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IT'S NOT HOW MUCH WE EARN,
IT'S HOW MUCH WE SPEND!

Over their lifetimes, most working people will more than likely earn more than a million dollars-maybe much more. So why aren't we all rich? Why aren't you rich? It's simple, really. The problem isn't our income; it's what we do with our money once we get it.

If there is one key concept on which everything else I have to say about finishing rich is built, it is this: How much you earn has almost no bearing on whether or not you can and will build wealth.

YOU'VE BEEN PROGRAMMED
TO SPEND WHAT YOU EARN . . .
AND MORE

I know it sounds far-fetched-especially if you're someone who is starting late on the journey to financial security and independence. But trust me, it's true. The reason you feel behind the financial curve-the reason you haven't been able to start saving and investing for your future the way you know you should be doing-is not that your income is too small. It's that your outgo is too big.

Are you rolling your eyes? I know-most people are convinced all their problems would disappear if, say, their income suddenly doubled. Chances are, you believe that, too. But if you do, you're hurting yourself.

WELCOME TO THE
"NEVER GET AHEAD RACE"

What happens when your income jumps? Tell the truth. Haven't you already seen your income go up only to find you're still living paycheck to paycheck? If you are at all normal, when your income jumps, so does your spending. It's just a fact. We earn more, and then we spend more. Then we need to earn even more, and then we end up spending even more.

This is what I call the "Never Get Ahead Race."

INTRODUCING THE LATTE FACTOR

Maybe you've heard of the Latte Factor. It's a concept I created based on the simple idea that all you need to do to finish rich is look at the small things on which you spend your money every day and see whether you could redirect that spending to yourself-putting five dollars a day away for your future, for example, rather than spending it on a fancy cup of coffee.

For most of us, there is no faster or more effective way to take control of your financial destiny than to find out exactly how much potential wealth you are squandering as a result of unnecessary spending on things like mocha lattes from Starbucks every morning on your way to work. But if you're starting late, it may not be enough simply to cut out a couple of hundred dollars a month in wasteful spending. You may need to cut your spending by $1,000 a month or more, and that's not likely to be possible if you focus solely on daily expenditures.

What you've got to do is turbocharge your Latte Factor. You've got to look at more than just the daily extravagances that drain your resources and consider as well the weekly, monthly, and even annual extravagances that you could easily live without-things like premium cable channels, extra-fancy cell phones, new wardrobes every season, and overly lavish Christmas presents.

This article is excerpted from 'Start Late, Finish Rich - A No-Fail Plan for Achieving Financial Freedom at Any Age' by David Bach.