The Latte Factor; A Millionaire’s Investment Strategy

What seems like forever ago I was sitting back in my desk pencil in the right hand scribbling in the margin of my three-ring notebook whilst listening to three cheerleaders talking about some “special trick” they were planning on practicing tonight at practice for the BIG GAME next week. While they talked about the “special trick” the four guys at the back of the room were also talking about the homecoming football game next Friday night and what their chances of winning really were as they were playing their inner conference rivals the Bear Creek Bears.

Today instead of doodling in my notebook thinking about a football game that I may or may not attend due to my financial situation, I’m thinking about the younger generations coming up through their formative years and how we can teach these young people how to be financially independent. So that they will never have to worry about money, today, tomorrow or in their retirement.

Over the past decade I have read multiple investment books about retirement planning, investment strategies, how to pay down debt, and get out from under the financial constraints of everyday living.

Literally if we teach the next generation about the fundamental principles of investing and finance then that entire generation could be millionaires with a little bit of effort.

The first book I would highly recommend a young person read is taught through a simple story called The Latte Factor. This book would be perfect in the hands of Junior High School kids and the concepts within it could be passed along and discussed in High School classrooms. These young minds could literally be graduating and departing their schools armed with the knowledge not only to be successful in chasing their dreams but having a successful financial well-being.

The first step in building a successful regiment of younger generation is to teach them about building a strategic portfolio and how-to invest in themselves financially instead of spending that extra $40 per week on a diner out with friends, or going out to the movie theatre, or drinking beer at the next homecoming football game, or buying another ultra new-fad t-shirt online.

The Latte Factor is written by David Bach and John David Mann, and is an easy read about a young woman in a city who everyday heads to a local cafe to purchase a coffee before she heads to work. Whilst in the cafe she spots a photograph that in her mind is too expensive as its priced at $500.00 “that’s just too expensive for a photograph” she muses at one point in the story. The owner of the cafe who happens to be hanging around the cafe over hears her talking to herself about the photograph. He engages her in conversation and over several visits to the cafe he eventually informs her about The Latte Factor. And the simple principle that you have more wealth than you think you do, if only you understand simple principles around your finances. Like how much overhead you have, the amount of money you are earning, where you are spending your money and where you can cut back on your spending.

Another awesome thing about this book, is the authors share with the reader in their Appendix a set of tables, charts and information about investing at different ages of life. And the longer you hold out on investing the more demanding investing for your future becomes. For example a younger person in their twenties only has to invest around $100 per month to earn that millionaire title, whereas a person in their forties would have to invest 10-times that amount or a $1,000 per month and the older you get the more money you must invest.

The final sentiment in The Latte Factor says “Now, go put this little book to work in your life…” it’s not too late to start investing in your own portfolio nor is it too late to begin teaching these principles of financial wealth to the younger generation. For myself this means spreading the good word about investment strategy to those around us with kids aged 5-years old up to 25-years old.

The table that exemplifies financial wealth and beginning at an early age is a table called “The Time Value of Money” on page 133. And this table demonstrates the investment strategy of two people; They named their people: Susan and Kim.

  • Susan
    • Starts investing at age 19
    • Invests $2,000.00 per year
    • Receives 10% annual return
    • Stops investing at age 26
    • A total of 7-years of investing
    • A total of $14,000.00
    • Without adding any more money and letting it build over the next 39 years
  • Kim
    • Starts investing at age 27
    • Invests $2,000.00 per year
    • Receives 10% annual return
    • Stops investing at age 65
    • A total of 39-years of investing
    • A total of $78,000.00
    • She has added year after year $2,000.00 until retirement
    • and earns… $883,185.00

Two investors, both had the means to begin investing at age 19 but chose different investment strategies.

The difference at age 65 years old is $213,963.00

The Latte Factor by David Bach and John David Mann
Appendix: Charts page 133 “The Time Value of Money”

The underlying principles taught by David Bach and John David Mann can be accomplished by anyone willing to invest their hard earned money in themselves and compound interest. Following these simple principles about investing and learning how-to budget your money can make you wealthy beyond your wildest dreams.

~ Aaron JacksonCrabb

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