The Power of Small Changes

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FIRECracker is a computer engineer/children’s author, who used to live in one of the most expensive cities in Canada. But instead of drowning in debt to buy a house, she saved and invested instead. What resulted was a 7-figure portfolio, which has allowed her to retire at 31 and travel the world.
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Save $5 on a coffee a day, retire a multi-millionaire.

Popularized by financial gurus like Suzie Orman, Dave Ramsey, and David Bach, the “latte factor” is something I’m pretty sure you’ve all heard of.

But for those who haven’t, the “latte factor” is the idea that cutting out the small purchases (like lattes), and investing that money over time, will give you a big fat retirement nest egg.

Sounds ludicrous? That’s what I thought too.

I mean, c’mon. People LOVE their coffee. When your boss is droning on about TPS reports or whatever other office bullshit…the only thing keeping you from face-planting into puddle of your own drool is that sweet sweet blackened nectar of the Gods. Starbucks Gods that is.

And then there’s also the math. When it comes right down to it, the math just doesn’t add up.

How exactly does $5 compound into a million? If you take $5/day, multiple it by 250 working days, compound that over 35 years at 6% return, you get $140,000, which is A LOT, but isn’t close to a million.

So why would we give up something we love so much for a seemingly unworthy gain? Why would we give into the ‘latte factor’?

Because it works.

Now, before you run off to grab your pitchforks and torches, let me tell you a story…

Back in 2010, a man by the name of Dave Brailsford was offered his dream job.


You see, ever since the ripe age of 19, Brailsford had a dream. A dream to join Team Sky, the elite British cycling team, so he could ride his way to “Tour De France” victory.

Starry-eyed and bushy tailed, he left his cushy draughtsman job (whatever the Bloody Hell THAT is) in Deiniolen, England, and moved to St-Etienne, France, without speaking a word of French, just so he could train to become a cycling champion.

The bad news is that he never realized his cycling champion dream. The good news is that during those gruelling 3 years, he discovered that his true passion wasn’t actually cycling. No, what Dave really loved was: Sports Sciences.

And once he got his degree and worked in the industry, he was asked to join Team Sky after all–but not as a cyclist. He was going to get Team Sky their long awaited “Tour de France” victory by coaching instead.

And when other coaches, journalists, and even his own team members laughed at him–especially since no British cyclist has EVER won the Tour de France, let alone win it in less than 5 years–Brailsford simply shrugged it off.

Instead he got to work. First he looked at their fitness regimens. Then their diets. And finally their sleep schedule. And when that was done, he went even further. He looked at their seat ergonomics. He looked at their hotel pillows. He looked at the quality of the massage oil in their spas. He even looked at the their hand sanitizers and hand washing techniques. He looked for small improvements everywhere, like a carpenter ant, foraging for every leaf and dust particle he could find, giving his team every advantage and leaving no stone unturned (and I mean that literally because he even looked at the gravel under their bikes).

And when people scoffed at him, saying his team will never win the Tour de France in 5 years, he smiled and told them they were right.

They would win it in 3.

And not only that, they would take home 70% of the gold metals at a little known competition called “The Olympics”, and repeat their “Tour de France” victory the following year.

And when his skeptics watched, stunned as his team stood on the stage holding their medals, Brailsford felt like he was on top of the world.

Great story, right? But what exactly, does that have to do with coffee?

Well, Brailsford realized his “Tour de France” dream because of the hundreds of small changes he made.

From the pillows, to the massage oil, to the hand sanitizer, to the gravel, nothing was safe from Brailsford’s tornado of efficiency.

Small changes matter. But it’s not just the changes themselves. It’s the fact that Brailsford cared so much about Team Sky that he was willing to optimize even the tiniest things, just to give his team that extra edge.

The same goes for people who save money by not buying coffee. It’s not the coffee savings, it’s the fact that they care SO much about becoming financially independent, they’re even willing to cut the coffee.

photo credit: From the book “You Say I’m a Bitch Like It’s a Bad Thing” by Ed Polish, Darren Wotz

And this is what we did. We started off with the small things too, like cutting out daily coffees, going to the library instead of buying books, eating out less. But as we grew more confident that the small things were adding up, we started to look at optimizing other things in our lives.

We started researching into the best credit cards (no fees, bonus rewards + insurance), the least expensive ways to travel (frequent flyer miles + 2 for 1 deals to attractions), the gyms with the most value (open the longest, with the least expensive fees), the best recipes with healthy yet inexpensive ingredients, etc. The list goes on.

Over time, all the small things added up. Because we optimized in every area we could think of, we managed to reach our goal within 9 years and retire at the age of 31.

