Save and Invest

4 financial experts weigh in on the "don't buy the latte" debate

Twenty20

You've probably heard this common financial tip before: If you want to save money, stop buying coffee out and make it at home instead.

Although 42% of Americans follow this philosophy, 18% say it's one of the most annoying pieces of financial advice out there, according to a recent survey of more than 2,000 U.S. adults, commissioned by NerdWallet and conducted by The Harris Poll.

Unfortunately, there's no definitive answer to the question: Should I skip the latte and save more? At the end of the day, it's a highly personal decision. But there's no denying the tip has garnered emphatic responses from both sides of the aisle.

Below, four financial experts weigh in on whether it's worth it to stress about small expenses like your daily latte.

David Bach: 'We all throw away too much of our hard-earned money on unnecessary expenditures'

Bach, the best-selling author of "The Automatic Millionaire," is credited with popularizing the concept of 'the latte factor.' The basic idea is that if you ditch a $5 latte every morning — or any small luxury you indulge in on a regular basis, such as bottled water, fast food or soft drinks — you'd have quite a bit of money to contribute toward savings instead.

"We all throw away too much of our hard-earned money on unnecessary 'little' expenditures without realizing how much they can add up to," he writes.

If you were to invest those savings, you'd earn even more over time, thanks to compound interest. But regardless of the rate of return, or if you choose not to invest at all, you'd still come out ahead, Bach says: "The key is not the return on the money as much as the amount of money that you're saving."

Sallie Krawcheck: 'There are layers of things that are wrong with this'

"There's this terrible advice that goes around: 'Don't buy the latte. Invest the money, and you'll become a millionaire,'" Krawcheck, a former Wall Street executive and CEO of Ellevest, tells CNBC Make It. "There are layers of things that are wrong with this."

First, Krawcheck points out, it would take a lot of coffee purchases and a high annual rate of return (10-12%) to turn your latte savings into $1 million. Most people aren't spending that much to begin with.

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Sallie Krawcheck: Why 'don't buy daily coffee' is terrible advice

Plus, if you budget responsibly (Krawcheck recommends the 50-30-20 formula), you should be able to spend a portion of your income on whatever makes you happy, whether that's travel, clothing or a daily coffee run.

"We're only on this Earth a short amount of time," she says. "We need to have fun."

Suze Orman: 'I would not insult myself by wasting money that way'

Orman, financial expert and best-selling author of "Women and Money," doesn't view coffee as a worthwhile expense. "I wouldn't buy a cup of coffee anywhere, ever — and I can afford it — because I would not insult myself by wasting money that way," she tells CNBC Make It.

Coffee isn't a necessity, Orman argues. Instead, you could be investing those dollars and letting them earn interest.

Let's say you spend around $100 on coffee each month. If you were to put that $100 into a Roth IRA each month instead, after 40 years the money would have grown to around $1 million with a 12% rate of return, Orman points out. Even with a 7% rate of return, you'd still have around $250,000. (While the stock market has averaged a 10% rate of return over the past decade, there's no guarantee that past returns will predict future gains.)

You are peeing $1 million down the drain as you are drinking that coffee.
Suze Orman

"You need to think about it as: You are peeing $1 million down the drain as you are drinking that coffee," Orman says. "Do you really want to do that? No."

Ramit Sethi: 'Life isn't simply about cutting back'

For Sethi, best-selling author of "I Will Teach You to be Rich," giving up life's small pleasures, like your morning coffee, just isn't worth it in the long run. Not only is it difficult to constantly say 'no,' but there's a limit to how much you can trim your spending.

"Life isn't simply about cutting back," Sethi tells CNBC Make It.

Instead of forgoing the latte, Sethi recommends focusing on managing your long-term goals first by automatically putting money into savings and investments each month. Then, after you pay your expenses, you can use any leftover money guilt-free.

"By reducing the number of things to focus on — and picking major, important items — you don't need to worry about that one-off latte or the extra $20 you spent on shoes," Sethi says.

Like this story? Subscribe to CNBC Make It on YouTube!

Don't miss: Here's the salary you need to earn to retire in 20 years with $1 million—without saving more than 15% of your income

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Don't cut back too much on spending or you'll be 'miserable,' says Ramit Sethi
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