Latte Factor Calculator
| $6 weekday coffee | Spent | Invested at 7% |
|---|---|---|
| 1 year | $1,560 | $1,611 |
| 5 years | $7,800 | $9,307 |
| 10 years | $15,600 | $22,501 |
| 20 years | $31,200 | $67,720 |
The latte factor is the finance writer David Bach's name for small recurring spending that compounds into a startling number: a $6 weekday coffee is $1,560 a year, and invested monthly at the market's long-run 7%, it crosses $22,000 in ten years. The exercise is not really about coffee - it is a mental model for pricing ANY small habit (delivery fees, the streaming stack, the vending machine, the app subscription you forgot) in the only currency that matters: what the money becomes if it is not spent.
Two honest caveats keep the model useful instead of guilt-inducing. First, the point is trade-offs, not deprivation: the question is whether the habit delivers more joy than its invested future self would. Second, cut the big three before the small one - housing, transport and food are most budgets' latte factors in aggregate, and a $200 refinancing or insurance switch beats a decade of home-brewed coffee. The calculator prices whichever habit you point it at; the ranking is your job.
How to use
- Enter the habit's cost, how often it happens (per day, week or month), and the years you want to project.
- Set the investment return (7% is the long-run stock average) - the tool shows the annual spend and the invested future value side by side.
- Compare habits by their decade numbers, not their daily ones - and run the big three (housing, transport, food) through the same math once before swearing off coffee.
Frequently asked questions
What is the latte factor?
David Bach's term for small recurring expenses that feel trivial daily but compound into large amounts: the $6 weekday coffee is $1,560 a year, and invested monthly at 7% it is over $22,000 after a decade. The term expanded from coffee to any small habit - subscriptions, delivery fees, convenience purchases - priced in invested-future terms.
How much is a $6 coffee a day for a year?
$1,560 for weekday-only habits (260 workdays), $2,190 if it is every single day. Invested monthly at a 7% long-run return, the weekday version reaches about $22,500 in ten years and roughly $67,700 in twenty - the compounding, not the coffee, is the eye-opener.
Is the latte factor real personal-finance advice?
Half of it. The math is real and the awareness exercise works - most people genuinely do not know their recurring-spend total. But the guidance half is contested: for most budgets, housing, transport and insurance dwarf coffee, so the honest sequence is audit the big three first, then enjoy small pleasures knowingly. Bach's own books say the same; the internet just remembers the latte.
What return should I use in the projection?
7% is the long-run US stock average before inflation and taxes - reasonable for retirement-horizon money in index funds, optimistic for a savings account (use 4-5% for high-yield savings) and wrong for anything you might need in three years. The calculator defaults to 7% and the honest move is to also run the number at 4% to see the range.