The Latte Factor: How It Works
Zoe Daniels in. The book Is 27 years old. She lives in Brooklyn. She commutes to her office at the Freedom Tower which replaced the World Trade Center. She's a travel editor. The only thing is she doesn't travel. She comes to new york six years later, she's kept making more money, but she's spending more money and she's not getting ahead. And she asked herself what is she doing with her life and she's not sure she goes to lunch with her boss and she starts talking about because what's wrong? She starts telling her about these things that she wants and she's like but I can't afford it, which is a very common thing that were raised with mom. Dad, I want this milk can't afford it. Super bad thing to say to your kids because it embeds them to believe that you'll never have money. She says, you know, you need to go meet Henry and Henry walks her through this idea that you know if you can afford that latte, you could actually afford this picture on a wall that represents your dreams. She wan...
ts that picture because it represents the life that she writes about. But she doesn't have, he starts saying to her, you know what, you could afford this if you just cut out the coffee and he's like you don't have to give up the coffee, it could be other stuff. And he walks her through the metaphor, he says you're let me give you just an idea, just kicks go home and break down where you spend money and then added up and see if you cut things out of what would be worth? So she goes home that dad, She writes down her morning lattes for 15. Her muffins to her juice because she goes and gets the juice break. Truth be told guys, I'm actually lowering these numbers because these are national numbers. None of this is what it costs in new york, new york, you go juice. It's 10 bucks to 12 bucks. You can go get a latte in Manhattan by her office because I know because I live down there and it's 6 50. The muffins are 50. But I wanted to make national average numbers. She gets bottled water to buck 50. There's nowhere you're finding bottled water in most places in Manhattan for a dollar 50 right? She goes and she totals this up and it's $29.75. And she goes, Okay look, just for kicks, if I take this dollar amount, what could it be worth? So she takes $30 a day, Times five which is 150 a week, Times 52 weeks, $700 per year. She runs it through a calculator in 40 years is worth $4,110,000. And you guys have read the book. She was she can't believe it actually. She was like, what? How could this be? Because she's not using her for one K. Plan. She hasn't saved any money in six years. How could this be? So she's so she reruns number. She's like 10% of the boy. But what if I can't get 10%? What if I could only get seven? So she runs him again. She has $1,076,000. What if I can't get seven? What if I could only get five, 991,000? She closed her laptop and she's like, wow, I have to figure this out. Maybe there's a way for me to do this. This is an actual picture inside the book of the latte factor. Have these little mugs, but this is just showing you the math and I know that one's hard to read. So let me just show this to you one other way, $5 a day. Starting in your 20s by retirement at 10%, $10 a day by retirement. 189,889, million $30 day again, back to that number. Crazy. Right? These are unreal numbers. So you just got to pick your number and figure out where it's coming from. So look, could be coffee. I'm a coffee drinker. I can't start my day without coffee. We have another cup of coffee at our break today. I add two cups this morning, but I either drink it free cause it's free here today, right? Or it's free at the office Or it's 20 cents at home. I posted that video you guys saw me do on facebook where I'm like, I'm going to go to the airport and you saw me pour my coffee into my to go cup And I joked and like, so this cost me 20 cents and now I'm all set now I'm getting line at Starbucks at the airport. Maybe it's not coughing, maybe it's bald water never. Has there been a bigger marketing gimmick in the world than ball water Aside from the fact that the planet plastic is killing the planet and killing animals in the ocean to this day, water is still free When I started teaching in 1994, Water was a $1 billion dollar a year industry, It's now in the us over $ billion dollars cigarettes. I really wanted to have packs cigarettes here but they said they couldn't do it to create a lot. But I wanted like a table with them because people still smoke And a pack of cigarettes a day. Like I think in New York now packs $15 a day, People spend $ a month on cigarettes, forget the fact that cigarettes kill you and smell if you took the money instead of buying cigarettes and you put it into Philip Morris Yeah, I love that you're laughing. But look, no one's millions of people are never gonna stop smoking. So if you could be smart enough to stop smoking then by the fillmore stock, I don't even feel more stock. I'm against it but own or if you're not gonna stop smoking then buy the stock right? Like if you're not going to stop going to Starbucks by the stock in the latte factor, the mentor whose name is Henry, take Zoey to Starbucks and starts to teach her these lessons and says, you know Zoe when Starbucks went public, if you put $ in the stock today would be worth over a quarter million dollars. Cars. I'm gonna show you a little bit here. Car slide. Um This is the number one place that people waste money. It's also, it's not just little stuff, it's big stuff. This is bottled water numbers also in the book. I use the dollar as an example, but just not having bottled water. 40 years could be $189,000. Here's here's cigarettes, pack a day, $7 dead and use the new york numbers $7 a day in 30 years. Could be a half a million dollars. $404,000. What if I can't earn 10%,, Let's use $25 a day at 8%. 20 years is 294, 30 years 745,000 40 years. It's $1,745,000. I know the numbers are starting to, you could even be glazing over. The reason I'm doing them over and over again is to drill it in. Small amounts of money can change your life. What's happening out there is that you're hearing That you need some, there's another person, I totally disagree with her, said you need $5 million dollars today to retire. Like you know we have a lot of guns in this country. Why don't you just tell people to go kill themselves right like six out of 10 people don't have $1,000 in savings and you want to go on TV and tell people they need $5 million dollars to retire. Just just have everybody go and shoot themselves like That's not what you do not want to be thinking. You need $5 million, retire. What you want to be thinking is what do I need to save the day? You could be thinking of daily dollar amounts, Is it $5 a day? Is it $ a day? Is it one hour day of your income because that's what will change your life and over time it will really make a difference. I want to help you find your latte factor so there's a form in the back of the book to track where your money goes. Use the form, Track your expenses, run the mouth and get started so the form