The MapleMoney Show » How to Save Money » Frugal Living

Latte Factor Lessons About Spending and Wealth, with Bethany Bayless

Presented by Wealthsimple

Welcome to The MapleMoney Show, the podcast that helps Canadians improve their personal finances to create lasting financial freedom. I’m your host, Tom Drake, the founder of Maple Money, where I’ve been writing about all things related to personal finance since 2009.

Have you ever heard of ‘the latte factor’? It’s a term used by personal finance experts to describe the impact that small, everyday purchases can have on your budget over time. My guest this week is Bethany Bayless, co-host of the Money Millhouse Podcast. She joins us to discuss exactly what the latte factor is all about, and how cutting small expenses can result in big gains over time.

Your daily five dollar coffee habit might not seem like much, but over the long term, it’s an expense that can really add up. Bethany explains how quickly five dollars becomes one hundred, then one thousand, and so on. She then shows us how much money we could have if we chose to invest $5/day, instead of feeding our daily Starbucks habit.

The latte factor can be applied to other regular purchases as well. When was the last time you evaluated your spending on monthly subscriptions, like Netflix, Spotify, Amazon Prime, etc. It’s amazing how easily these services can add up. It’s an episode you don’t want to miss, and it’s all right here, on The MapleMoney Show!

Once you’ve overcome the latte factor, put your money to work in a low maintenance, low fee portfolio, and watch it grow with our sponsor, Wealthsimple. MapleMoney listeners get their first $10,000 managed free for one year. Visit Wealthsimple today to sign up!

Episode Summary

  • The latte factor defined
  • How small purchases add up over time
  • Recognizing your emotional connection to your daily spending
  • How much is your coffee subscription costing you every month?
  • Why you should reevaluate your subscriptions on a regular basis
  • Other places to find budgeting wins
  • Getting rid of one large payment can increase your cash flow significantly
Read transcript

Have you heard latte factor? It’s a term coined by David Bach, author of The Automatic Millionaire, a book you should definitely read. Our guest today is Bethany Bayless, co-host of the Money Millhouse podcast. She joins us to discuss what the latte factor is and how cutting small expenses can add up to some real gains over time.

Welcome to The Maple Money Show, the podcast that helps Canadians improve their personal finances to create lasting financial freedom. And once you’ve overcome your latte factor put your money to work in a low-maintenance, low-fee portfolio and watch it grow with our sponsor Wealthsimple. Maple Money listeners get their first $10,000 managed free of charge for one year. For more on Wealthsimple, head over to Now here’s Bethany…

Tom: Hi Bethany, welcome to The Money Maple Show.

Bethany: Hi Tom. Thank you so much for having me. It is so cool to be here in Canada.

Tom: This episode started based on a joke where we were kind of joking around about personal finance in Canada and started talking about the Timmy’s factor as opposed to the latte factor. Have you had Tim Hortons coffee before?

Bethany: I have reached the summit of Tim Hortons coffee and just fallen deep into its powers of seductions.  When I was in college I was a part of a group and we had a tour in Canada for two weeks and so we went and got Timmy’s almost every single day. And I think in that two weeks I became addicted very, very quickly to Tim Hortons and how it is far superior to anything we have in the United States.

Tom: I think you just passed the only rule for citizenship.

Bethany: Oh, I thought I had to marry a Canadian!

Tom: Yeah, anyway, going back to this idea of the latte factor can you explain to people what the latte factor actually is.?

Bethany: Absolutely. The latte factor is conceived by experts out there who say that when you are constantly making small purchases such as a latte—if go out and get a latte every single day those are going to start adding up to more and more and more money. And so taking a look at how much is adding up and maybe cutting back on that and investing that into something into the future will be better for you financially. It’s just kind of being aware of those small purchases and how they add up to more.


Tom: Yeah, I have a problem buying $5 lattes when I can have a Keurig pod at home for pennies or dimes at least.

Bethany: I don’t even think about it. If I’m going to go get a Starbucks sometimes I don’t even look at the price until after the fact. This is my drink. This is what I’m getting. I don’t care how much it costs. And more and more times I look at how much it costs, “Oh, my gosh, that was $7. What??”

Tom: I think this matters the most for someone that’s on a regular schedule. If they’re working Monday to Friday and grabbing a coffee as part of their commute or it is part of their break or both, how does this add up over a week, a month, a year?

