You may have heard of the "latte factor," which states that by skipping the daily stop for a $3 coffee, you can save hundreds, even thousands of dollars, a year. But if don’t drink that much coffee anyway and are still short on savings, what do you do?
Since many Americans are higher in credit card debt than they are in bank account balances, figuring out one’s own latte factor is crucial to keeping spending under control. That means paring down the shopping list and accepting the fact that your "wants" are far more numerous than your "needs."
That doesn’t necessarily mean scrapping your entire wish list of treats. Michael Baras, a financial planner in West Hempstead, N.Y., says simply cutting some small luxuries can mean a lot to the bottom line. "Luxury is good, as long as it’s affordable and in moderation, but keeping track of these minor affordable luxuries are even more important when you are of limited finances. Cutting back on those can be a painless way of creating or saving more money without making drastic changes to your lifestyle."
Baras’ favorite coffee, a Starbucks grande Caffe Macchiato, costs $3.85, and he estimates that by cutting back on the daily coffee run, gourmet java-holics could save up to $1,500 per year. But for others, the big-ticket items — the annual laptop upgrades, switching SUVs every few years, splurging on that 3,000 square-foot house — may be the real leak-springers in one’s wallet.
Kicking the shoe-shopping habit
For Mary Carlomagno, her latte factor was clothes shopping. As a real-life version of Carrie Bradshaw in Sex and the City, Carlomagno dropped hundreds of dollars on clothes every month, averaging over $10,000 a year. She justified the costs by working as an events planner in Manhattan, but when her three full-size closets were overflowing with items she never wore twice — or even once — she knew keeping up with the urban Joneses was doing her in.
"I wanted to be on the cutting edge," said Carlomagno. "I always wanted to wear something new and different, because there’s a lot of peer pressure in Manhattan when it comes to fashion."
After adding up the additional $240 she paid monthly in cab fees and the constant take-out dinners, Carlomagno decided to take action. Instead of going cold turkey, she cut back on a single expense every month to see how it changed her life and her finances. In her subsequent book, Get A Life: My Year of Learning to Live With Less, Carlomagno describes how she gave up shopping in February (the shortest month), avoided taxis in August, and ate at home all of June. (She also gave up coffee in September but primarily for health reasons.)
After forgoing shopping, her financial manager called her to congratulate her on her hefty savings and ask what happened. Carlomagno’s response: "I stopped buying shoes."
Now the founder of Order, a company that helps others control their clutter, Carlomagno not only examines the price tags but her desire to buy. "I go through a series of questions: Where will I wear this? Will I wear it two weeks from now? Can this money be spent better somewhere else? I actually try clothes on to see if it’s really something I want and will wear a long time. I want my clothes to make it through more than one season."
Resisting the consumer culture
Judith Levine is another cost-cutter who spent a year without shopping and chronicled the experience in her book Not Buying It. A freelance writer who splits her time between a country house in Vermont and an apartment in Brooklyn, Levine didn’t cut back on shopping for financial reasons, even though she had $8,000 on her credit card, but because she was disgusted at the effects overconsumption had on the earth and everyone on it.
“I remember after September 11, the president and [New York's mayor Rudy Giuliani] were saying we could defeat the terrorists by going out and buying more stuff. But family, friendship, national security — we get all this from shopping? Overconsumption is already wreaking havoc, from global warming to crummy wages of foreign workers making the $29 DVDs on sale at Target.”
She knew her lack of shopping wouldn’t change the world, but she wanted to understand her feelings about how and why she bought her stuff. She and her partner, Paul, decided to go a whole year without buying anything but the barest of necessities. Of course, those classifications were sometimes fuzzy — Q-tips were not considered a necessity, but Levine couldn’t bear to part with her favorite olives.
Most people could not go cold turkey like Levine, but she said she didn’t miss the items she bought but rather the experiences around them. “I really missed movies, not just for the entertainment but for feeling in the know and being connected to culture and my friends.” Even the item she most missed — ice cream — was due mostly to the symbolism of the perfect summer evening stroll with a cone in hand.
Levine did break down once — she bought herself a pair of $138 pants at 30 percent off — but by the end of the year, the first thing she did was simply rent six movies, saying she is no longer an impulse shopper. "We didn’t have a backlog of desires. Once you stop, the desire passes."
Levine curbs her spending by supporting small and local businesses instead of big-box stores, and thinking about the life history of an item. "I think about where that item was before, how much fuel did it take to ship it here, and what will happen to it after I get rid of it. By spreading out the lifespan of a product, you think about it differently."
Cost-cutting can also turn one into a more engaged citizen, says Levine, based on the fact that because she had to rely on free entertainment from public libraries and parks, she saw how those government services were crumbling. "Public amenities are not products I can buy and return if I’m not fully satisfied. They are ours to fix, and the solutions can only come through civic action and public policy."
And even though saving money was not a goal, Levine paid off her credit card bill at the six-month point and spent $8,000 less on items than the year before.
Both Levine and Carlomagno reported similarly positive byproducts of their experiments: Better health from cooking at home and bicycling or walking instead of driving, and better relationships with their significant others.
"My husband and I spend much more time together, and a lot more time outdoors because we’re now used to riding bikes around the city and taking walks," said Carlomagno. "We also cook dinners together because dining out all the time eventually loses its charm."
Levine, who made paper hearts for a Valentine’s Day gift instead of buying flowers, said she and Paul are more in sync about their financial motivators. "We keep thinking as a couple about what our needs and desires are. That consciousness of spending and saving made us feel more secure about our future."
Both say cutting back on spending gives one a newfound appreciation of the Latte Factors in life. "By giving up the little luxuries, I got back in touch with the good things about my life – living and enjoying the simple things more," said Carlomagno. "That gave me more of an overall appreciation of luxury."
© 2013 msnbc.com. Reprints