself of your everyday comforts.

]]> By: English Major http://www.thesimpledollar.com/2007/01/31/the-automatic-millionaire-the-latte-factor/comment-page-1/#comment-4671 English Major Wed, 31 Jan 2007 23:48:30 +0000 http://www.thesimpledollar.com/2007/01/31/the-automatic-millionaire-the-latte-factor/#comment-4671 I'll bring up here my perennial problem with the whole "latte factor" savings projection issue: if you don't buy a bagel and coffee for breakfast, you still need to eat breakfast. Presumably, this means that you're spending enough more on groceries to cover making breakfast. That takes a substantial chunk out of the savings—it may not halve it, but it does make a difference. I’ll bring up here my perennial problem with the whole “latte factor” savings projection issue: if you don’t buy a bagel and coffee for breakfast, you still need to eat breakfast. Presumably, this means that you’re spending enough more on groceries to cover making breakfast. That takes a substantial chunk out of the savings—it may not halve it, but it does make a difference.

]]> By: MossySF http://www.thesimpledollar.com/2007/01/31/the-automatic-millionaire-the-latte-factor/comment-page-1/#comment-4639 MossySF Wed, 31 Jan 2007 17:47:22 +0000 http://www.thesimpledollar.com/2007/01/31/the-automatic-millionaire-the-latte-factor/#comment-4639 It's interesting -- I hear the "8% is a more accurate projection" statement all the time. Historic data (based on most large cap indexes) from the last 120 years all show the market has returned about 11% (before inflation). So is this 8% number just pessimism? Or reality because most people underperform the market drastically due to bad stock picks, bad fund picks, high commissions, high yearly expenses and poor tax treatment? I have a feeling it's the latter. Maybe you should qualify all your calculations now. If you are a passive, diversified investor with reasonable allocations across all important asset classes and paying no next to no fees by buying low cost index funds/ETFs and optimizing your tax drag, use 10% as your number. On the otherhand, if you are the typical investor who buys 3 different Large Cap Growth fund to "diversify" and then sells in downturns to move to something else that went up already, 8% is your number. It’s interesting — I hear the “8% is a more accurate projection” statement all the time. Historic data (based on most large cap indexes) from the last 120 years all show the market has returned about 11% (before inflation). So is this 8% number just pessimism? Or reality because most people underperform the market drastically due to bad stock picks, bad fund picks, high commissions, high yearly expenses and poor tax treatment?

I have a feeling it’s the latter. Maybe you should qualify all your calculations now. If you are a passive, diversified investor with reasonable allocations across all important asset classes and paying no next to no fees by buying low cost index funds/ETFs and optimizing your tax drag, use 10% as your number. On the otherhand, if you are the typical investor who buys 3 different Large Cap Growth fund to “diversify” and then sells in downturns to move to something else that went up already, 8% is your number.

]]> By: Trent http://www.thesimpledollar.com/2007/01/31/the-automatic-millionaire-the-latte-factor/comment-page-1/#comment-4635 Trent Wed, 31 Jan 2007 17:23:43 +0000 http://www.thesimpledollar.com/2007/01/31/the-automatic-millionaire-the-latte-factor/#comment-4635 Mossy: that's true, but many people set up deposits for X dollars and let them sit, not adjusting for inflation. MDJ: I agree, but Bach continually uses 10% in his books. Mossy: that’s true, but many people set up deposits for X dollars and let them sit, not adjusting for inflation.

MDJ: I agree, but Bach continually uses 10% in his books.

]]> By: MillionDollarJourney.com http://www.thesimpledollar.com/2007/01/31/the-automatic-millionaire-the-latte-factor/comment-page-1/#comment-4615 MillionDollarJourney.com Wed, 31 Jan 2007 16:31:56 +0000 http://www.thesimpledollar.com/2007/01/31/the-automatic-millionaire-the-latte-factor/#comment-4615 A 10% average annual return until you are 60 is also optimistic. Most use 8% or less in their calculations. FT http://www.milliondollarjourney.com A 10% average annual return until you are 60 is also optimistic. Most use 8% or less in their calculations.

FT
http://www.milliondollarjourney.com

]]> By: Trent http://www.thesimpledollar.com/2007/01/31/the-automatic-millionaire-the-latte-factor/comment-page-1/#comment-4611 Trent Wed, 31 Jan 2007 16:14:38 +0000 http://www.thesimpledollar.com/2007/01/31/the-automatic-millionaire-the-latte-factor/#comment-4611 3bean: I'll write about this on Friday in my "buy or don't buy" recommendation, but I can say that you're pretty much spot on. So guess what my recommendation will be... 3bean: I’ll write about this on Friday in my “buy or don’t buy” recommendation, but I can say that you’re pretty much spot on. So guess what my recommendation will be…

]]> By: 3bean http://www.thesimpledollar.com/2007/01/31/the-automatic-millionaire-the-latte-factor/comment-page-1/#comment-4610 3bean Wed, 31 Jan 2007 16:13:21 +0000 http://www.thesimpledollar.com/2007/01/31/the-automatic-millionaire-the-latte-factor/#comment-4610 Trent- I'd like to hear your opinion on the major differences between Smart Couples Finish Rich (SCFR) and the Automatic Millionaire. I've read both but it felt a little bit like I was reading the same book twice. Don't get me wrong- he’s a little cheesy, but I like Bach. SCFR was one of the first personal finance books I read, and it taught me a lot of basic personal finance knowledge (difference between a 401(k) , Roth, etc.) I read the Automatic Millionaire a few weeks later (it takes all of 1 hour to read), but felt like it didn’t have any new concepts. What are your thoughts? BTW- thanks for the post of the Coupon Broker. I placed an order with Kirsten this morning. Trent- I’d like to hear your opinion on the major differences between Smart Couples Finish Rich (SCFR) and the Automatic Millionaire. I’ve read both but it felt a little bit like I was reading the same book twice.

Don’t get me wrong- he’s a little cheesy, but I like Bach. SCFR was one of the first personal finance books I read, and it taught me a lot of basic personal finance knowledge (difference between a 401(k) , Roth, etc.) I read the Automatic Millionaire a few weeks later (it takes all of 1 hour to read), but felt like it didn’t have any new concepts. What are your thoughts?

BTW- thanks for the post of the Coupon Broker. I placed an order with Kirsten this morning.

]]> By: MossySF http://www.thesimpledollar.com/2007/01/31/the-automatic-millionaire-the-latte-factor/comment-page-1/#comment-4594 MossySF Wed, 31 Jan 2007 15:47:21 +0000 http://www.thesimpledollar.com/2007/01/31/the-automatic-millionaire-the-latte-factor/#comment-4594 Inflation will continually increase the nominal amount invested every month. That $10 "Latte" will be $12 in 5 years, $14 in 10 years and so on. On the otherhand, the initial $10 amount though does have the biggest impact since it has the longest time build up through compounding returns. The final effect of inflation depends returns -- the higher the returns, the smaller the gap is between inflation reducing the final real amount and inflation increasing the amount invested. Inflation will continually increase the nominal amount invested every month. That $10 “Latte” will be $12 in 5 years, $14 in 10 years and so on. On the otherhand, the initial $10 amount though does have the biggest impact since it has the longest time build up through compounding returns. The final effect of inflation depends returns — the higher the returns, the smaller the gap is between inflation reducing the final real amount and inflation increasing the amount invested.

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