Incremental Money Waste

Have you ever heard of the ‘latte factor’? It’s a term that sums up the idea of incremental money waste and how it affects your long-term financial picture. I have touched on it before, but I’ll dive into a bit more this week.

What Do You Regularly Buy?

The concept is that you might buy a cup of coffee every day although you could certainly make it yourself. I use a Keurig type machine and am brand-loyal to a higher priced brand of coffee. So, a cup at home for me costs about $.60 when I factor in a splash of cream. If that brand had a shop near me, it would be about $3.00 for that same cup. In a 5-day work week, I’m saving $12.00, or $360.00 a year.

Compounding the Problem

Doesn’t sound all that bad, does it? Well, if you were to save that extra money and invest it in a mutual fund, you could possibly get a 7-10% return on it (based on the history of the stock market). Using this calculator shows that loss of earnings to be $63,070 – 112,909 over 30 years. Is a daily cup of coffee in a coffee shop worth that to you? Compounding is a magical thing when it comes to money, the money earns interest, the interest earns interest, and so on.

What Other Ways Do You Spend?

The other kind of incremental waste is things you buy and never use, or don’t use to its full advantage. For instance, a produce item you buy and then throw away or a magazine subscription you rarely read. They are costing you more than the few dollars you spend today, it’s costing you possible future earnings!

In that same vein, I read a blog post recently about having a really small wardrobe of basic items. The author wears mostly black and denim and has very little else in her closet. The post got me thinking about my own closet, I find that when I’m putting away my clean laundry it’s the same clothes over and over. I think it’s time to do a closet purge and start a shopping moratorium. Then take the money I’m not spending at coffee shops and on clothes and open an investment account!

Let Us Save For You

While Billcutterz isn’t an investment firm, we can help cut your bills down, so you have extra money in your budget to invest. Take a few minutes to sign up and submit your bills, then sit back and enjoy the savings. If you want a little extra money to buy k-cups to make your coffee at home, refer your friends to us and get paid in Amazon gift cards.