Keep the Latte. Invest the Same Amount.

The latte factor is the financial author David Bach’s phrase, popularized in his bestselling books. The arithmetic holds up: small daily spending, invested instead, can grow into a large sum over decades.

What stuck in the culture was the guilt. A generation heard that their coffee was the reason they were behind. Plenty of writers pushed back. Ramit Sethi, who calls his approach a conscious spending plan, argues for spending a lot on the few things you love and cutting hard on the things you don’t.

The latte factor quietly assumes that the $5 you didn’t spend ends up somewhere useful. On its own, it doesn’t. Money you don’t spend stays in checking, and checking is exactly where the next small expense finds it.

Saving by subtraction only works if something actually moves the money. If nothing does, the coffee goes and the savings never show up anywhere.

Nick Maggiulli, who writes the blog Of Dollars And Data, uses a cleaner rule he calls the 2x rule. Whenever he splurges, he invests the same amount. His example is a $400 pair of shoes: buying them means putting $400 into the market as well. If he isn’t willing to set aside the second $400, he skips the shoes.

The rule does two things at once. The splurge no longer has to feel like a failure, and every splurge leaves something behind.

Say you buy a $5 coffee every workday, about 260 days a year, and match each one with $5.

• The coffee: $1,300 a year, the same as before.
• The match: $1,300 a year, set aside and invested.

After 10 years, you’d have put in $13,000. If it grew about $8 a year for every $100, this example comes to roughly $19,800. After 20 years, $26,000 put in comes to roughly $63,800.

That $8 is an assumption, set below the S&P 500’s long-run average of about $10 a year per $100 since 1957. It assumes the match is added monthly and nothing is withdrawn. Real markets don’t move in a straight line, and in some years the balance would be worth less than you put in.

Either way, you drank the coffee. The only difference is whether anything was left over.

Illustrative only: 8% assumed annual return, set below the S&P 500's long-run average of about 10% since 1957. Not a forecast or a guarantee. Real results will differ and you can lose money.

Matching doubles what a habit costs you each time. A $5 coffee becomes $10: $5 for the coffee and $5 set aside for you. That’s the point, but it only works if your budget can absorb it.

If it can’t, you have two honest options. Match a fraction: $1 per coffee is $260 a year, which comes to roughly $3,960 after 10 years on the same assumption. Or decide this habit costs more than it’s worth to you, and cut it on purpose. Both are better than cutting it out of guilt and letting the $5 drift.

One more thing comes first. If you carry a credit card balance, pay that down before you match anything. The average card charges about $21 a year for every $100 you owe, far more than any example here.

Matching by hand means remembering every single time. Coinage’s Spend Matching remembers for you.

You create a rule with two parts. First, what it watches: one merchant (your coffee shop), a subcategory (all coffee shops) or a whole category (all restaurants). Second, the match: a flat amount like $5, or a percentage of each purchase. When you spend there, Coinage adds the match to a running total. Once the total is big enough, Coinage buys into a Nest you choose, a portfolio you build yourself.

The money for that purchase is cash in the investing account you connect. You keep it stocked with a recurring deposit from checking, set a monthly limit to match it, and Coinage never goes over that limit. Spend Matching is part of the free plan.

You can point the rule at whatever you’d otherwise feel guilty about: coffee, takeout, concert tickets, the occasional pair of $400 shoes.

So, should you really stop buying coffee to save money? Keep it. Just let each one cost $10, and keep the second $5 for yourself.