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My thoughts on The Latte Factor

Money! You know, the topic that can be really easy for some people to grasp and impossible for others. One's ability to manage and save money is incredibly important and unfortunately, it does not come easy to all. I, for example, am not always the best with my money. I am always looking for materials and perspectives that can help me get better with it so when I heard about this book I thought it might be a helpful resource. For the record, yes I am aware it might be considered silly to spend money on a book that teaches you how to be better with money... but there was an Apple Books sale... Okay yeah, still silly 🤷🏼‍♀️


Now you may be wondering, what is The Latte Factor? If you haven’t realized from the book blog or what I said above I will reiterate... It’s a book! Now you may be thinking “Well what is it about and why does it sound like a fiction book rather than a financial resource?” Well my dear inquisitive friend, that is because it is technically both. David Bach wrote this book to help explain to people three secrets for financial freedom, but instead of just writing it out step by step in the usual boring financial way. Bach created a fictional story to capture the readers attention and provide an example of how the secrets work.


This is where I warn you that this review will not be spoiler free because it's pretty much impossible to review a book like this without spoilers. Plus it's just a story used to explain money, it’s not like you’re getting a huge plot twist. So if you just want to read it yourself go now and read no further, but if you want to hear my thoughts and possibly even save yourself having to pay for the book, then please continue.


Lets start with an overview. The story is about Zoey, a young woman in her twenties, she is struggling with money and growing debt while living in New York City. Zoey loves her job but works crazy hours and doesn't feel she is earning enough to accomodate her needs and future goals. Boy do I know how that feels! Anyways, Zoey gets a job offer at another company that would pay more and she begins trying to decide what her best option is as she loves her current workplace but needs to sort out her financial future. Her boss suggests she visit her favourite Brooklyn coffee shop (Helena’s Coffee) and to talk with an elderly barista named Henry. Plot twist... Henry isn't just a barista. He's also apparently a financial savant that sits Zoey down to give her the "Three Secrets to Financial Freedom" in the normal cryptic way that all elder wise men give, providing it bit by bit over a few days 🤦🏼‍♀️. Throughout her week of deciding her future she continues to visit the coffee shop to chat with Henry as he helps her discover that she already earns enough to secure her future and pay off her debt, who knew! (Sorry I many be a little bitter about this whole thing)


My thoughts on this are fairly simple; it's a cute concept, you know explaining how to be good with money using a fictional story. Though it’s only really useful for someone that knows very little about money or has never tried to plan for their future. The three secrets are very basic and if you've ever really talked about money with a professional or a parent you should know most of it already.


Now you may be wondering, what are the three secrets to financial freedom? They are:

  1. Pay yourself first

  2. Make it automatic

  3. Live rich now


Why don’t we break that down a little more.


1: Pay yourself first.

What “Henry” meant here is simple, the first hour or so of work is your money and you keep it. That doesn’t mean you take it and buy yourself the purse you wanted or anything like that but rather you put it into savings. So if you make $20 per hour then for the five days you work that week you make $100 for yourself, look at that you've got $100 saved per week. That means you saved $5,200 in a year. So on and so forth.


The point Bach is trying to make here is that most people don’t pay themselves. They put money towards rent, food, transportation, debt and then at the end they have little to nothing left and instead of investing the last amounts they spend it. He uses this section to talk about compound interest and the ability for your savings to make you money over time.


It’s not a bad thought process, to pay yourself an hour of work per day and it isn’t bad advice. $100 out of a pay check isn’t the end of the world and is manageable for most professionals. The thing that most forget is to actually put it into the savings account or a 401(k) like they talk about in the book. Finding something with compound interest that will let you make money from your money. Its especially easy when you realize what money could be getting saved. Ex. In the book Zoey mentions that she eats take out all the time... so cut the takeout, budget for a grocery store and put the left over money into savings. Ta-da, you’re paying yourself!


2: Don’t Budget - Make it Automatic

I mean this one is pretty simple. You use the lovely technology we have now to make things automatic. You set up with your work to automatically put 10% of your cheque into a 401(k), or you’re bank account automatically transfers 10% of your paycheck into a savings account. Whatever it is that you’re doing with the money, you make it automatic. Budgeting is hard, and self restraint can be even harder for people. The thought of taking your money and putting it in a separate place and not touching it might be the, yeah right, moment for most people. Most people don’t have the ability to leave their money where it is if it’s easily accessible, or they wont even put it into the savings account in the first place.


3: Live rich now

In the book, Henry refers to this as the ”why”. The first two steps are the how and this is the overarching reason. It’s what you are working for. No, it does not mean go buy a mansion, a corvette, or a yacht. This means breaking down what it is you want. Obviously when you are young, saving for retirement is hard to imagine and you don’t get the benefit for a few decades. Instead this means you have to decide what to invest your money into, what makes you happy. This may be setting aside money to a dream account, saving to afford something you want. The book uses the example of photography classes, purchasing a camera. This is for the more short term goals and wants. Putting $100 each month away towards a trip or something like that, what you really want, what is going to make you happy. In a year you have $1,200 towards a vacation or something else you wanted. The point is that you don’t disregard it because you can’t afford it, you just budget to do it in the future and invest in it, invest in yourself.


I will say that two things frustrated me about this book. That a) Zoey’s boss didn’t just tell her all of this information herself since she had clearly spoken to Henry about it herself at one point. And b) it’s a little frustrating to watch Zoey go through the week not realizing that Henry is clearly not a barista... An actual barista at the shop points out that he leaves whenever he wants and instead of realizing ‘oh hey he’s the owner’ she goes, ‘what kind of a job is that’. An older man who sits around a coffee shop talking to customers and not really working to be a barista and show up whenever he wants, thats crazy. Like honey, yes it is crazy. That’s not how jobs work, give your head a shake...


My favourite quote from the earlier chapters was, “Earnings are like the tide, - and your spending is like the boat. When the tide rises, the boat rises with it.” Basically Bach’s example of how many professionals spend. Just because someone’s income goes up doesn’t mean that their savings does. Usually more income just means more spending, that is the issue that people need to face rather than not having a job that pays enough. (Though there are people out there that don’t make enough to reasonably afford the necessities so it doesn’t apply to all people, just a large majority). The point being that when you say ‘I can’t afford it’ you have to ask yourself, can I not afford it because I don’t have the income to do so or because I spend my money elsewhere. The Latte Factor in that sense means that the $5 per day on a latte that many people spend could instead be put into savings and you can make coffee at home instead. That way you are investing in yourself and your future but you still get a coffee, just maybe not as good of one unless you make great coffee 🤷🏼‍♀️.


What David Bach's The Latte Factor really settles down to is that planning is important and that you shouldn’t avoid things because you “can’t afford it”! Most of the time you could afford it if you made a better plan. Not knowing where you're money goes and understanding why it goes there means you really won’t be able to afford the things you want in life. Why spend your life chasing after things when you could prepare for them and make it available to yourself? Make yourself a priority, make your future a priority. That at least, is what I took as the main point. Though maybe spending $20-27 on a book that tells you that isn’t the smartest place for your money... Especially since I just told you it here.


So, would I recommend this book? It depends on the person, I think it would be useful for kids in high school that are learning about financial stability and entering the workforce. If you are a professional already working or a broke university student then maybe just talk to a free financial advisor at your bank that can help you figure most of this out, or do what I did and take a Personal Finance course offered by your University.