looks like this and all you do is track where your money is going for a day. What did it cost you, Did you waste anything? Take the dollar amount added up, then go run a calculation. Latte factor mouth right down one day, one month, 1 year, one decade. Just run the math, then go out just like I'm showing you and run it at 10 years, 20 years, 30 years and 40 years. Here's the thing the first decades number for a lot of you. It's not gonna, you're not gonna get excited. Even when I was with chase earlier day that first you're really gonna be 1st 10 years, it's gonna be somewhere between 50 to 100 g. It's not a million dollars because You typically don't make $ million dollars by investing in a decade. It takes 2-3 decades. It takes decades to build wealth. Not days. I know it's uncomfortable in this room right now because what I'm saying to you is real. You have got to save yourself first. That means pay yourself first. You need to become financially selfish. You must keep an hour a day of your income. I'm going to go through when we come back the retirement vehicles that will allow you to do this. You cannot listen to the critics by the way. Typically the critic is poor. I've never met a rich critic quite frankly. So you need to get your tips from real people who have become millionaires on an ordinary income. Everything I've always taught is based on that philosophy. I want you to run the math yourself. I want to give you a calculator that you can use to run the math. This is the calculator that I use investor dot gov go to investor dot gov Put in compound math calculator, this is at the very bottom of this page and you can run calculations all day long and there's lots of different ways you can run them. And I will tell you, you put an initial investment, multi contribution length of time, estimated interest rate, how long and then you can decide you want to compound it daily, monthly or annually. Most compound interest charts are done monthly if you're investing monthly, but you can run either number annually will give you the lowest number monthly. We'll give you the second number and daily will give you the highest number dailies. Unrealistic because most people don't invest daily most investment monthly. Um, here's another calculus on my website, go to the latte factor dot com. There's that, the logic of calculus on there. And also there is um, that tracking sheep, here's a great app. This is my favorite app to track where your money goes. Is clarity money. The moment this app basically launched, I liked what this app because it's all phone based. I like what this app does is you put in your credit cards, your bank account. It will show you in minutes where all your money is being spent all the time. And I'll remind you we're spending money. It will also show you what you're doing with subscriptions. So subscriptions and then you signed up for this monthly netflix phone, some box of goodies being shipped to you. It summarizes them when you see it summarized it will depress you because those are all people that you're paying first before you automatically. And a lot of it you're not using the good news is because it's on your phone and we're all on our phones all day long and you can get reminders and you look at it. There's also little buttons where you can go click and unsubscribe companies hate this but it's the fastest way I know to reduce your expenses is to cut all these fixed all these monthly little things you signed up for. I see people all the time. They have $2, a days. And this little chart I called the double eight factor. You start to look at your monthly expenses and you look at ways you can cut and save them. Like here's a real example of somebody who we went through expenses. She was paying $80 for cable. We got her cut to 40. She had premium cell phone plan. We took her from 70 to 30. She had gym member. None of these things do we end gym membership 140 dinner is out. We cut how many times she ate out entertainment. We cut that down Just by making those changes not giving anything up. She saved $540. So go check out clarity money dot com. Uh do you know reminds really going another website, Mint dot com. I used to use mint dot com and recommend mint dot com until clarity came out clarity. I became full disclosure and investor in clarity because I liked it so much and brand ambassador for them and advisor, uh, we did sell the company to Goldman Sachs now owned by Marcus, which I'll show you a little later there inside the app, you can actually then put money right into a money market account Which is one of the highest paying money market accounts in America. It's like over two point I think it's 2.2% right now. Your bank count zero and Marcus is 2.2%. Um, there are other companies that can help you cut your expenses. Here's a website called ask trim dot com. Again, it'll go through what you're paying for and show you ways to get better deals. Here is the website I just talked about for the high paying money market account 2.25% on savings rates. A complete no brainer. Like you've got your money to be encountering zero and you can put it with Goldman Sachs and get 2.25%. It's a no brainer. It's liquid. You can put small amounts of money in here and they're not the only ones like I I don't want to seem like I'm selling anything like there are there are tons of these like here's bankrate um and you can go to bank rating, you can compare rates, but like has anybody here ever heard of B. B. V. A. How many of you have heard of Goldman Sachs? So that's how I work. Like do I know who these people are? Um So you don't necessarily have to have the highest rate, but there's a great website. Bankrate, compare money market rates. This is my favorite way to invest. Your change, literally. You can do change round up. So like you go spend 50 at Starbucks, you can set it up where the next dollar 50 gets rounded up and put into an automatic savings account, you can invest a dollar in a diversified portfolio on Acorns. So Acorns is an app, you download the app and in minutes you can be investing small amounts of money. Now you tell your story because you invested in Acorns the last time I was here, uh I started to use it and round up those monies. I think I've rounded up over 1100 times plus put $20 a month in there and it's yielded over $1,300, give her a round of applause. So that's probably 18 months ago, I was here roughly. And that's a small thing, right? You did $20 a month. And you have, by the way, you have more money now in that little account Than 60% of America. So so don't believe like it doesn't make a difference because it does. Even if you would like you to go put more than $20 a month and now, but like at the rate you're going you're gonna have $10,000 in an account in a decade. Here's one called Robin Hood, one of the fastest growing brokerage firms in America. Uh their everything on their websites free. The acorns is free to after you have $5,000. It's a dollar a month. Until you have $5,000 invested. Right now Robyn's free. So you again I go back to you don't have to be rich to start investing.