See How Cutting A Small Expense Adds Up To Big Savings

The latte factor is a money-saving strategy we’ve noted before, in which redirecting your money from small things (like daily lattes) to savings can make you wealthier. Not convinced this strategy could make a big difference? Try this simple calculator.

David Bach made the term “the latte factor” popular and his calculator can help you see exactly how much you could have if you cut down on those small expenses many of us don’t even think much about spending — whether it’s a cup of coffee, fast food or ATM fees.

Simply choose your dollar amount and the annual interest rate for your savings account or other investment vehicle, and get your instant latte factor. For example, cut out the $2 weekly ATM fees by switching to a bank that reimburses them, and invest the amount at 3 per cent and you’ll have $1228.01 in 10 years, $8076.98 in 40 years. Redirecting $2 daily has an even bigger payout: $56,694.21 in 40 years.

Of course, tackling your biggest expenses first will get you the most progress on reaching your financial goals. You should also evaluate which things you apply the latte factor to, so you’re not cutting back on the little things that matter to your everyday happiness. But seeing in cold hard numbers how little changes really add up can motivate you to find ways to cut out the small stuff that’s a waste of money.

The Latte Factor Calculator [Finish Rich via Moolanomy]

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