Personally I’ve been operating a part-time business on top of my full-time job, way easier and more profitable than cutting that extra latte! (Although I got to admit I’m trying to change that latte for a cup of tea…)

I’d like to break the fabled Latte Factor ever further than you have done. If you follow the LF you will not drink one latte in your life. Why? Because whilst you are denying your taste buds between the ages of 25-65 (or more!), you are spoiling your savings account.

BUT…you are constructing your savings and retirement plan based upon a non-latte life. You are not saving or earmarking any money for future lattes. Your “future goals” contain no lattes, just as your present goals contain zero lattes. You will go your whole life, 25-85, without ever having tasted a latte.

In conclusion, the Latte Factor diminishes the quality of ALL stages of your life.

This change of phrase is right on!

@Al:When I save a dollar by reducing spending, it’s all mine.

This is the “downward” mentality of money. This is the Latte Factor school of thought. This is the guy who’s tagline is “Live Rich, Finish Rich”, but goodness don’t spend your money. How am I supposed to “live rich” if I don’t spend my money? Why do I want to die with money in the bank?

The Latter Factor has a simple fundamental problem, quality of life. Bach gives you reasons not to drink the latte so that you can have a bunch of money in 40 years. However, he never “replaces” the latte. You don’t “make your own” or “chip in for a machine at work”, you just don’t drink lattes. You drop your quality of life to meet future goals, you don’t drink lattes from 25 to 65 so that you can drink as many lattes as you want from 65 to 85. Does that sound like the great life?

But that’s not what we want to do.

We want to maintain and improve our style of living and that almost inevitably takes more money. Conscientious frugality involves cutting those “expenses” that fail to provide value, it’s not about wantonly chopping expenses for the pride of having money in bank.

Yes, most people can chop expenses. Yes, most people can even reduce expenses while maintaining their standard of living. But each consecutive time you trim the fat, there’s less fat to trim. On the other side, there is no known ceiling for what one person can earn. Whatever you make per hour, there’s someone making twice that much money.

So for people who want to fix their finances next year, go ahead and trim a little. But start planning to grow, to work the problem from both sides. At some point, it’s way easier to try to make $100/month than it is to trim $50/month.

“I’m not arguing that it isn’t possible to make more money, I’m arguing that you will need to find a balance inbetween work and family and that will limit your willingness to get a second job.”

Shall we dissect that paragraph:

1. “I’m not arguing that it isn’t possible to make more money” — then don’t argue, offer solutions instead of “I hate…” comments.

2. “…you will need to find a balance inbetween work and family…” — that’s true. There are only so many hours in the day. A single mother of three has to provide not only monetary support for her family but also ‘in-person’ support. But, there are also times in life when a person has to choose the best path for their family and not themselves (ie what is best for the children). It’s called making sacrifices. Mother is the hardest job in the world.

3. “…and that will limit your willingness to get a second job.” — again, it’s all about the mindset. As you say, “LIMIT YOUR WILLingness”. How much strength of character does that mother (or anyone else wanting to make extra money) have? How much will power do they have to actually overcome those LIMITS (whatever they may be)?

No, paper routes and collecting cans will not rake in the millions, but if you want to make extra money, then you have to research and asses the avenues available to you. If you are in the same situation as your example family, then you have to realize that your ‘extra income’ stream won’t double your regular paycheque. But think differently: if the paper route brings in an extra 5% of regular income per month…great! I’d like 5% more money a month too! Double that with cutting costs: add 2.5% more income; cut 2.5% expenses = same result with only HALF the work as initially forecasted!

Single mother with no education and three kids doesn’t have the same money making options as a Harvard law grad. It all comes down to choices. Our past choices determine our present and probable future. If we don’t deal with the problem at hand then we have to deal with the consequences. As time goes on, those consequences compound (like savings).

“A logical person in this situation will START somewhere by cutting expenses before resorting to a second job.” That’s fuzzy logic. My kind of logical person would feel like maybe flipping burgers isn’t the best way to support his/her future family and would go about doing whatever it took to secure a better financial base — raising the standard (more income) rather than lowering it (cutting costs). Endure the short-term pain to avoid the long-term pain.

After writing all that, reality has to play a part in all of this. Not everyone has the mentality or fortitude to be a “middle-class” citizen (I seriously wish I didn’t!). Nature hates a void, they say. There will always be poor people. Unfortunately, there looks to be a whole lot more coming your way in 2009!

