Saving $$: The Latte Factor

This is a simple concept, but sometimes I need to remind myself of this simple way to save $$$.

Let’s say I spend $5/day on lattes every day. That equates to $9100 over 5 years.

But I mustn’t forget that this is after-tax money. If I were in a 30% marginal tax bracket, this $9100 is costing me $13000 in gross income.

If  I took that gross income and put it into a tax sheltered account (such as an RRSP in Canada) I would not only save the taxes on the income, but I would see any gains on the sheltered money grow tax free over time.

While I can’t do without coffee, I can certainly find ways to get it for free. Most workplaces offer free coffee…

So a simple change in behavior – no real deprivation required – can help me squeeze out about $13k every 5 years. And there are likely dozens of similar ways to save money.