I have future expenses and goals that I know will cost me a good chunk of money, but I can’t say I'm fully confident that I will be able to fund it all. I hope to be an entrepreneur and live a lavish lifestyle, but all that involves great deals of money. Soooo, one day on my walk around Indigo in the summer I picked up a book called The Latte Factor. It caught my eye automatically for 2 reasons. #1 the book had a cup of coffee on the cover (I love lattes) and #2 in bold letters the cover stated: “why you don’t have to be rich, to live rich”. I WANT TO LIVE RICH! So of course I had to give it a read. I think the book had lots of good advice on how to reach more financial freedom, and my Sauder Business Brain was definitely stimulated. So basically, I will be sharing 3 tips to help you and myself gain more financial freedom.
The book is about a girl named Zoey who works as an editor for a travel journal in the One World Trade Centre in NYC. Zoey is still pretty young making an average livable salary, but has lots of expenses including high NYC rent, student loans and day-to-day living expenses. One day while complaining to her boss (who's secretly her best friend) about her tight financial situation and outstanding payments on her credit card, her boss advises her to speak with Henry. A man who works at Zoey's favourite Brooklyn coffee shop. Zoey goes to this coffee shop religiously every morning, prior to work to grab a latte and stare at a print on the wall featuring a beautiful ocean-side view and sun. She dreams of one day owning the print, but at a high price tag of $1 200, it's a purchase she can’t fund.
So, after building up some courage Zoey takes the advice of her boss and asks to speak with Henry. Henry is an older man who automatically takes Zoey under his wings and starts to share the basics of achieving financial freedom. They speak over days but this is a basic rundown of what he tells Zoey.
Henry explains that there are three ways of achieving financial freedom.
Pay yourself first
Don’t Budget, make it automatic
Live rich now
So let's begin with: Pay yourself first
To pay yourself first you have to view your income as a time clock. If you work from 9 to 5 and you are rarely saving, your pay outflow probably looks like this.
9 am to 11:30 am - Money straight to taxes
11:30 am to 2 pm - Mortgage or rent
2pm to 3pm - Transportation costs
3 pm to 5 pm- Everything else (student loans, entertainment, groceries)
So, as you can see by the end of the day nothing is left. It's all been distributed towards needs and some wants. But if you want to start actually saving money, the first person who receives from your pay outflow should be yourself. And when Henry explains this concept he doesn’t mean money that gets spent right away on new shoes, but instead money that goes straight into savings account for yourself. “When you pay yourself first, what you are really doing is putting yourself first.” Realistically, you need to be selfish, and put yourself first before paying others. I am a big believer in spending money on experiences and items that might excite you, because we all are here on earth to live a happy life, and you never know when that might end. So you should always live in the moment. But having some money saved for big purchases, vacations, or to have as a safety net in moments of emergency is also heavily important. So put yourself first, and pay yourself first too (SAVE YO COIN SIS)
You have to switch your clock to look like this.
9 am to 10 am - money to saving
10 am to 12:30 pm - Money to taxes
12:30pm to 3pm - Mortgage or rent
3pm to 4pm - Transportation costs
4 pm to 5 pm - Everything else (You might have to find ways to cut some unneeded expenses)
This simple change should result in gradual gains. Henry also mentions that “each one of us was put here to do something special, but most of us are not doing it - because we are too busy paying everyone else first, paying yourself first can be the most powerful force” We all got dreams, vacations and general purchases that can support us in meeting our own individual life purposes, so let's make that happen by paying yourself first. After you get your paychecks, make sure to set aside a specific percentage each time for yourself, regardless of how small that percentage might be. Say you work 5 days a week at an hourly wage of $20. You should be saving $20 every day, which is $100 a week ($20 x 5) and $5 200 a year. That's honestly a pretty solid chunk of money you can keep for yourself in a year.
Ok, so let's move on to Henry's second point: “Don’t budget, make it automatic” Budgets can be pretty tedious and hard to follow. “It's because they’re not fun and because they work against people rather than with them.” I think following a strict budget can be very restraining, and hard to grasp. So, there are small changes you can implement to find ways to start budgeting subconsciously. First of all, you could set up a simple save on your bank card. Most banks offer the option to set up an automatic transfer (for no cost) to your savings account, every time you use your debit card. For example, If you go into your bank you can ask them to set up a feature that allows you to have $2 sent to your savings account from your checking account, every time you use your bank card. This is one way you can automatically start building up your savings account.
That's just a personal tip I have from working at TD, but another way you can automatically start saving without budgets is to figure out what your “latte factor” is. In the book, Zoey spends around $5 on coffee every morning, but this is a daily purchase that could easily be avoided by making a good cup of coffee at home. So consider what your daily or weekly latte factor might be. A small expense that you can cut back on. In Zoey's case, a coffee before work costs her $1300 a year.
That $1 300 definitely contributes to a feeling of joy, but at the same time, if you are working towards saving for a trip or a life event, that's a big chunk of money that can help you reach your goals. So consider what your latte factor might be, in my case I think I'm very similar to Zoey with the daily latte or matcha. This is about giving up something small to get something big. “The solution to your money problems is not more money, it is rather new habits - with that little shift you can change your destiny”
Let's move on to Henry's last major piece of advice: "Live Rich Now"
I’m sure we all can’t wait to one day live a happy, lavish life. But we gotta start living it in the present. We should live life in a way that we won’t regret, and filled with things and experiences that spark joy. We gotta Mare Kondo this life of ours.
So just some tips. Live life how you dream to live it now, and on your own financial responsibility. Henry emphasizes being your own source of financial freedom always, and not waiting for a prince charming to make your financial dreams come true. Cause gals let's be real here, we really can’t trust any guy these days, so take control of your finances now and into the future. But for real, if there are experiences you wish to live, make them happen. Set up a plan for yourself to make your dream a reality. You can honestly achieve your goals at any pay scale, because in retrospect the more money you make typically results in bigger spending habits, so more money doesn’t equate to more savings. So make what you crave a reality now, despite your current wage.
Ok, so let's move to the final remarks.
These days saving accounts don’t offer a very high-interest rate, it just keeps up with inflation. So be smart with the way you save money, and a great way to do that is with blue chip stocks. These stocks are reliable, as they will typically always make you money in the long run. As annoying as this sounds the market always corrects itself, and always goes up over the years. So the returns you can get from investing in a well-known, popular and timeless corporation filled with innovation, can rarely do you wrong. And the returns can be over 10%, something a simple saving account could never provide. I won't spill too much more information, I think everyone should read this book as there are so many more cool facts, and twists and turns that the book offers. It's also a very short read which is another reason you should read this book.
Ok, that’s all. Let's make those financial dreams a reality, and let's live rich :)
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