The road to riches right in our pockets

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The road to riches right in our pockets


Want to be rich? It’s easy: Don’t spend a dime.

Ask everyone who has built their own fortune and they tell you so. Frugality is their common trait.

They track their spending down to the coins in their pockets. They live by the adage that a won saved is a won earned.

Dreaming to be rich while spending liberally is like hoping to lose weight while eating whatever and however much you want.

Of course, even the biggest Scrooges have to spend something. But the wealthy and wise know when to spend and when to refrain from spending. Unlike most of us, they do not open their wallets for unnecessary luxuries. For them, thoughtless expenditures do not exist.

“The latte factor” is an expression coined by investment guru David Bach. It refers to the fact - which should be obvious - that regular spending on small purchases can add up to a huge amount of money over time.

Cutting back on that daily mocha or latte could translate into big savings at the end of the year. Financial planners advise clients to remember the latte factor if they want to build wealth.

Apple’s app store has a latte factor app that tracks spending to help cut down on frivolous purchases. Once you type in expenses, the app calculates average expenditures and shows how saving that money can add up over various time periods. The app would be indispensable to anyone who wants to get a start on the path toward riches.

South Korea has a wealth of coffee shops. Coffee shops and coffee chain outlets numbered 12,381 at the end of last year, up 54 percent from the previous year, according to KB Financial Group.

One wonders if so many are necessary, but coffeehouses in popular districts are often packed with young people. They will skip lunch or eat ramen, but they cannot forego spending 5,000 won ($4.38) on a venti cappuccino.

Whenever I take a sip from a coffeehouse drink, it leaves a bitter taste that is not entirely from the coffee.

Coffee lovers say they would not compromise on their daily luxury. People are free to make the own choices, but it is ridiculous to charge 4,900 won for a latte. It is even more ridiculous to pay it.

“Saving has nothing to do with income and everything to do with lifestyle,” says Bach.

With individual debt at historically high levels, we would do well to seriously consider the implications of the latte factor for ourselves as individuals and society at large.

* The author is an editorial writer of the JoongAng Ilbo.

by Bae Myong-bok

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