Is your daily coffee costing you a vacation?

How do you start your day? An apple perhaps. Or a bowl of cereal. Do you skip breakfast altogether and grab a coffee on your way to work?

It’s the last one isn’t it? (the fact you’re reading this article kind of gave that away).

A chai latte, a cappuccino with coconut milk, just a flat white for the lady in the red scarf, and the gentleman with the big round glasses is going to take his usual morning espresso. And the smell, that sweet aroma of freshly brewed coffee is all around you! Ah (deep inhale)… the perfect start to the day!

And that will be £4.05, please.

That’s fine! It’s less than 5 pounds! In the grand scheme of things what difference will a mere £4.05 make to your savings?

Enter… the Latte Factor.

Latte as a metaphor

Yes, I am referring to the latte you know and love, or don’t – I’m not one to judge someone on their coffee preferences.

Only this time, the popular frothy beverage is serving a more… financial purpose.

Conceptualised by financial author, David Bach, the Latte Factor breaks down how small, and seemingly insignificant purchases can end up piling up.

Let’s stop and think about this for a second. How much do you think you spend on coffee per week? Per year?

Let’s do the maths. For the sake of this experiment I am using the price of a normal latte from Pret a Manger in London which is £4.05.*

If you buy a latte once per day, five days a week, that’s £20.25 per week. For an average of 4 weeks, that’s £81 pounds per month.

And that brings us to…drum roll please… a total of £1053 per year on average. And this all started from one single, innocent latte.

But this is precisely what David Bach is trying to prove with his Latte Factor: the latte is a metaphor for expenses we often dismiss because of how “small” they are. Especially when these are regular expenses – like your morning coffee, subscriptions, hidden mark-ups, and so on.

Replacing lattes with cafes con leche

We’re all guilty of it: “I want to go on a holiday next year, but I just can’t save that much money!”

But now you’re wondering whether you can invert the Latte Factor in a way that’ll end up saving you enough for your next holiday.

Well, according to David Bach and the maths I just so expertly performed, you could go on a holiday next year. A couple of holidays in fact, judging from the £1053 you could save from coffee alone!

So why is it that we don’t do it?

The first and perhaps more obvious reason is that you don’t want to give up your morning latte.

One other reason is: planning ahead too far in advance is not for everyone. For some, it takes away the excitement.

But, if I am to quote one favourite proverb of mine: “wise kids cook before they’re hungry”. Meaning it’s always good to plan and save even if the holiday you are saving for is not in the immediate future.

Which brings me to the other side of the coffee.

The other side of the coffee

Life is also found in the little moments and there are instances when you want to treat yourself to a morning coffee, £1053 per year be damned.

In fact, one of the main criticisms Bach received on his Latte Factor theory was that it’s impossible for people to save as much money as he claims because no coffee cost - at the time the theory came out - $5! (do you hear that sound? That’s inflation knocking on your door).

You could say that the Latte Factor is misleading. Because let’s say you did end up cutting your morning coffee, there is no guarantee that you’ll consciously save it instead of spending it on something else. That money will only be saved, if you save it.

Save in Jars

Then again, it is just a metaphor, as I said before, and everyone’s Latte Factor is individual to them.

Yours could be the five different streaming services you pay monthly: could you cut them down to two? Or perhaps you always buy lunch when you’re in the office: have you thought of meal prepping instead? Or maybe you need to rule out all those treats you keep getting from the vending machine that eyes you up all day.

And don’t get me started on hidden fees and mark-ups. These always end up costing you high values if you’re not checking and comparing different financial providers.

Exchange money without hidden fees

It all comes down to setting priorities and budgeting, while making sure you have space to enjoy life! It’s up to you to identify your Latte Factor, see what works for you and how you could rearrange your spending habits in order to save more.

To answer the simple question of whether your daily coffee is costing you a vacation, no. But it’s definitely costing you. And that cost, when piled up then yes, could be the funds that sponsor a vacation or two if saved and managed wisely.

Written by Eleni Socratous

*Pret A Manger Menu Prices UK 2024