Every recurring expense has two prices: what it charges, and what that money could have grown into. This calculator shows the second one.
What a habit costs is not what it charges
The "latte factor" — popularized by author David Bach — is the observation that small recurring expenses carry a second, hidden price: the growth that money would have earned invested. The daily amount is trivial; decades of the daily amount, compounding, is not.
The formula
- The expense is converted to a monthly amount (daily × 365 ÷ 12, weekly × 52 ÷ 12).
- Future value = monthly amount × [((1 + i)ⁿ − 1) ÷ i], where i is the monthly return and n the number of months — the standard future value of a recurring contribution.
How to use the result
Don't use it to shame your coffee. Use it to rank your habits: run each recurring expense through the calculator and keep the ones whose daily joy honestly outbids their compounded price. Then flip one canceled habit into an automatic monthly investment of the same size — the calculator has just shown you exactly what that's worth.
Frequently asked questions
- What return rate should I assume?
- Long-run averages for broad stock index funds are often estimated around 7% annually before inflation, but past averages guarantee nothing. Run the calculator at a couple of rates — say 5% and 8% — to see the plausible range rather than a single fate.
- Is this an argument that I should never buy coffee?
- No. The point is informed trade-offs, not austerity. Some daily habits are worth every cent of their compounded price; the calculator exists so you pay that price knowingly instead of accidentally.
- Why does the invested amount grow so much?
- Compounding: returns earn returns. A recurring contribution invested monthly benefits from growth on all prior contributions, which is why the final figure can be a multiple of the raw amount spent — and why the effect strengthens dramatically with time.
- Does inflation change the picture?
- Yes — the future value is in future dollars, which will buy less than today's. For an inflation-adjusted view, use a 'real' return (your expected return minus expected inflation) and read the result in today's purchasing power.