My top 4 anti-Latte Factor money hacks

I read about The Latte Factor quite late on . The crux of the message was that small habits developed during your life can have a large cumulative and compounding effect on your wealth. The author calculated that a daily trip to Starbucks for your morning coffee ($4 per pop) could add up to over $18,800 over 10 years assuming a modest investment growth of 5% per year. I think the moral of this story is that you should definitely bring your own coffee!

Having done some soul searching about my own spending habits, I started to implement some small changes in my life 5 years ago in order to combat the Latte Effect and here are the top 3 things that I did and their results.

1. Cycle to work

Going on the subway is notoriously expensive and unpleasant. For someone as claustrophobic and privacy loving as myself, I see it on par with Chinese water torture if done every day. Consequently I discovered cycling, which not only saved me tremendous amount of £$ but also cut of journey time by 20% each way. That’s 30 minutes per day that I could use for other more productive tasks.
 
An unintended benefit of cycling so much is that I no longer need or wish to go to the gym since I already get sufficient exercise on my 2 wheels, which I have documented in detail in my blog about staying fit whilst holding 4 jobs. That’s an extra 1 hour per day I’ve now reclaimed in my life.
Cost benefit analysis – cycle to work generates 28x return on investment (ROI) over 5 years.
Cost over 5 years – £550 in total
£300 for a bike and £50 maintenance per year. Assume a 5 year bike lifespan so that’s £550 in total.
 
Direct benefit over 5 years – £8,000 in total
£1000 subway ticket savings per year plus £600 of annual gym membership -> £8000 savings over 5 years.
 
Indirect benefit over 5 years – £7,500 in total
1.5 hours of additional time saved per day. Assuming 4 commuting days per week and 48 working weeks per year, that’s a whooping 288 hours saved. Assuming pessimistically that I can only leverage 10% of that to make it revenue generating for my consulting gig at my hourly rate (currently £50 per hour), that’s an additional £7,500 revenue over 5 years.
 
Conclusion – 28x ROI
For a £550 of investments I managed to deliver £15,500 of financial benefits over 5 years, which is 28x ROI. This is even excluding the health benefits derived from exercising (which I guess some would discount as the same benefit could be derived through gym, but still, who wants to exercise indoor when they can embrace nature).
 

2. Selling my TV

A few years ago I sold my fancy smart TV. Not sure why to be honest but it just felt right. Ever since then we have not had a TV in the household (well that’s actually a lie, we do have a small screen mounted onto our kitchen wall but it’s so awkwardly positioned that it never gets an attention).
 
The immediate effect was that I suddenly found a lot of free time for myself. I never binged on TV but still spent on average 5 hours a week watching it and thus out of nowhere, these 5 hours magically became available for doing something more productive.
Cost benefit analysis – getting rid of my TV generated 24x ROI
Cost over 5 years – £450
I bought my TV for £600, sold it for £150 so the net loss was £450.
 
Direct benefit over 5 years – £1,800
I scrapped the £30 per month Sky cable package, which equalled to £1,800 over 5 years.
 
Indirect benefit over 5 years – £9,125
I saved 1 hour per day, which was 1,825 hours over 5 years. Assuming 10% of that is revenue generating at £50 per hour, that’s still a whooping £9,125 of additional income.
 
Conclusion – 24x ROI
By taking a write-off of £450, I gained an additional £10,925 benefit over 5 years, representing an 24 times ROI.
 

3. Not wearing shirts

I personally hate wearing shirts because I find them extremely restrictive of my movements, which prevents me from feeling relaxed and thus hinders my mind. At a philosophical level, I view shirts as the symbol of the modern day prison uniform where all workers are forced by their employers to conform to a point of singularity. Being a bit of a maverick, when I quit my previous job in 2016 to join a start-up, the ability to wear T-shirt to work ranked unusually high on my list of demands.
 
Cost benefit analysis – not wearing shirts could save me £2,700 over 5 years.
Cost over 5 years – £0
Absolutely nothing.
 
Direct benefit over 5 years – £2,700
My previous job was intense and it took up quite a lot of my time and therefore washing and ironing shirts is a task I preferred to outsource. I used a company called Laundrapp, which allowed me to order via my phone and they would come to collect, wash, iron and deliver the shirts. 5 shirts cost £12 and I would do that for about 45 weeks per year, which added up to £2,700 over 5 years. Not anymore!
 
Indirect benefit over 5 years – Unquantifiable
Quite hard to quantify, except that I love wearing T-shirts, which made me feel free.
 
Conclusion
There’s zero reason to wear a shirt most of the time nowadays. Unless you love ironing then ditch them! T-shirts rock.
 

4. Moved into the suburb

I used to live right in central London, in the wealthiest neighbourhood. To be honest I absolutely loved the cosmopolitan lifestyle: I woke up to the city skyline, crisscrossed my way into the office on the bike, worked my socks off, latched onto an afternoon hardcore boot camp session, before going out with friends and hailing an Uber home.
 
The problem was that the lifestyle was incredibly expensive and hectic – the living space was heavily restricted and it was noisy and stressful. So we took a drastic decision to move 35 miles away from the city centre into a 3-bedroom house in a leafy suburb.
 
Cost benefit analysis – moving into the suburb didn’t bring any direct financial benefit but significantly improved my quality of life.
Cost over 5 years – £105,000
Additional £250 per month of train fare -> £15,000
Loss of £1,500 per month of rental income from the suburb house -> £90,000
 
Direct benefits over 5 years – £102,000
We rented out our London place which generated a net rent of £1,300 per month post tax -> £78,000
We significantly reduced our discretionary spending by around £400 per month as we dined out and drank less -> £24,000
 
Indirect benefits
  • By eating more home made meals, we became significantly healthier and fitter.
  • We enjoyed a lot more space and tranquillity than we did in London, enhancing our well-being.
  • I now dedicate my 40-minute train commute per day to productive tasks such as blogging on WealthyBy40, which could potentially become an income-generating asset one day.
Conclusion
In the strictest ROI sense, the move was a break even financially at best. Yet it yielded significant amount of intangible benefit that I wouldn’t trade it for anything else. You can’t put a price on open space and waking up to birds singing.
 

Wrap up

What were your top 4 money saving hacks? Which delivered the greatest ROI? Would love to hear about them. As usual, please comment away.