I often talk about the “latte factor,” made famous by David Bach. In a nutshell, the “latte factor” refers to the fact that the raw repetition of a habit that costs money each time can drain you dry financially.
For example, let’s say you have a latte each morning that costs $4, along with a muffin that costs $2. $6 for a morning treat isn’t bad. But in a week, that’s $42. In a year? $2,184. After ten years of this, when you could be putting the cash in a high-yield savings account that returns 4% on your money, you’re out $26,221.38. That morning coffee and muffin just cost you a car.
The obvious answer is to start ditching these little habits whenever we can find them. Give up that morning latte. Eliminate some monthly bills. Cut out that twice-weekly trip to the bookstore. Give up cigarettes or caffeine or such. This stuff really will work to improve your financial state, and you should strongly think about doing every thing like this that you can.
But that’s not the full answer.
Over at 43Folders, Lance Arthur wrote a brilliant summary of some of the life lessons he learned from a deceased friend of his, Leslie Harpold. This one stuck out at me:
She managed to curtail her smoking habit and for a while traded in her cans of Diet Coke for big glasses of water instead. She began to feel the health benefits of both decisions — but discovered also that she felt worse, emotionally, even if she felt better physically. She was giving up things she really enjoyed for all the right reasons, but she felt like her life hadn’t really improved as a result.
What’s the conclusion?
It’s your life. Live it how you want to. Accept the responsibilities of your decisions, but also the rewards and pleasures — without guilt.
I take this to heart when I think about the things I’ve given up and the things I’ve struggled with over the last year or two. I’ve had little or no problem getting rid of many things in my life, trimming my monthly bills, and so on. I’ve eliminated several expensive hobbies and habits and I feel much better for the change.
I’m just left with one real weakness, one area that I overspend on and don’t worry much about the consequences: food.
I love artisan foods. I love trying to make my own complex dishes. I love a perfectly assembled cheeseburger, with a sharp cheddar cheese melting on top, a gigantic slice of pickle upon it with diced and sauteed mushrooms and onions slathered on top. I love the dining experience at a mind-blowing restaurant. I love food in all of its amazing forms.
This extends even to beverages. I love selecting the perfect bottle of wine to match a meal, and my wife and I drink a glass with the majority of our evening meals. I love the fizziness of an organic ginger ale. I love the taste of a homemade stout on my tongue, made with oatmeal and subtly producing a chocolate-like flavor.
Food is the one area of my life that I’ve always found enjoyment and happiness, and it’s one that I am loathe to give up. I might always seek ways to trim my budget, but I won’t sacrifice the simple pleasure of an ice cold soda or a bowl of homemade ice cream or a freshly-baked loaf of bread.
To me, this is the spice of life. It is part of that area of safety that I’m trying to protect through financial prudence. To abandon something that brings such deep value into my life would be giving up the very reason I’ve learned to become financially responsible to begin with.
So if you ever catch me examining a selection of $20 cheeses, realize that I’m living my life the way I want to live it, without fear or worry. This is what financial independence is all about.