The Plummet of ‘08 is a great example. The majority of people only see red (I know I’m seeing a LOT of it!). But there are plenty of people caught in the plummet who are also looking for opportunities. They will be the ones who are further ahead (making more money) in five years, not the ones who only cut costs to “save” money today.

A paper route and collecting cans and bottles will generate very little income.

“or even…gasp!…get a different job that pays more! ”

This is exactly what I hate about MSN articles talking about saving money. They offer vague and often useless solutions to problems. Need to save money? Stop driving two cars and only drive one! So simple!!

I’m not arguing that it isn’t possible to make more money, I’m arguing that you will need to find a balance inbetween work and family and that will limit your willingness to get a second job.

FT, you have a kid on the way, right? Imagine if you were flipping burgers while your wife is in labour… or you can’t go to school plays, birthdays and other events because you have to make an extra buck. A logical person in this situation will START somewhere by cutting expenses before resorting to a second job.

Single mother, no education, three kids = no options for earning more? Let’s explore options shall we?

Government funded education programs; paper/flyer route; collect cans/bottles; baby-sit; or even…gasp!…get a different job that pays more!

It’s all about mind set. Yes, there is also reality. But the thing is, you have to START somewhere! Don’t just flap your arms and huff in defeat or you truly won’t earn any more. No one said life, or making money, was easy.

I was raised by a single mother as well. Let me tell you, I definitely respect her now that I’m older because she really busted her a$$ to provide for her kids and create her own success (she bought a house and paid it off in ONE YEAR!).

It can be done and it is done, every single day, all over the world.

I was raised by a single mother that lived paycheque to paycheque. Some people definitely don’t have the freedom to seek alternate forms of income or to leap-frog to different companies in search of better paying jobs.

But not everyone is that restricted. Most of us have the option to seek out better careers or try to be creative with income through second jobs. I know too many people that are stuck in a rut, working a job that they hate for very little pay. No college education? No high school diploma? It doesn’t matter, you always have options. You just need to step out of your comfort zone and be proactive about it.

Obviously you’ve never met a family living paycheque to paycheque…

Are you telling me an uneducated single working mother with three children should give up her free time just to earn an extra 5 grand on a second job that pays minimum wage?

It’s not going to happen. Most people in this situation will have their priorities set straight and she’ll put her family first. She needs to raise her kids, which will consume all of her free time. For her, earning more is not an option. Reductions in spending will come fast and early. Moving to a smaller house is likely to follow. The only way someone like this will get a second job is when her back is to the wall.

And of course, the children will be getting jobs and maxing their hours as soon as they are of legal age, which will begin to point them into the same direction as their mother.

Save money!!

http://resourcesandmoney.blogspot.com

Basically, if you don’t think like a wealthy or rich person, or think you should or could be rich and wealthy, then you probably never will be.

@mjw2000 and Brandon: exactly the point of the aforementioned study. Get rid of the limitations:
“…for low-income and the working classes…and those of limited means, to increase there income this is of little use…”;
“…some people are at their maximum in terms of earning power.”

Both those statements are false. Everyone with a job is of “the working class”; everyone has “limited means” (yes, even Buffet). And WHY?!? would increasing income EVER be “of little use” to ANYONE?!?

I am at the top of my salary at my job, want to know my secret of how I increased my “earning power”? Get ready…it’s called a “Second Job”! TAH DAH! I work some extra days throughout the year and EARN an extra $5000 (net). Hey, wow! My earning power just increased! And $5000 is of much use to me of working class and limited means. And with that extra cash I then turn around and, using my brain (of limited means), I try to make that money work for me (i.e. dividend stocks), which then ends up making me even more money “of little use”.

Earning MORE is NEVER bad! You just have to know how to handle the extra! Ross Perot (billionaire) once got his income tax down to 1%! Think he ever thought earning more was a burden or of little use? Doubt it (see first paragraph).

@Dan: I know a family of eight (plus two parents). The father is a multi-millionaire. Why? It wasn’t that he wanted to be rich, but he knew he was going to have a BIG family so he knew he had to make a lot of money to support them. By the time they all grew up and left home he didn’t downsize himself to a minimum wage job but just kept on making making his millions but no longer with eight dependents to drain the coffers!

@Linda: I’m sure it says somewhere that money is the root of all evil. Welcome to YOUR Capitalist society! Don’t like it, move to Cuba.