The Latte Factor
For as long as I can remember, I have been intrigued and inspired by personal finance. Whenever a conversation about budgeting, investing or saving arises, my eyes light up in the way that another person’s might if she won a year’s worth of free Chipotle or was upgraded to first class on an intercontinental flight. I am passionate about personal finance, not because I particularly enjoy math or because I am motivated solely by material things, but because understanding and being in control of your finances is the most surefire and effective way to lead an empowered, successful and free-spirited life.
As I entered the “real world” after college, it quickly became apparent to me that not everyone my age shared this same passion. Rather than sparking confidence and excitement, conversations in any way related to money sparked fear, discomfort and guilt in many of those around me. I realized that these feelings were a direct result of not having the knowledge and understanding of how to make smart financial decisions. While many of my friends and peers were eager to learn more and change the negative feelings that they had toward money, resources that were relevant to twenty-somethings and their lifestyles, desires and interests were few and far between. It became shocking to me that while our twenties are, arguably, the most crucial decade for our financial future, there is so little information out there that is applicable to the lives that my friends and I lead. This lack of information inspired me to share my knowledge, my passion and my journey towards financial freedom and literacy. I am by no means an expert, but I am extremely passionate about helping 20-somethings realize the importance of educating themselves and taking control of their financial health.
Up until this point, the majority of personal finance blogs catered to young people emphasize plans that are either difficult to understand or irrelevant to our lives, such as the Latte Factor. The latte factor, in short, is the idea that making small changes, such as cutting out your daily Starbucks run, will lead you to build wealth in the long run. I disagree with this school of thought for two reasons:
1) I believe in loving and living life.
Life is short. We all devote countless hours and amounts of energy working to earn a living. While, of course, many of us love and are fulfilled by our careers, what is the joy of working if you can’t enjoy a glass (or two!) of Cab at Happy Hour, buy a bouquet of flowers to brighten up your tiny studio apartment or any other small act that brings you happiness. I believe that all of us can and should design a life that allows us to spend on the things that bring us true happiness and save on the things that don’t matter, as much, to us. If a personal finance blog, book or plan doesn’t understand this, it is not a plan that you are likely to stick to.
2) Cutting small costs is not the most effective way to build long-term wealth.
We are ALL busy people. As 20-somethings, we have a force behind us that nobody else does: TIME! While many aspects of personal finance and how we choose to spend our money are up for debate, one idea is not. Compound interest. I don’t want to lose anyone too early on and will get more in depth (in a fun and easy to understand way) in a later post, but compound interest is the idea, for example, that you can invest a small amount of money every year from ages 25–35, stop, let it grow and STILL have more money at retirement than someone who invested a larger sum of money from ages 35–65. Even though she invested for 20 years longer!
I would SO much rather make sure that my peers understand important concepts like their credit score, compounding interest and their 401(k) and enjoy every day of their life to the fullest, instead of focusing their time and energy on cutting out lattes or any other action that does not have nearly as significant of a long-term payoff.
I am so excited to channel my passion into something that, I hope, will be positive for all of those in my life. I want to inspire people to realize that focusing on their finances does not prevent them from being the fun, free-spirited millennial that they so desire to be. In fact, being in control of your finances gives you even more freedom. You will have the freedom to do things like:
- Quit that job that you dread going to. Because you have an emergency savings to tide you over while you search for your dream role.
- Take that girl’s trip to Vegas. Because you have created and streamlined your budget enough to be able to spend on things that excite and inspire you and cut costs on things that don’t.
When I envision my future, post-work life, I see myself sipping wine in the sunshine of my Napa Valley vineyard home surrounded by the people that I love most. Because this dream is nothing without my friends and family present, I hope that my blog can inspire all of my peers to educate themselves, take control and start taking steps today toward the life that they have always imagined.