62. Start Late Finish Rich

By: David Bach

Kim and I have decided that one of our goals for 2008 is to put some of our financial ducks in order, and so we used a christmas gift certificate to Borders to get a bunch of financial advice books. This is the first one that I read, and it has some pretty solid advice. A lot of it is obvious advice that is said in a very creative way, but more importantly, a very specific way. For example, he discusses something that we all know, that spending money on little things you don't need adds up. However, he shows you exactly how this works (he calls it the latte factor based on the following example which i took from his website):

$5 per day (the average cost of a latte and a muffin) x 7 days = $35 per week

$35/week = $150/month

$150 per month invested at a rate of 10% annual return =

1 year = $1,885
2 years = $3,967
5 years =$11,616
10 years = $30,727
15 years = $62,171
30 years = $339,073
40 years = $948,611

And the point isn't of course if you don't drink coffee you can make a cool million, but rather if you look at your expenditures and figure out a way to cut out $5 a day, it will add up in the long run. The 'latte factor' is one of the strategies that Bach uses to explain how to save- he also talks about a diversified portfolio, and offers very specific actions and steps to take (which is perfect for us, since its not something we have a great deal of knowledge about).