 
|
The Latte EffectFinancial experts have touted the latte effect phenomenon since Starbucks hit mainstream America in the 90s. The root of the concept is that consumers spend seemingly small amounts of money daily that add up to large sums of money over the course of the year. The idea behind the effect is to see how much we spend on unnecessary items every day, and more importantly, how that money could be put to use in a more productive way. The point behind the concept is a look at our money and spending habits over the long term. For example, if you spend $3.50 every morning on a cup of coffee (or latte, cappuccino, mocha, whichever you prefer), you will spend almost $1,000 in one year. Keep in mind that $3.50 is a median price. Some drinks at Starbucks and other coffee houses can cost more than $5 per cup if you add syrups, extra espresso or substitute soy milk. If that $1,000 were invested into an IRA or other retirement fund, in 30 years you could see a substantial amount of money, upwards of $16,000. (Of course this will vary greatly depending on the retirement plan.) The concept is not limited to coffee alone. It could be applied to cigarettes, candy, or any other items you buy on a daily basis. The theme is money management, and how easy it is to spend a large sum of money, or worse charge it, without even realizing it is happening. The consequences for charging small items such as these can be very detrimental to your finances if you are not paying off your credit card each month. It is easy to charge your way into hundreds, if not thousands, of dollars worth of debt because the price seems so small. But, over the course of a year, unpaid balances on credit cards hurt your credit score. If the latte effect has helped you charge your way into unmanageable debt, consider a debt relief program such as debt consolidation or debt settlement. Author Bio: Allison Roberts is a graduate of the University of North Texas Department of Journalism. She has experience in agency and in freelance public relations. Allison currently writes for Credit Solutions and she is completing an unfinished work of her late grandfather. For more articles by Allison on bankruptcy, visit Credit Solutions.
|
 |
|||
