A coffee a day could be killing your savings
By Aaron Broverman • Bankrate.com

Punctuality has a price for Emily Herd, a 23-year-old recreational therapist from Vancouver. "I waste money when I'm early for things. I get bored, so I go get a coffee and a donut, or go into Shoppers Drug Mart and look around," she explains.

For Herd, that incidental spending amounts to $50 a week on donuts, coffee and lunches out. That $50 a week turns into $2,600 a year.

"I was looking back at my income tax returns and I was like, 'I made how much last year? Where did it all go?'" she says. "Then I looked back at my bank statements and I saw where it went."

Herd's money was disappearing because of her Latte Factor. That's what David Bach, Oprah contributor and author of The Automatic Millionaire, calls the small, frequent discretionary purchases we all make that, when added together, amount to hundreds of dollars.

Small savings can make you big money
Whether it's coffee or comic books, if it chronically appears in your weekly or monthly expenses and isn't something you can't live without, Bach recommends you cut it out and redirect that money to your savings and investments. 

Here's how he breaks it down: The cost of a latte and a muffin is about $5 a day. Multiply that by seven days and you're spending $35 a week or $140 a month. Here's how that $140 a month could grow if you invested it and made an annual return of 10 percent:

1 year = $1,848
2 years = $5,913.60
5 years = $13,987.88
10 years = $33,809.85
15 years = $65,733.32
30 years = $333,299.95
40 years = $893,946.59

So, your coffee money could turn into $893,946.59 if you invested it wisely. That should be enough to convince you to cut your spending, but for most people, it isn't.

It's not easy resisting temptation. As much as cutting out our regular, small purchases might fatten our wallets down the line, most people aren't able to eliminate their indulgences cold turkey. "It's really tough to stay disciplined," admits Herd.

As a recent university graduate, she says it's hard enough to save the money required to move out of her parents' house, let alone think about saving almost $900,000 in 40 years. But experts say it's possible to adjust your Latte Factor and still save money without forgoing the things you love.

You don't have to go cold turkey
Trent Hamm, who hails from the cornfields of Iowa, is an average guy who had a financial meltdown in April 2006. He had bills from multiple credit cards, student loans and various other expenses and owed much more than he could ever hope to earn.

He brought himself back from the brink of financial ruin after realizing his frivolous spending and lack of emergency savings meant he couldn't provide the lifestyle he wanted for his newborn son. Now, he shares what he learned on his blog, The Simple Dollar.

Hamm says the key to responsible spending is discovering what your indulgences are. "Keep a running tab every time you spend money. Then, once a month or so, look for patterns. The things to really knock out are the ones that repeat a lot," he says.