Drafted By: Melissa Kubek


The other day at a coffee shop, I met with a good friend of mine who I hadnt seen in a while and we started to catch up on whats been happening in each others lives.  A few minutes into our conversation we reached the topic of real estate and with much frustration my friend told me how impossible home ownership seemed.  She went on to say how the high cost of living coupled with wages that don’t substantiate the Vancouver lifestyle are to blame for her inability to save any money for a down-payment. I smiled and asked her how she liked living the Vancouver lifestyle.  With excitement she began to list the different events she had attended over the past few months, the dates shed gone on, drinks, roof top parties, etcbut it was the following piece of information that caught my attention.I met a guy!

Fantastic! I said, When? Where?.

Last week at XYZ Coffee Shop!!  Every morning on my way to work I stop in to pick up my latte and three weeks ago I noticed him in line.  Over the next few mornings there he was, we started talking and last week he asked me out for drinks! 

While the obvious, good friend follow up question should have been How was the date?, my actual follow up question was How often, and how many years –  have you been going to XYZ Coffee Shop?. With a slightly confused look on her face, my friend replied with Just over seven years nowwhy is that?. I took out my pad of paper & pen which are always with me and opened the calculator application on my phone.  I asked her the following questions:

Q1.  Approximately how much do you spend each week on your morning latte?

Her reply: Around $15.00

Q2.  How much does one latte cost?

Her reply: $4.10

Q3.  Do you ever buy anything to eat as well?

Her reply: Of course, some mornings I dont have time to eat before I leave my place..

Q4.  How often would you say you buy something to eat, and whats the approximate price?

Her reply: Maybe twice each week and its usually around the $2.00 price point.

Q5.  In addition to buying your morning coffee each work day, do you ever buy it over the weekend?

Her reply: Yes, typically on Saturday mornings after my run Ill head over to the coffee shop for my latte.

As I plugged in the numbers into my calculator, I came up with an amount that nearly doubled what she thought she was spending.  I showed her how her morning latte x 6 days per week + 2 x $2.00 breakfast treats = $28.60, not $15.00.  At this point and knowing me well enough to know how my mind works, my friend smiled at me and said I think I know where this is goingShe humored me and allowed me to continue though. 

Taking the calculations a little further now, I plugged in the numbers into an online calculator which allowed for compounding interest in order to show her the following:


Over the past 7 years her morning coffee ritual before work has cost her approximately $10,400. Granted, coffee prices have gone up slightly at this coffee shop over the years. However, for simplicity in this example I have kept the numbers as they are today.  When I showed her how much she had actually spent on her morning lattes she was blown away.  Thats not even the best part! I told her.  Had you properly saved that same $123.90 each month over the past 7 years and allowed compound interest to take over you could have an additional nearly $4,700 simply for saving the money properly for a combined total of $15,100 (10% interest & to keep it simple for these purposes we wont include a rate of inflation).

But wait, theres more! I went on to explain to her how if she kept that same money properly saved for just an additional 3 years beyond the initial 7 years and continued to deposit that same $123.90 each month, that because of the laws of compounding interest she would have approximately $25,600 by the end of 10 years! Her morning latte was not only costing her the initial investment of $14,872 over a 10 year period, but she was also losing out on nearly $11,000 of bonus money as well.

That $14,872 could have been your down payment and the additional $11,000 could have continued to increase in value providing you continued to save it, or at the very least you could have gone on a great vacation or even an amazing shopping spree! I watched her face as the realization and acceptance came over her.  She had been drinking away her down payment and bonus money by spending what money she did have in small and otherwise insignificant ways, also known as The Latte Factor (coined by David Bach, some years ago).


 Link to the FREE David Bach Latte Factor: Calculator

Does she need to stop having her morning coffee? The answer is NO, but she does need to find a way to save money and take advantage of the powerful effects of compounding interest. If my friend can save even $200 each month using the same formula, she could have her downpayment or more within 5 years ($15,000 approx.) or over $41,000 within 10 years. 

We put a plan in place and shes going to have $60.00 automatically deducted and saved from each paycheque so that she doesnt have to think about it and within 5-7 years I hope to be handing her the keys to her new home. 

If youre interested, here is the link to a great calculator which will teach you more about the latte factor and get you on the fast track to saving for homeownership:

oh and just in case you were wondering, her date didnt turn out so well. 

For all of your real estate questions never hesitate to contact me direct: melissakubekrealestate@gmail.com

Disclaimer: The information provided in this article is general advice only and is not a guarantee of any kind. Prior to making any financial decision speak with a qualified professional to assess and serve your individual needs.The user must accept sole responsibility associated with the use of the material herein, irrespective of the purpose for which such use or results are applied. RE/MAX results realty is independently owned and operated.