The claim and its arithmetic
The pitch: a $5 daily coffee is $1,825 a year, which invested at 7% for 40 years is roughly $390,000 — therefore small indulgences are secretly ruinous. The compounding is genuine; the house will not argue with (1+r)ⁿ. Every recurring outflow does have a future-value shadow, and seeing it once is clarifying.
Three honest objections
The counterfactual. The formula assumes every skipped coffee becomes a brokerage deposit for four decades. It doesn't; small savings leak into other small spending. The realistic alternative to a $5 pleasure is a $4 pleasure, not $390,000.
The denominator. Households do not go broke by percentage of coffee. Housing, vehicles, and recurring contracts are 60–75% of most budgets; the discretionary froth the latte factor moralizes about is single digits. A 10% error on the house is worth twenty years of lattes.
The exchange rate. The joy-per-dollar of small daily pleasures is often excellent. Deleting them buys little and costs morale — the budget equivalent of dieting by chewing less.
What the idea gets right
Its true target is not the latte but the standing order: the subscriptions, memberships and auto-renewals that recur without re-decision. These have the latte's compounding without the latte's joy — and unlike coffee, nobody savours a forgotten SaaS seat. A stack quietly consuming 2%+ of net income is a genuine allocation and deserves an annual audit; that is the honest heir of the latte factor.
The house position
Audit the big three lines with Rent or Buy, How Much Car and the Subscription Ledger — in that order of magnitude — and buy the coffee. Frugality that compounds is frugality on recurring structure, not on pleasure; the opportunity-cost note marks the same abuse from the other side.