A reader recently commented that she is sick of hearing financial gurus admonishing people to give up their lattes and save the money toward retirement, buying a house, kid's college fund, etc.

Lillian wrote that "Well if getting a Starbucks every day is the only real luxury I afford myself, I feel that I can afford to miss out on an extra $3,600 that takes five years to save."

I agree with her completely, but here's the thing: the only way to save money is to not spend some of the money that you earn. One of the best ways to reduce spending is to look for little things that slowly but surely drain your bank account but don't provide you with the value that you want for your money.

If spending $3500 a year on lattes is something you want to do -- and are willing to spend less on something else to do it -- go for it!

Think of the "latte factor", as David Bach calls it, as an example of a way that a lot of people spend money without realizing how quickly it adds up. In order to cut back on frivolous expenditures, it's good to look at how much they cost on an annualized basis: and then you can decide which ones you want to cut out. If lattes don't qualify as something you want to cut out, that's fine as long as you can find another way to save some money. $1.69 per bottle Vitamin Water perhaps?


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