There’s a long-percolating concept among personal finance gurus: The money you spend on small purchases, say, a latte every day or so, could be redirected towards huge savings. Think hundreds of thousands of dollars over 30 years, if invested. Proponents have included Suze Orman, Penelope Wang of Money Magazine, and most notably author David Bach.
But another personal finance writer, Helaine Olen, says no way.
“We weren’t spending more money on luxuries,” Olen said of the late 1990s. “We were spending less.”
Using herself as an example, Olen says the cost of coffee and other small expenses pales in comparison with the rising cost of health care, education, and housing.
“Think of it this way: at $5 per latte, I would need to give up 260 caffeinated drinks per month to pay my monthly health insurance bill.”
She recently traced the history of the concept in a Twitter essay.