Bethany: There are times that as a part of your routine, that’s what you do. Also for me, I don’t know about you guys, but sometimes I have an emotional connection to coffee. It makes me feel warm and makes me feel like I’m getting a treat. I’m treating myself because I deserve it. It’s that emotional thing as well. It’s also very social. So if you are taking a break with your co-workers you might say, “Let’s just go to Starbucks. Let’s just go hang out,” and throughout the week that will add up. If you go every single day before you go to work and you’re dropping $5 a day that adds up to $25 a week. That math is very simple. If you really want to know how much these little things are adding up you can use a tool like a calculator. There’s a calculator on Financial Mentor that I have used when it comes to cost. You enter how much you’re doing so every dollar amount of any regular, unnecessary, expenditure, basically. So let’s say we’re doing $5. It will ask how often you normally spend this money. Let’s say we do $5 every five days. Then it takes it a step further (which I really like) it says, “Enter the annual return on investment you could earn if the money were invested rather than spent.” Take that a step further and it says if you’re spending $25 a week, time four weeks in a month is $100 a month. You have a coffee subscription of $100 a month every single time. Over the course of a year that’s $1,200. That’s a lot of money. You could take that money and go on a trip. You could take that money and do something or you could take that money and invest it. And so that’s why he takes it a step further. So let’s say we have the annual return on your investment as a percentage. My husband and I put our money into a bank account and our specific thing that we’re doing—we get a 2.75 interest return. So let’s say we take that 2.75 percent… Then it says enter the numbers of years you’d like to estimate for the growth. So let’s say I kept it in there for five years. You calculate that. Then it asks for the number of dollars that would be spent. So $5 a pop for every five days for every week actually comes out to $1,800 in 24.

Tom: Yeah, that’s from the extra weeks in a year.

Bethany: That’s it, exactly. So all those… It actually comes out some more. Let’s say we took that $1,800 and invested it at that interest rate for five years. You’re losing $128 in investments so really, you’re losing almost $2,000 when it comes to how much money you’re spending each and every week. It’s just an interesting way of looking at it.


Tom: Yeah, and that’s a savings vehicle and it’s only over five years. But if you went even further with this to something like seven percent in actual stock investing or through a robo-adviser it would be so much more.

Bethany: The total dollars spent—am I doing this right? Let’s say that our investment percentage is seven percent over the course of 30 years. So, if we kept doing this for 30 years instead of taking that money and investing it for 30 years, over the course of 30 years doing $5 a day, five days a week is $10,944. Almost $11,000. If you invested that you would have gotten an interest rate for that seven percent—the interest rate alone would have been $26,143.12.

Tom:  Wow. That’s a lot of coffee.

Bethany: Yes, that is a lot of coffee. That is a car. That is something big!  Yeah. I don’t know, we’re in America so that could be your child’s education, (we don’t get that for free) it could be taxes. It definitely adds up. But the real cost over the course 30 years is $37,000 you are losing, ultimately.

Tom: Yeah, that’s the opportunity cost of not investing but instead, buying coffees every single day.

Bethany: it just shows that little things are a bigger deal than you initially think.

Tom: One thing I should mention is what we’ll link to that calculator in our show notes so people can find and play around with that because there’ll be people that don’t want to use the seven percent number or they want to match it if they are doing a GIC or savings account. They’ll just want to match it to their percentage in their situation. Another thing I really like with the latte factor is the idea of not just bad spending habits but also bad habits. I think one of the better examples is what if someone was to quit smoking because some people might spend $10 a day just on that.

Bethany: Oh, that’s so true. And you know what I think it comes down to ultimately, is just the discipline you have. If you go back through your life—I know of someone who had a really bad credit score here in America. Their credit score was terrible. They were just having a hard time and they felt very hopeless so they talked to someone, got help and got more disciplined when it came to their credit score and they ended up being able to raise their credit score 75 points just by doing the little things. The consistency each and every day. Being intentional, creating better habits. And that actually translated over to them also losing 75 pounds. When you get disciplined in certain areas of your life it leaks over into all the aspects of your life. And like you said, creating good habits when it comes to giving up smoking. That’s not a good habit anyways. Maybe it’s like going out and drinking with your buddies. If that’s what you like, great. But if you are more disciplined when it comes to that it’s better in the long run for you, your health and your quality of life.

Tom: And this isn’t to say that people can’t have their coffee. When I was going to an office Monday to Friday, I would keep a box of tea in my office. They’ve got hot water on tap so I was having multiple teas every morning and I wasn’t paying a whole lot. I’d buy a big, 144 box of tea bags from Costco and bring that into the office. You can have things just by changing how you come at them. You don’t have to pay at a till every time you want a drink.