We’re not geniuses. And neither was Brailsford. We were just willing to make a large number of small changes, which added up over time, so we could achieve our goals. The small things didn’t matter. Reaching the goal did.

So the next time you’re standing in line at Starbucks, think about it. Are you willing to do whatever it takes to become financially independent? Are you willing to give into the”latte factor”?



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7 thoughts on “The Power of Small Changes”

  1. Totally agree with the message here that a series of small changes can add up to major savings.

    In evaluating my own situation, I think I run my finances fairly tightly but my savings rate cannot match what you had previously achieved. Part of it I believe is the nature of the job I am in and I was wondering what your thoughts are.

    I work in government but I do earn pretty well (perhaps not as much as other professionals in my age category) but one of the major drags on saving is the amount of my gross income that is contributed to my defined benefit pension plan.

    Is there really a way to accelerate retirement when I don’t want to give up the DB pension but I need to have as much additional savings/investment on my own outside of the pension?

    Also, in an unrelated question, I believe you were saying your rent was about $800/month, is that in Toronto? How do you find rent for that low without being in either a tiny box/run down or sketchy neighbourhood/or not soul crushingly long commute?

    1. If you have a government DB pension, you’re actually pretty set. If you want to retire early, you can calculate the commuted value of your DB pension and take it out into a LIRA. Though I can’t imagine why you would want to, considering how you have one of the few gold-plated pensions left in the country, and it’s very difficult to be laid off or fired in a government job. When you say “accelerate retirement”, how early do you mean?

      Yes, the 800/month rent was in Toronto. We rented the top floor of a townhouse in Greek town, which was one of the few places in Toronto that wasn’t sketchy or far away. Since the landlord was 70 years old, he didn’t care about aesthetics, which helped us a lot, because the place had everything we needed and was only 25 min subway ride to work! There are still some good deals to be had, even in Toronto, if you’re not super picky about how “modern” and “fancy” the place is. My ex co-worker is currently renting a 1 bedroom condo downtown for 1200/month, while everyone else is paying 1600+ because it’s an older condo. Basically, if you’re flexible, you can always find good deals for anything.

  2. I should have clarified. I understand that with a DB pension it’s an excellent pension, in theory (assuming it’s actually around and not completely raided by the time I retire which is perhaps just my own paranoia).

    The point really is that just because I have a gov’t job doesn’t mean I want to really spend the next 20+ years of my life at this job. So I could have a great pension waiting for me but if I hate that time in between am I really any better off? As much as non-gov’t folks think everything is cushy, it’s sort of like any other place. Some take it in the face work wise and others skate along, getting away with doing nothing and that work piles on to others.

    1. One of my friends works for the government and she says the same thing. She’s frustrated that everyone else resents her for working so hard, while they do very little. So I can understand where you are coming from.

      The good news is that your job is relatively stable, so if you want to become FI, you’re in a good place. And if you decide to retire early, you can take the cumulative value of your pension and add it to your portfolio. What time frame are you thinking of for early retirement?

    2. I thought I was the only one who wanted to be FI with a DB plan, mainly to be self sufficient in case politics change and DB plans are slashed to shreds.

  3. HELP!!!

    I am reading your BLOGS for the first time – by accident. I am a baby boomer who missed my mark.

    I also grew up poor and wanting to get out of that situation, married a middle class man and had children. I was left with nothing after a divorce. So I went back to school and earned a PhD, which meant loans, no assets, etc.

    After graduating a few years ago, I was working 8 – 5 (50-60) hours a week for little because I had no REAL experience, which left me exhausted and frustrated. I was trying based on the advice I was given. Changing jobs did not help!

    This is not working as I am too old to play games with “office politics.” Simply I do not want to. So I made a little change and started investing in company 401K with just $100 – $200 bi weekly. No much but all I could afford!

    Following the Millennial Revolution, I see where I missed my chances. Of course, many of my generation did/do.

    What would you suggests?
    How can I double about $10,000 in 401K?
    Am I doomed to die poor? I only need about $50,000.00 right now for an investment.

  4. Well, there’s an old Chinese saying (or as my people call it…a…saying) “The two best times to plant a tree are 20 years ago, and right now.” I admit I’m not as used to analyzing financial situations of Boomers but I’d be happy to give it a shot. I do need more information, though. Could you privately email me the following info?
    1) Your current monthly income (gross and after tax)
    2) Your current monthly expenses
    3) Your current assets (401Ks, investment accounts, home equity, etc.)
    And I’ll try to see what I can do. Temper your expectations though, properly investing can make a good financial situation great, but it won’t magically turn a bad one into a good one.

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