Have you heard of the latte factor?
I think most of us have. It basically says that the reason we can’t save any money is because our daily $5 coffee habit is ruining our momentum.
I don’t know about you, but I’ve never thought much of this concept because I have never spent even $5 on something frivolous like a daily coffee when I can make it myself at home. So, while I think that idea probably works great for people with more extravagant spending habits, I find the reverse latte factor to be much more interesting.
The reverse latte factor concept uses the power of the latte factor (consistency) to explore what making/saving small amounts of money consistently could do instead.
If you’re trying to pay off debt, it’s SO EASY to fall into a cycle of deprivation while you try to throw all of your extra dollars at the credit cards or the loan, etc. While this tactic can be beneficial, it’s also isolating and makes life much less fun. I can say this because I’m in debt payoff mode and the guilt that I feel for even necessary purchases is a problem.
To help combat that, I’m contemplating how to implement the reverse latte factor.
How could I come up with an extra $5 per day?
I could make an extra $5 through one of my gigs by picking up an extra delivery per day, by scheduling an extra class per day, or possibly by trimming each of my variable budgets by $5.
Even if only a handful of days were successful in scrounging up an extra $5, that can still be a pretty large number over time.
An extra $50 a month (only 10 days of the month made an extra $5) over the course of a year can put an extra $600 towards credit cards or an emergency fund. $50 over the course of 5 years becomes $3000 and $6000 after 10 years
If you’re able to stay the course for 20-30 years, that measly $50 looks like $12,000 or $18,000.
It’s worth mentioning that these numbers are all before any compound interest is figured in if you’re able to let that money sit in a higher interest savings account, or better – sit in the stock market.
I think this is a fantastic way to do a little extra work and have a decent amount of extra money to put towards a debt payoff goal, a traveling goal, or investing goal. I’m hoping that by sending even an extra $50, I’ll speed up my debt payment plan and lessen some of the guilt I feel for not sending EVERY possible dollar to it.
I’ll report back what I found success with and what I learned.