Bethany: You can have your tea and drink it too.

Tom: Yes.

Bethany: That is basically what it comes down to. It’s funny, I lived in England for a year and that’s where I really got introduced to teatime. But it was something like every 30 minutes. And I was chill on my tea intake. There were other people in the office that we’re getting 10 cups of tea every day. No shame. You want it, that’s great. That’s great. But imagine paying for that?

Tom: Exactly.

Bethany: You can have your habits but just re-evaluating doing something that’s maybe a little bit cheaper will add up over time.

Tom: Sure the latte factor has kind of got a nice theme to it as a calculator and everything else. But really, it’s kind of just cash flow. It’s cutting out wasteful spending and then using that new-found money to do something with it.

Bethany: Absolutely, because everyone gets a certain amount of money. Like you said, we all have a certain budget. We have what we’re able to spend in a month. And imagine cutting out that every single week and adding an extra $100 to your budget every single week just with coffee. We’re talking about something very small and very little that adds up over time. What if you take a look at your budget and you see some of the subscriptions that you’re subscribed to. For me, I’m subscribed to Netflix, Hulu and Amazon Prime. Thankfully, I don’t have a cable bill anymore. But that’s another thing that adds up. Your cable bill is something you should take a look at. See how much you’re spending on it each and every month. Is this something you can cut back on? Crunch the numbers and see if freeing up this money over here will release the money to be used for something else that works for your ultimate goals. There is a subscription that I had (past tense) that I really liked. It was really cool. You would get makeup every single month and it was really great. It was $10 a month, a really cheap rate. Well, I didn’t use half of the things they sent me. I used one or two every once in awhile but I had all these extra bags that I didn’t need because they came in these little cosmetic bags—I didn’t need those. But I have another subscription over here that is sustainable living. They’re sending me things that will save me money over the long term and be better for our environment. And it’s my favorite subscription and it’s a better return my investment. They’re sending me things like reusable bags. Instead of buying sandwich bags, I use these reusable bags. My husband now uses them every single day. He has a peanut butter and jelly sandwich he takes the work. He uses one of these. We’re saving money in the long term when it comes to how much we’re spending and that will ultimately free up our money down the road as well.

Tom: Yeah, my wife had one of those monthly box things that has all sorts of stuff in it. And you’re right, half of it is awesome and the other half makes you wonder if you need that. So you just end up with the bunch of random junk.

Bethany: Or presents for your friends.

Tom: Good idea.

Bethany: Yeah, I repurpose them as gifts but then I think I should have got them a better gift. I should have just spent the $40 and got them a nice gift they actually want.

Tom: Yeah, she’s canceled that now too. We also did this with our kids. I had a kid’s activity magazine that they’d each get for their age level and they weren’t doing it. So when it came up I said, “If you guys aren’t doing this I’m not renewing it,” and they kind of didn’t so…

Bethany: I’m constantly re-evaluating my subscriptions. Every single month I’m looking at this. There’s one I use sometimes but not other times that I’ll go back and forth to is Spotify. There will be times I’m on a Spotify kick. I may be driving a lot. I don’t have as many podcasts or whatever so I’m using Spotify a lot. Then there’s other months that I’m not using it at all and I’ll just cancel it for that month until I realize, “Oh, miss my Spotify.” And it might be a month or two later but I still keep cutting back on those subscriptions even if I like them. Now, you can’t do that with a cable bill necessarily. But if you’re not using a subscription like Netflix, cancel it for whatever length of time you want. You can always go back to them later.

Tom: People are going to say they want that $5 latte and want to be able spend their money how they want. How did they handle that? Is there somewhere else they can find these wins?

