The Latte Factor- Book Summary

The latte factor is a metaphor. It could be anything you spend extra money on that you could happily do without.

If you can afford latte, you can afford a lot more things of high value that you thought you can’t afford.

You are richer than you think you need to start by realizing you spend more on latte.

You should pay yourself first this means you pay yourself the first hour of each work day’s income. 1^st hour of income is YOURS.

Many people fail to put this principle to practicality, that’s why so many people work eight, nine, ten hours a day, week after week month after month. For decades an average of 90,000 hours over a lifetime – nine thousand and at the end of the day they retire with nothing to show for it. They spend their lives building someone else’s wealth but not their own.

Money is the biggest reason marriages fail but it’s not even the lack of money, it’s the lack of talking about it and working it out together.

After paying yourself first you need to put this money, NOT in a jar account but in retirement account (401k) where that money can compound.

Find a way to save 10% of your income before taxation e.g. IRA, 401K, etc. Make saving your 10% automatic this is how you do it otherwise your saving will be on backburner.

Big hats no cattle

Avoid acting big financially fast put your money together. The power of compound interest cuts both ways: debts can compound too and once it starts, it can grow pretty fast and get pretty scary.

Myths of Money

MYTH #1: Make more money and you’ll be rich.

How much you earn has almost no bearing on whether or not you’ll become financially solid. Most people think they have an income problem. They don’t. They have a spending problem. Yes a healthy income is good. But chasing after the bigger dollar is not necessarily the solution to your money problems.

When you grow your income bigger you just take whatever money problems you have and make those bigger, too. Because your money problems come from your money habits, and those don’t change just because your income goes up. The solution to your money problems isn’t more money; it’s new habits. What makes you financially set for life isn’t bigger income; it’s smart saving and investing.

MYTH #2: It takes money to make money.

You don’t need a huge chunk of money to build wealth.

The power of compound interest is as real as gravity. And for most people who’ve built financial security, that’s exactly how they did it: a dollar at a time. It doesn’t take a big stake to start with. What it takes is facing the reality of your situation and deciding to do something about it.

“And you need to stop telling yourself, ‘I’m no good with money,’ because you don’t have to be a mathematical genius or Wall Street wizard, either. What you need is the capacity to be honest with yourself. Which is a rare commodity these days. The idea is to set yourself up so your life won’t revolve around the lack of money. Which, by the way, no one else is going to do for you.

MYTH #3: Someone else will take care of you.

“Not that people actually say this out loud,” “because most don’t—but they’re saying it with their choices and behaviour. “There’s no Prince Charming coming with a big bag of cash. You have to be your own Prince Charming…”