The Latte Factor Book Review: 5 Free Lessons To Improve Your Finances

The Latte Factor Book Review

The Latte Factor Book Review

I recently read this little gem of a book by David Bach.  Then I picked it up and read it again.  I knew I had to read it more than once to get the most out of it.

And I’m glad I did.  There were definitely more nuggets found the second time around.

The Latte Factor is a fictional story that illustrates financial truths.  The author teaches us simple but profound lessons about what it means to be rich, and how to reach your financial goals while staying true to your values.

Most people don’t believe they can live a rich life today without making more money.  If this is you, then The Latte Factor is a book you could learn something from.

After reading it twice, here is my Latte Factor book review, including 5 lessons I learned to improve my finances:

  1. You’re richer than you think.
  2. You don’t need more money, you need new habits.
  3. There are 3 secrets to unlock for financial freedom.
  4. Don’t believe the money myths that hold you back.
  5. Wealth is not just for the wealthy.

1.  You’re richer than you think

David Bach, the author, tells a story through the life of Zoey, a 20-something college grad who works for an advertising firm.

Zoey finds herself at a stage in life where she starts questioning the direction she’s chosen.  She has a good job with decent pay, she’s able to support herself, and she enjoys the work she does.

But she starts to wonder what else is out there.  Every time an opportunity comes up that appeals to her, she immediately rejects the thought because she believes she can’t afford it.

Buying a coffee Latte Factor

She meets Henry, who works at a local coffee shop she goes to every morning.  Through this friendship, Zoey starts to see her financial situation through a different mindset, and Henry helps her understand that she has enough money now to live the life she wants.

This is where the “latte factor” is introduced.

In Zoey’s case, her morning latte was keeping her from realizing that she actually could afford a rich life.

And no – not rich as in having more money than she knew what to do with – but rich as in experiencing fulfillment and joy and purpose in her life.

The latte she paid for every morning, as well as a breakfast muffin, salad for lunch, and takeout for dinner added up to a significant amount over a month’s time.  She just didn’t see how these expenses were draining her income on a day-to-day basis.

And stealing her dreams.

Sometimes we can get stuck in an endless loop of wanting more, but denying ourselves because we think we can’t afford it.  We operate in the limiting belief that we’ll never get ahead unless we make more money.

It’s when we start being purposeful about our time, our money, and our habits that our eyes are open to the possibilities available to us in our current circumstances.

Getting clear on our priorities gives us the focus necessary to know what we’re willing to sacrifice.

The next time you tell yourself I can’t afford it, stop and think if that’s really true.  Are there small, insignificant expenses you could cut out of your normal routine in order to save for what’s really important to you?

The key to living rich today is lining up your spending with your values.  Get specific on what’s important to you, so you can start being intentional with your money.

If you’re willing to make adjustments in your habits, you’ll find you can afford a rich life today.

2.  You don’t need more money, you need new habits

At the beginning of the book, Zoey is offered a job that offers more pay but less freedom.  She knows the position would require longer hours than her current one, but the pay increase seems like the only way for her to get ahead.

However, she loves the company she works for and the people she works with.  She is conflicted throughout the story about whether she should take the job offer or not.

Her new friend Henry sees in her something common to most people:  the belief that more money is the answer to money problems.  Zoey thinks if she just had a higher income, then she would be able to pay off her debt and afford the things she wants.

Henry challenges her to think differently.  Instead of waiting for something to happen in the future, he tells her to take control of her actions today.

New money saving habit Latte Factor

She doesn’t need more money to live rich, she just needs to build better habits.

After Zoey confesses that her past raises never seemed to help much, she starts to understand what Henry is saying.  Earning more doesn’t automatically mean saving more.  In fact, when most people get a raise, they increase their cost of living along with it.

So, just making more money won’t get you out of debt, or increase how much you save.

It’s not the amount of money that needs to change, it’s what you do with the money that matters.