Bethany: Absolutely. I think it’s funny because you’re an adult. You can do whatever you want with your money. I can’t tell you what to do. But I think the concept is beneficial even if you want that coffee or not. Let’s say use a real world example when it comes to something big. Maybe it’s not something so tiny, it’s something big. Something I did for my overall wealth ever since I have had money is I’ve always paid cash for cars, which I understand is not necessarily an option for everyone. But, if I look at the amount of money that car costs—that’s coming out of my account every single month, plus the interest rate you’re paying on that, and if you bought it new… all these things come into factor when it comes to that. That adds up to so much more over the course of time than your $5 coffee would. So let’s look at the bigger things. That’s just an example. Again, you’re an adult. You do what you want. But, maybe another option could be to pay off your car. Just pay off the one you have then keep that car for 18 to 22 months. You’ve already paid off the car. You’ve done it. Let’s say you were paying $350 every single month. Keep saving that same amount you were paying. Keep putting it away. Keep making that work for you instead of paying it to your car. So give it 18 to 22 months to pay off your car and start putting that money away. Then after 18 to 22 months you’re going to have this massive pile of cash so you can now trade in that car that’s paid off. Add that on top of it and then upgrade and drive it for free because you’re not paying interest on that car anymore. You paid for it with cash and now you’re not paying the extra expenses as well. Again, I’ve never had a car payment. And when I go into dealerships they always look at us in amazement because we’re paying cash for our car. Ultimately, I’ve never paid interest on my car, ever. So I think it’s a big win over time.

Tom: I have paid interest and it’s not fun. I love your idea because it’s the exact same commitment. If it’s $350 a month or whatever, you’re earning the interest instead of paying interest so you’re going to come out ahead.

Bethany: Exactly. If you put it in an account that’s earning interest for you that’s exactly what’s going to happen. You’re going to have that interest. I mean, $350 was with your interest anyway, right?

Tom: Yeah.

Bethany: You’re paying that interest anyway. Now you get that interest and it is working double for you.

Tom: Yeah, it’s the exact same lifestyle spending-wise but it’s so much smarter.

Bethany: It’s putting up with an older car for a little bit longer.

Tom: Yeah, exactly. And the longer you can do it, the better anyways. Despite us talking about the latte factor or the Timmy’s factor this whole episode, I do like this idea of big wins more than that $5 coffee. And I’d much more prefer this idea of taking those savings from a car and putting that towards investing. You’d come out even further ahead.

Bethany: Oh yeah, and it could even go further than that. Take your cable bill for example. If you’re paying however much for a cable bill, is that something that you can also make a big win and save that towards something? Hopefully, one day the price of my house maybe! That would be nice to own my house and then start paying myself what I was paying in rent. My husband and I are very tempted. We are very tempted in converting one of those school buses into a house and just hitting the road. We would have a free house. We wouldn’t have to pay rent. One of our ideas would be a big, big win. We were literally talking about it this week—buying a fully renovated school bus which would be about $40,000 with all of the work already done. Then we wouldn’t have to pay rent which is a big chunk of money every month. Let’s move into that school bus, sell all our stuff (or put some things in storage) and then take that however much rent we pay every month, start saving it and maybe we’ll be able to put down 50 to 100 percent for a house. That’s disputed by some people who think you should have some mortgage. But how nice would that be to pay cash for a house and, ultimately, keep working on a better life?

Tom: That would be awesome as long as you can live in a bus.

Bethany: I mean, how long would we have to live in the bus? We’ll keep having that dream of our mansion in Texas… Well, maybe not Texas. But that’s what we talk about because we live in California which has an extremely high cost of living. One day we’d love to have our own house. We don’t want to pay rent anymore. You can get super creative and maybe start renting out that bus or renting out multiple properties. I’m telling you, there are lots of things that this latte factor really can spur on. A lot of great ideas.

Tom: Yeah. So people shouldn’t just throw this idea away because they think it’s all about coffee. It’s more of the concept.

Bethany: So you can have your Timmy’s. That’s fine. That’s allowed. I know you’re addicted to it but it works over time and it’s just a bigger picture, I think.

Tom: This has been great. Can you tell people where they can find you online?

Bethany: Yes. I have a podcast out there. It’s called The Money Millhouse. We talk about personal finances every single week over a cup of coffee. Sadly, not Timmy’s. I wish it were. I also wish we had those donuts too but is where you can find us. And we’re all across social media in the same name as well.

Tom: Great. Thanks for being on the show.

Bethany: Thank you, Tom Drake.

Thanks Bethany, for stopping by to discuss the latte factor. You can find the show notes for this episode at Have you just started listening to the Maple Money Show recently? Then be sure to subscribe in the podcast player of your choice and check out some past episodes. We’ve had some amazing guests in the past that you shouldn’t miss. Thanks as always for listening and we’ll see you next week.

“I’m constantly reevaluating my subscriptions. Every single month I’m doing this...there are times when I’m on a Spotify kick, and other months I’m not using it at all...if you’re in a month where you’re not using Netflix as much, cancel it. You can always go back later.” - Bethany Bayless Click to Tweet