I'm not convinced by the argument that the middle class stay middle class because they spend too much on convenience. $4752 a year extra will not make me rich, far from it. $475,200 a year extra WILL make me rich.
Then, this is just one source of additional savings. Cut further on services you don't really need (coffee at $4 a pop, $150/mo cable TV bill, etc.) and now we're talking some serious money.
Middle class people don't spend enough in a year ($40k per person, tops?) to be rich even if they spent NONE of it. And if they "got rich" saving money, what is that money for? To be spent on desirables.
That sounds like a lot. Would you say that the middle class is hamstringing their upward mobility by drinking lattes? There are several issues with this simplistic analysis. Here are just two. One, it's ignoring inflation and risk. Two, it's playing a psychological trick on readers (and perhaps on yourself) by asking them to superficially compare the utility of two things, $300,000 in the hand 40 years from now vs 14,600 lattes spread over 40 years, that will make the money seem like the obviously better choice to most people.
Actually, it's exceedingly difficult to get a handle on sparse, spread-out utility like in the latte scenario. Eliezer has the thought experiment where he asks you to compare the disutility of one person being tortured vs a million people suffering some trivial inconvenience like having a dust speck in their eyes. There he is spreading the utility over many people rather than over many years for one person, but the issues are strikingly parallel.
In theory (as presented by David Bach's latte factor (haven't read it but have heard of it)) but in practice unless it's forced savings people tend to spend differently if they have money and resources just because they feel secure and have a safety net. So they can take more risk.
The other thing that the "latte factor" doesn't take into account is the positive benefits of that $5 purchase. You go somewhere, you feel good perhaps that has an impact greater than just drinking coffee that you make yourself. There is a psychic benefit.
And I think Eliezer's experiment is a load of crap, imho.
For instance, 40 years ago, $3000 would buy a competent sports car, new, (MGB), and $7500 would buy a V-12 Jaguar (Source: http://www.teglerizer.com/new_car_prices_in_1972.htm). Imagine telling some in 1972 that if they put $50 a month in an investment account, in 2012 they'd have $37,500. That's sound like an enormous sum to them (10 new sports cars!), but when they cashed out this year I bet they'd be underwhelmed with the buying power of all that saving.
And when comparing inflationary effects, I bet if you gave a true comparison between the quality of the cars available in 1972 and 2012, adjusted for inflation, that the 2012 cars would win out.
:-)
In fact, I need to squirrel away a very large proportion of my salary to retire and be better off than I am now. I can't afford that, which is the point. The middle class is too poor to ever be rich.