And if what you’re doing is always leaving you broke, then you need to do something different.  You need to change your habits.

It really is that simple – but it’s not easy.  Changing your habits is harder than getting a raise.

After all, your brain has gotten very comfortable with the financial decisions you’ve been making since you were old enough to get a job.

Habits require time, practice and intention.  Think about the habits you have today that are keeping you from living the life you want.  Impulse buying?  Eating out?  New shoes?  That morning latte?

When we spend money without considering the long-term consequences, we’re choosing to perpetually delay our goals in life.  And it all comes down to the small, unproductive, insignificant choices we make with our time and our money.

You have the power to take control of your actions and choose how you respond to the circumstances around you.

Stop waiting for more money, and start building better habits.  Ones that will work for the future you want instead of against it.

3.  There are 3 secrets to financial freedom

Okay, so let me rephrase that.  I learned that the author believes there are 3 secrets to financial freedom.

But let me clarify.  I don’t believe financial freedom is unlocked with secrets, and whether or not there are only 3 is anybody’s guess.

With that in mind, let’s just go with it.

Here are the 3 secrets to financial freedom, according to David Bach:

  1. Pay yourself first
  2. Don’t budget; instead, make it automatic
  3. Live rich now

Probably not what you’d expect, eh?  I mean, there’s nothing about investing – and budgeting is even discouraged!  What the heck?

Vacationing couple living rich now Latte Factor

But if you read the book, you’ll see the wisdom in all three.  In fact, the first secret is the only financial advice my parents ever gave me.

In the book, Henry helps Zoey break down the value of her time as a paid employee of an advertising firm.  For every hour she works, there is an amount of income that goes toward an expense.

So, maybe the first 3 hours will go toward rent, the next 2 hours will go toward food, and maybe an hour to pay for the subway.  She is trading her time for money, so she can afford a lifestyle.

He explains that her income is like a pie, and the hours she works are like pieces of the pie.  There are big slices (like rent) and small slices (like coffee).  And when she gets paid she serves up all the slices to everyone asking her for part of her income.

But she never serves herself, because after she pays everyone else there’s nothing left.

And this is why over half of Americans have less than $1,000 in savings.  They never get around to paying themselves.

Reality is, if you don’t pay yourself first, you probably won’t have any left to pay yourself later.  There’s too much left to chance and will power, which are usually never in your favor when it comes to money matters.

The best thing to do is pay yourself first.  A great way to accomplish this is with payroll deductions to a 401k.  Or automatic transfers to a savings account.  Either way, put that first slice into some type of interest-bearing savings account before you start serving everyone else.

You’re not only paying yourself first, you’re putting yourself first.

The second secret helps you get the first secret done without any need for discipline or will power.  Automate your savings so you never see or touch the money.

Don’t even “budget” your savings – just learn to live off of what’s left after it’s taken out.

If you put your savings on automatic, you’ll never miss it.

When you implement the second secret, you unlock the third one.  Learning to live off a portion of your pie will not only allow you to save for retirement in the future, but also for those things that bring you fulfillment in the present.

Once you get your retirement account rolling, set up other savings accounts for short-term financial goals.  Maybe start a vacation fund, or a hobby account.  Then schedule automatic transfers regularly so you can start living the rich life today.

4.  Don’t believe these money myths

Your beliefs surrounding money are typically shaped by your upbringing, experiences, and culture (among other things).

The money mindset you end up with in adulthood is often a subconscious belief system that affects your attitude toward money in major ways.  Some good, some not so good.

These beliefs can be so ingrained in our minds that we don’t even question them.  We just accept them as truth, and we allow them to guide our expectations and behaviors.

The problem is, sometimes that belief structure is sitting on a foundation of untruth.  This is what the author refers to as “money myths”, which can keep us from achieving financial freedom if we believe them.

In the book, Zoey confides in her boss that she would love to buy an art piece hanging on the wall of the coffee shop.  In Zoey’s mind, she can’t afford it – or any other “luxury” for that matter.

