I am sure many people have heard personal finance experts talking on TV and radio about spending money in your daily morning latte and how by avoiding that expense you can save and become rich. Haven't you heart about that yet?

To all those who haven't heard of "Latte Effect" it is the principle of skip coffee and save money.

Here is how it works - you spend around $3 on latte and around $2 if you need something sweet like toffee almond bar or oatmeal raisin cookie to sweeten your morning and enjoy your latte. Overall you spend $5 every morning 5 days a week in a coffee shop.

If you don't spend that money in the coffee shop you will be saving 5*20(working days in a month) = $100 per month.

That comes out to be $1200 per year. Now let's say you invest $1200 every year in an investment that gives you 10% return then in next 20 years you will have around $61K. And if you keep doing the same for over 30 years you will have $178K.

Wow! That’s some money.

But is it really worth to give up on little pleasure like nice latte and a cookie to have a wealth after 30years when we might not even be able to eat anything sweet because of diabetes or other health related problems, which definitely hit us when we become old?

I would go for a middle ground. Enjoy the latte and save for the long run too. I can definitely give up latte from 5 times a day to maybe 2 or 3 times a day and invest the money that I save giving up on coffee. Sounds good??

Well I have been doing this for a while and I make sure that every day I don't drink coffee I put the money aside to invest at the end of the month. We got to follow our investing principle religiously.

You can apply this "Latte Effect" to anything that you spend on regularly for pleasure and everything you deny yourself that pleasure you make it a point that the money saved goes to a good investment.

Find a middle ground and enjoy the pleasure of latte while money keeps compounding itself for you in investments.