Latte Factor vs Saving on the Big Things

If you read personal finance magazines, books, and websites (especially topics like financial independence and retiring early (sometimes called “FIRE”), etc.), you have probably seen articles about how much money you can save by consistently saving on little things, like your daily coffee.  One personal finance guru has an online calculator.*

Then there are others who say don’t sweat the small stuff and focus instead on the big things; instead of wasting your time trying to save money by modifying your coffee habit, you should save money on your car and house.


The “Latte Factor” is one presentation of the little-things-add-up-to-big-things philosophy.  “Watch the pennies and the dollars will take care of themselves” is another way to say it.  This way of thinking has plenty of proponents, myself included.

As mentioned above, you’ve probably also seen articles about how much you can save on the big things.  At least one expert (which is to say, someone who has written a book and sells it on his website) says, “forget all that little stuff, I’ll show you how to do big things and once you do them you won’t need to worry about the little things” [my paraphrase].  Save on the big things, and you won’t have to worry about the little things, the thinking goes.

So, we have a debate: Which is better?  Saving money by consistently reducing or eliminating spending on a small purchases (e.g., fancy coffee like latte that you might purchase 200 to 250 times per year) … or … saving money on a big purchase (e.g., a car or your house that you might have only several times in your life) and the semi-big expenditures like cable television, telephones, and credit-card interest?

It seems to me, it’s not an either-or proposition.  There’s no reason you can’t save on both the small things and the big things.  In my opinion, saving on the small things is good training for saving on the semi-big and big things.  Kind of like in professional sports, start in the minor leagues and then move up to the majors.  It reminds me a bit of the sentence in “The Richest Man in Babylon” where Arkad says, “If I set for myself a task, be it ever so trifling, I shall see it through. How else shall I have confidence in myself to do important things?”

Set yourself the task using your habits of frugality, efficiency, and economy to save money on the small things and you’ll find you can also save money on the big things.

* I’ve experimented with the calculator at and have found that the weekly and monthly calculations do not match (aren’t even close) to results I get with other online compound earnings calculators.  However, the daily calculations are consistent with other results.


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