The Latte Factor

Not about coffee

Back in January I resolved that 2019 would mark the year I learned about personal finance. Surprisingly, I managed to go through grade school, undergrad, and graduate school without ever having to take a personal finance course. Given some years of bad decisions, I chose to start paying closer attention to my lack of financial literacy. Based upon the numerous, pessimistic articles about the demise of my generations finances, this lack of understanding seems to be a common problem. Thankfully, the library stocks a vast array of books that all claim to help solve any and all financial problems. After reading several dozen variations of financial self-help, all the books boil down to one lesson: save more, spend less.

Some authors present their theories better than others. The Latte Factor by David Bach preaches that any can become a millionaire by “paying yourself first”, i.e. making saving automatic and put money in savings before paying bills. A pretty simple idea that I believe anyone can theoretically follow. I think most of the advice in the book is useful.

A recent trend in the self-help non-fiction genre is to use “parables” to present the information. Most of these stories border on cheesy and paternalistic. Most non-fiction writers do not succeed at fiction prose for a reason: heavy handedness. My main complaint is that a majority of these modern parable always revolve around a naïve female who cannot make any of her own decisions, knows nothing about money, cannot explain the basics of a 401(k) , and blanks out when forced to discuss the stock market. Enter the wise (usually male) mentor who teaches this young, bumbling woman about the ways of the financial sector and compound interest rates. Because we all know only women spend money on frivolous items and struggle to understand the difference between mutual funds and bonds. How did we ever survive without someone showing us how a calculator works.

Maybe I differ from other people in my age demographic in that I just want the facts. Though, in the author’s defense, I did read the book in under an hour, which was the intent. So I guess, mission accomplished on his part.

I digress. I actually agree with most of the points presented in the book. But I wonder about the target demographic. The book is written in extremely simplistic prose and the parable really  becomes annoying after the second chapter. Honestly, you would think that Zoey (the heroine) never ever looked at her bank account or read the financial benefits package that came with her employment. In my opinion, this is main problem with using fake parables to illustrate a point. The characters must be reduced down into the most one-dimensional stereotypes in order to force the main points on the reader. I infinitely prefer books that lay out the information with real life illustrations versus over written fake ones.

Here are the seven key points illustrated throughout:

  1. Compounding Interest: Small amounts of money invested over time turn into a mountain of cash.
  2. Time: Time matters. Think about that when you consider whether you should wait to invest until all your debt is paid off.
  3. Return: ROI is real.
  4. More Than Lattes: Basically, what do you spend money on that you could live without.
  5. Habits: We spend money on things that do not bring us joy and end up collecting dust in some dark forgotten closet corner. It may give us some immediate gratification, but no lasting satisfaction. If we ran an experiment and shunned our “lattes” for a month, we would probably not miss them. By latte, I mean anything superfluous like 1000 cable channels, a third car, eight computers, take out every night, etc….
  6. Control: We have more control over our financial destiny than we believe.
  7. Small Amounts Matter: There is power in small amounts of money. Every dollar that comes through our hands represents possibilities. Every dollar we can save and put to work for us will compound if given enough time. This enables us to build wealth on almost any income.

Overall, the messages presented in the book are simple enough to understand and are applicable to anyone. I just seem to have an unjustifiably negative reaction to fake parables. However, if you are simply looking for a quick read on basic financial principles, The Latte Factor is a decent place to start.

Themes Explored: nonfiction, economics, finance, personal finance, currency, money matters, money, investing, personal responsibility, wealth building, investing

Synopsis: The Latte Factor demystifies the secrets to achieving financial freedom, inspiring readers to realize that it’s never too late to reach for your dreams. (Adapted from Goodreads)

The Latte Factor, Atria Books, 2019, ISBN: 9781982120238