I suppose an average that high is possible if you buy at a market low (after the crash/Great Depression) and sell high… but that involves market timing which is unlikely to happen. 8% is much mor realistic for an equities market over the long term… in fact it might be too high taking into account the economic advances in the United States over the last two centuries… some believe we’re unlikely to see progress like that in this country again.

I’d do alittle more looking into it before making such a broad sweeping statement like 10% is unrealistic …

then again I’ll never shy from being proven wrong.

I also quit smoking, quit junk food, drastically reduced eating out, and more, and all that stuff really adds up (about $20,000 a year in total). That’s big money. And if you put your mind to it, quitting these additions isn’t that hard.

Check out my post on this:

How I Save Money

What’s it all for if LIFE can not be enjoyed?

Some of this stuff is simply getting far to micro for me to enjoy. I guess I manage my finances well, so many of these articles are not directed at me, but there needs to be a limit. Enjoy the coffee…Enjoy the PRE-OWNED Lexus, enjoy a trip to Ireland, just don’t go over-board with it.

I wrote about this phenomenon myself on my blog a few months back

Here’s a quick look at some of the personal finance related articles that caught my eye over the past week…

Jim profiles the “Dogs of the Dow” stock picking strategy.
Flexo thinks that we should forget about “The Latte F…

So I started making the sandwiches and packing lunches the night before, which is a major pain that I would love to give up. But I figure I’m saving us $10 a day, including the cost of food from the grocery store, so I am committed. That $10 is $2,400 a year, better off in my pocket (or a college fund).

Also, I buy my diet soda (I know, I know, bad for me and my teeth) on sale by the case at a downtown drugstore, and lug them back to the office instead of buying them from the office vending machine. This saves another $120 a year ($0.25 or less versus $0.75), and is the exact same soda.

The sandwiches aren’t bad, and this way when I do go out for an occasional pricey lunch, it’s a real treat.

I absolutely believe that our regular habits count the most when it comes to managing money over a lifetime.

All cost savings ultimately add up.

Having said that, I simply brush off the “convert $3 in $1 million” advice that follows the “stop spending” advice. I just pretend it’s for inspiration. Most of such schemes sound pretty stretched out from reality. Sometimes, these stupid schemes take the charm away from the main advice: “spend money smartly”.

Yeah, it’s tax-free in your Roth, but you are limited with how much you do there. I already max that out, so when I save more money, I can’t put more into a Roth. When they make Roth’s without limits, I’ll buy into it being tax-free :-).

You can’t focus on these little things and expect to be any better off in the long run if you don’t concentrate on the bigger decisions… regardless of whether you’re getting 6% or 10% on your anti-latte investment. Most people won’t invest the money they save from this endeavor, anyway.

Brian H: “Almost all the successful people you read about started small.” I’m not sure that this is a provable statement, but even if it is true, that doesn’t mean the Latte Factor is the solution. Start out small could easily mean starting out building a small business… which is how the successful people I know started. Lattes (or any other little expense) were not part of the equation.

Alex: Thanks for the link. It is a wow factor. People who read Bach’s theory are supposed to say, “Wow! I can save almost $1m by not drinking lattes!” And then they’ll buy his book. “Wow” sells books… just ask Tom Peters.

Stephanie: I agree that people can cut back, but buying things one doesn’t use is something different than buying a latte which presumably provides immediate sustenance and enjoyment.

For example, my mom needs to stop buying things just because they’re “on sale.” She bought this all-in-one record player, cd player, radio thing the other day, because we don’t have one anymore. But, for the 10 or so years we did have all of those things, she never used them! She bought it just because it was on sale!

I did a post on this recently – and not only do I discount the premise of the latte factor, but I think that under certain circumstances that Latte might actually add-value to your life.

Here’s a link…

http://www.thealexblog.com/2006/11/06/beyond-the-latte-factor-look-at-the-income-side/

“The rich invest their money and spend what is left; the poor spend their money and invest what is left.”

This paragraph is the key to understanding how to put your financial house in order. Ignoring it will leave you in a sad place. Practicing it will propel you toward your goals.

You don’t have to invest all your money at once. You can start off with just a few dollars. And trust me, no matter how bad times may be, you will not miss a few dollars a week.

And if you think that a few dollars a week won’t add up to muchâ€â€?you’re wrong.

Almost all the successful people you read about started small. The famous actors that now make millions of dollars per movie, started working for free in community theaters. Then they moved up to getting paid a few bucks for bit parts in movies.

Many CEOs and presidents who make millions of dollars a year, started off in the mailroom working for minimum wage at the very same corporations they now run.

And almost all of the world’s richest investors started off making tiny investments at first. You can’t get to something big if you don’t start with something small.

So yes, even investing just a few dollars a week will open the door for you to soon start investing much more.

Small hinges swing big doors.

I don’t think a 10% average annual return is unrealistic at all. Take that money and invest it in a broad market index in your 401K for 40 years could easily result in million dollars.

I ran the following example through a savings calculator: If you can find $6 a day to save instead of spend, and invest that $180 every month for 40 years at an average return of 10%, you’ll have just over $1,000,000. If you do this in a Roth IRA, it’s all tax free.

For Updegrave, who can afford vacations? And while I know the cost of college is rising, it’s rising across all income levels. When I was in college a few years ago, it was a difference of about $70K between the state university and the private university, assuming no scholarship at all. And any attractive candidate will usually get some scholarship, provided he or she picks the right university.

The expensive car thing is on the level though. Enormous car loans seem to be the kiss of death around here. Even cheap cars that are stupidly financed are big money wasters.