Woman supporting herself Latte Factor

She admits that all the recent financial advice from her new friend Henry has been difficult to accept – especially since she found out how wealthy he is.  Taking guidance from a millionaire seems a little ridiculous to her, considering she can barely make ends meet.

Her boss has heard the “can’t afford it” excuse from Zoey before, and recognizes that Zoey is stuck in a false mindset.  She challenges Zoey’s beliefs by identifying three money myths that keep many people from achieving financial freedom:

  1. If you make more money then you’ll be rich.
  2. It takes money to make money.
  3. Someone else will take care of you.

The first myth was mentioned in the second lesson listed above.  More money doesn’t solve your money problems, which means it certainly won’t make you rich either.

You must focus on your money habits and mindset instead.  Once those are in line with your values, you can live a rich life without needing a higher income.

Another myth that many fall for is that you need money to make money.  Zoey’s boss tells her that she doesn’t need a huge chunk of money to build wealth.

Small adjustments in her daily spending habits can result in enormous savings – enough to even make her a millionaire someday.  All it take is consistency, time, and compound interest – and the earlier she starts, the better!

The last myth is typically associated with women, but these days men fall for it, too.  However, women are more adversely affected by it.

This is due to a variety of factors that the author brings up through the story, including how women earn an average of 20% less than men, but typically live 7 years longer.  Women also take off several years to raise kids, and half end up in divorce.

As women, we cannot afford to rely on someone else to take care of us. 

We must sift through our mindset to purge any limiting belief that keeps us from taking responsibility for our own financial future.

If you’re married, have a plan for how the survivor will be financially supported when the other dies first.  This is just the responsible and loving thing to do for your partner.

If you’re single, make financial choices based on your ability alone to support yourself.  Take full responsibility for building your own wealth, so you never have to rely on someone else.  Then when you do meet your Prince Charming, financial security won’t be a factor in your relationship.

5.  Wealth is not just for the wealthy

This was probably the most encouraging lesson of all for me.

Anybody can build wealth.

Woman with cash Latte Factor

Regardless of your age, your debt, your background, your anything.

It doesn’t matter where you’re at in life, you have the control to create better habits, change your mindset, and choose to respond differently to your circumstances.

You have everything you need – right now – to change your future and your legacy.

The key is in knowing what you value.  Because once your financial decisions reflect what’s truly important to you, your life will start to shift.

You’ll feel a new sense of peace.
You’ll have a renewed sense of purpose.
And you’ll start believing that you really can live rich – but also build wealth.

As Zoey considers all that Henry has shared with her about living a rich life, he reminds her of a simple but significant truth.

Each of us is put here to do something special, but most of us aren’t doing it.

I truly believe this, and that God does have a unique purpose for each individual on this earth.  If we are chained to debt and held captive by limited beliefs, we’ll never fully experience the fullest life He has for us.

Financial freedom is not just for the sake of having enough money to buy whatever you want.

Even more so, it allows you to live freely the life you’re meant to live.

The Latte Factor book review summary

The Latte Factor is a quick read but packs some powerful lessons.

In a nutshell, these are the top 5 tips I got out of reading this amazing book:

  1. You’re richer than you think. If you’re willing to make adjustments to your habits, you’ll find you can afford a rich life today.
  2. You don’t need more money, you need new habits. It’s not how much money you have, it’s what  you do with the money you have.
  3. There are 3 secrets to financial freedom.  Unlocking all three will help you achieve your biggest financial goals.
  4. Don’t fall for the money myths.  Creating a healthy money mindset is just as important as using smart money management.
  5. Anybody can build wealth.  You already have everything you need to change your financial future.

I hope you enjoyed The Latte Factor Book Review.  I encourage you to apply these important principles to your own personal finances so you can start achieving your financial goals!

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Lessons From Latte Factor Book

The Latte Factor Book Review: 5 Free Lessons To Improve Your Finances


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