Ramit Sethi argues you shouldn't obsess over small daily expenses like lattes. Instead, focus on systematic long-term investing to build wealth. He tracked his early earnings for six weeks and found he was spending 70% on food, showing where the real money goes.
May 22, 2008
70%
How many of us have heard our parents or something saying, you need to stop drinking those lattes. They add up to a lot of money. And yet we still drink them. I drink them. Why? Because we're not going to change our behavior for something that's 30 years down the road. So what are we supposed to do? For me, the big takeaway was that if something hasn't been working for 10, 15 years, as personal finance columnists have sort of lectured to us, doing more of it isn't going to change that. A lot of people, especially bloggers, love to write about frugality. Like, oh, I cooked this thing at home and I cut down on the number of grains of rice, so I was able to save 15 cents. I'm like, get a life, okay? The real power to grow wealth does not come from saving teeny bits of money here and there. Okay, that might make you feel good, but let's get real. The way that you grow money is by systematic long term investing. That has been the single most effective way to get wealthy in American history. The minute that your personal finance infrastructure becomes oppressive, that's the minute you stop using it. So if it would make you feel just tedious to have to enter nickels and dimes, put them in a cup and forget them. Just don't even worry about that. If you can get the major trends, you'll be shocked. I'll tell you this, when I started tracking my money, I was doing an internship or something. So it was the first time I was really earning money. And I looked at where I was spending after six weeks and I was spending 70% of my money on food, which is totally absurd. I had no idea. I'm like, where is it going? So. So that's when I was able to. Once I knew the problem, I was able to fix it pretty easily. But you know, you know, if I lost 15, 20 bucks here or there, you know, as long as I kept doing it, great. I think sustainability is more important than detailed accuracy.
