Stop Stressing Over the Cost of Lattes and Find a Side Hustle Instead

Heather Nowlin
I Recently Took over My Mom’s Personal Finances Heather

“The Latte Factor” Is a Joyless Habit, and Energy Management Will Make You Happier in the Long Run

Photo by Nolan Issac on Unsplash

If you ever read financial blogs, articles, or advise pieces, you’ve probably heard the phrase The Latte Factor. Popularized by David Bach in his “Finish Rich” books and seminars, the phrase become ubiquitous and synonymous with frugality since first appearing in the 90s.


I recently had a huge realization — one that seems super obvious when you say it out loud:

The fewer hours I work at my salaried job each week, the more money I make per hour.

Obvious, right? If I limit myself to 40 hours per week — or, let’s face it, even 44 — I am making more money per hour in a day, a week, a year than I am if I let that weekly hours number slip up to 45… or 50… or, let’s face it, even more. So, when I stop working at 40–44 hours per week, I’m not only more productive (yep, see the research here), but I’m actually doing my wallet a favor by earning more per hour.

Let’s add one more factor to that recipe: We all have limited time and energy (link to “Want to Manage Your Time? Manage Your Energy” story you’re gonna write very soon) in a day, a week, a year. And what we get done in our 40 or so work hours depends on how we treat that time and energy — how we “manage” it. The more I get done at my salaried job, then better I look — which can mean raises, a better annual performance bonus, even promotions. (This is, of course, the motivation behind letting my workweek slip into the 50-hour range each week, and it’s not a bad idea all things considered.)


I recently realized that if I work fewer hours at my job, which has a cap on salary and bonus every year, then I have more time and energy in my day, my week, my year to spend how I choose.

If I have more time and energy to spend on something other than my regular 9 to 5, then I can replace a couple hours here and there on something that generates a second income.

If I generate a second income, then I will have more money.

Ergo… you see what I’m driving at. If I manage my time and energy at my “work” work, then I will have more money to spend on lattes — or whatever I want.

That brings us back to The Latte Factor. Now, to be fair, the point Bach was making in his ridiculously popular books and seminars (which, side hustle note, I’m betting he started working on after putting in his 40–44 hours somewhere) is bigger than depriving ourselves of much needed caffeine in a day. More than that, he used the latte to represent the importance of saving, of investing (using the cost of that latte in an equation that explains compound interest very effectively — and the concept of compound interest is incredibly important {LINK TO THE COMPOUND INTEREST STORY I WILL WRITE SHORTLY), and further was pointing how frivolous spending in general is something we do in a middle class experience without even thinking about it. (Those who struggle with poverty have an entirely different experience with money, and we should think about that from our middle class day-to-day a whole helluva lot more than we actually do. More on that to come.)

This Forbes article defends Bach very nicely:

More Than Lattes — Focusing just on a cup of coffee misses the point entirely. The Latte Factor applies to everything from how much we pay for cable (if we have it at all) to whether we own one car or two (or none). I believe that many families could remove hundreds of dollars a month from their budget by taking a close look at their monthly bills. I call it the One-N-Done method of saving money. If a family could save $250 a month from their budget, that turns into more than $250,000 after 30 years at a 6% return.

But here’s what I want to add to that. The thing that I’ve realized lately from turning my computer off after 8 hours of good, solid 9 to 5 job work hours that I’m actually quite proud of:

I can save $5 a day by skipping the latte (the Latte Factor) and invest that money instead — earning a lifetime of compound interest that works in my favor and helps me “finish rich.”

Or, I can find secondary work that takes 4 hours a week and earns me $25 bucks an hour — and invest that money earned into something that generates a lifetime of compound interest and helps me “finish even richer.”

If I do the first, I’ve net $25 that week (give or take, depending on what size latte I like).

If I do the second and keep the latte habit, I’ve net $75.

And if I do both, of course, I net $125 bucks that week.

Big difference, right?

If I only do the side hustle thing, and keep the daily latte, consistently — meaning, 52 weeks out of the year — then that’s an extra $3,900 in my compound-interest-bearing bank account every year. (The latte saved only nets me $1,300 bucks a year, and keeps me grumpy most mornings — affecting my energy management and making it wayyyyyy less likely that I’ll actually get a full performance bonus worth of work done at my 9–5 and $100 bucks worth of work done on my side hustle, by the way.)

So, it’s really just about the math: Manage your energy (with the help of a daily $5 latte if needed), and commit to a side hustle for maximum personal financial wellbeing.

See you at the coffee house. Cheers!

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