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When life just sucks, it's so easy to just wanna turn on autopilot to get through the day.  We usually spend more, care less and eat like we never had our favorite ice cream before (which happens to still be vanilla as the most popular ice cream flavor in America) hmm... some things never change.

But, for many of us, most things do.  Like our current assets and household income compared to when we were married.  So, it should come as no surprise when we tell you that it's time to turn off your autopilot and get serious about your spending.

Is the café really a money grub?

The daily trip to your local café for a cup of joe is the classic "wolf in sheep's clothing".  

There's a concept that has been established by David Bach, a Best Selling Author of books like, The Automatic Millionaire and Smart Couples Finish Rich.  It’s referred to as “The Latte Factor”.

The concept is relatively basic and has been recognized as a simple truth about a common problem.  Frivolous spending adds up and incremental investing can make a difference in your long term goals.

The Latte Factor shows you how avoidance of a daily $5 latte, instead dedicating these funds to an investment with a reasonable return equal to approximately 10% over thirty years would result in $330,221 plus a little change.  That’s one expensive latte!

Low cost, daily items make a difference.  So does good financial planning and investing-  

The problem for many of us is that we regard these low ticket, comfort purchases (the sheep) as innocent expenditures.  When they are actually (the wolf) brutal attacks on our potential long-term investment opportunities.  

It's more than a cup of coffee.

No longer can you regard the purchase as a $5 expense.   Instead you should review your bank statement for wolves.  Look for repetitive purchases such as coffee, lottery tickets, café snacks or fast food meals.   Use "The Latte Factor" calculator to determine what those wolves are doing to your money for retirement.

It's time for changes.

The truth about the problem is that it's not as simple as it is obvious or obvious as it is simple.  In other words, we make these purchases everyday.  So it's obvious we are spending money on frivolous purchases that are high in frequency.  But, it's hard to recognize how a simple, small ticket purchase can cost so much unless we analyze it over a period of time.  

What's not obvious is that it isn't just about realizing the real loss of such a small, high frequency purchase, rather knowing what steps to take to discontinue it.  The simple part is that the problem isn't about a cup of coffee.  It's about a habit.  

Attack the real wolf.

Once we find how much money is going out the window, we want to slam it shut.  For many of us, the savings is hundreds of thousands of dollars.  That's the wow factor!  Yet, many don't get passed this part to make the next move.

The rest of us will want to stop buying that latte after lunch.  We stop for a week or two, only to start buying a soda and chips at the convenient mart after work everyday.  It wasn’t the latte after all.  The real wolf is habitual spending, an addiction.  

How do we get addicted?

It starts with being undisciplined spenders.  We want something, so we buy something.  If that something has sugar, caffeine or simple carbohydrates then our body is being stimulated to produce hormones like dopamine when we consume it.  This adds to the addiction.

This is the same hormone that is activated by heroin and cocaine.   It is referred to as a pleasure hormone and stimulates feelings of enjoyment, motivation and focus.  This hormone is also activated when we make purchases or gamble.  

Hormones like dopamine are rewards for the brain and a basis for physical addiction to certain habits.  Satisfying these cravings stimulates the hormone and increases feelings of euphoria.  While the feelings may be more pronounce with drugs like heroin they are similarly addictive as when we make a purchase of a sweet drink or lottery ticket.

If you're buying a super sweet soda or latte everyday then your brain is rewarded with two types of dopamine protagonists, the sugary drink and the purchase itself.  Buying a lottery ticket, like all games of chance, provide a risk vs. reward that stimulates dopamine neurons to flood the brain.  This provides that physical component to the action that causes us to go back next time and buy another one.  Call it a habit or an addiction, but the cost is the same and it's not just the cost of a single lottery ticket.  

Is it a problem?  Maybe.

Now you know it’s more than a latte.  The purchase is part of the addiction and undisciplined spending.  You head to work everyday and you get into the habit of stopping off for a latte. You take a break and you stop in at the local cafe for an iced tea.  You’re paying for fuel at the local Gasmart® and you pick up a lottery ticket.  

If it’s occasional, you likely don’t have a problem.  If it’s everyday, routine and similar type purchases you need to stop.  But, are you ready?

Is this the time to break-up with your extra tall, extra sweet, double chocolate mocha latte with a double shot of espresso? surprised What?!

Maybe not.

The addiction is real.  The loss is large and your latte is tall.  But, on the scale of big pictures, you may be better off taking things one day at a time right now. 

That’s right.  There's an even bigger picture than the big picture.  It takes into account the likelihood of your success removing a life pleasure at a time when life is so completely fricken' messed up.  

No excuses - just realistic strategy

Yes, it’s an addiction, but in this case it’s not heroin.   If it helps you get through the day with one less derogatory comment about your ex or one more ounce of energy to get your a@# out of bed in the morning, then give it some time.  Don’t wait too long though.  The financial pain won’t go away.  But, consider it a financial/emotional triage.  Fix you, then fix your financial plan for your future.  This will provide the best strategy for long-term success.

When you’re ready.

Addiction Front

  • Recognize the spending habit and specific repeat purchases in an effort to discontinue
  • Abstain from purchasing specific items until you are strong enough to purchase occasionally without it becoming a habit (for some this may not be possible without a financial coach or counselor)
  • Add healthy habits that also increase pleasure hormones to incent you to improve your health and well-being
  • Remove triggers that cause you to take action to make these repetitive purchases
  • Forgive yourself if you resume habitual purchases so that you quickly acknowledge and discontinue 
  • Develop stop guards to future repetitive purchases
  • Think about how long you had to work this month for the total dollar amount of your repeat purchases for the month
  • Ask a friend or family member for help in keeping you committed to your goal
  • Seek counseling or therapy if you consistently resume your spending habits or are unable to stop frivolous spending at all

Financial Front

  • Don’t stop all high frequency purchases at once
  • Start with the purchases that you know you can cut out easily
  • If you cut one thing out, be careful not to add something else in its place of equal value
  • Substitute with low cost replacements-  skip the café and make your own coffee at home
  • Cut sugary, high carb, junk foods out of your daily meals so that you are less likely to physically crave expensive snacks and energy drinks as a daily habit
  • Track your progress by monitoring your anticipated growth of savings based on your current changes
  • Download savings apps that can help you save on everyday purchases to add to your long-term savings (Try the 2020 DMK Best Automatic Savings Apps)
  • Actually redeposit the savings into your investment account (it doesn't work if the money just stays in your checking for more frivolous spending)
  • After a month of savings, you can determine an amount to initiate automatic monthly deposits into your investment account (you can afford it once you discontinue the habit) (Try the 2020 DMK Budget Series)

-OurDMK.com



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