12 Ways to Save Money Amid Rising Prices Due to Inflation
Pick any personal finance guru’s TED talk or “how to save money” blog post, and chances are you’ll hear something about ditching those little luxuries in the name of budgeting at some point.
“Buy your coffee at home could save you a bajillion dollars a year!”
Okay, sure, switching from a $5-a-day Starbucks habit to making Folgers at home can help you burn through a decent amount of savings over time. (In fact, more than $1,500 a year.)
But in the grand scheme of your financial well-being, will switching from freshly ground mocha delights to frozen blocks of coffee improve your chances of success?
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Rami Sethi, the guy behind I’ll Teach You to Be Rich, isn’t so sure. According to Sethi, it’s not the little things we need to focus on – they are The big picture things.
You can only cut so much
In a recent post on Twitter, Sethi summed it up this way: “Buy all the lattes you want. A $5 coffee won’t change your financial life. But learn how to invest automatically, how to choose the right asset allocation, and how to negotiate a $15,000 raise. I believe in asking the $30,000 question, not the $3 question.”
Here, he is half right. One $5 latte? No, it probably won’t decide your entire financial future. Daily $5 coffee? It can certainly affect your budget in a much bigger way – especially if you could invest the difference.
But he also went on to say another thing that I think is also worth adding to the conversation:
“There’s a limit to how much you can cut, but there’s no limit to how much you can earn.” Frugality will only get you so far. You can only cut so much! But you can always make more, and once you learn how, many of your money problems will disappear.”
And that, I think, is the crux of his position on the whole latte debate. Sure, you could break your daily commute at a coffee shop, but then what? What if that’s not enough? It’s better to focus on diversifying and increasing your income, rather than trying to cut out everything that makes life enjoyable.
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As Sethi says, “You should spend extravagantly on what you love and cut back ruthlessly on what you don’t. I don’t believe in cutting back on small purchases. I want you to spend MORE on the things you love.”
Why not both?
In the end, both sides are valid. The traditional advice to eliminate wasteful budgeting is sound. If you’re struggling to make rent, ditching expensive coffee in favor of homemade coffee is sure to affect your bottom line.
But Sethi is also right. When you cut your budget to the bone, what are you left with? Even if you manage to whittle it all down to the ultimate parsimony, how long can you realistically last before you, well, lose your mind?
As the name suggests, personal finance is personal. Yes, there are broad strokes that apply to everything. But the essence of what works for your neighbor will not be the same as what works for you. They may be able to live off less coffee without much of a morale blow, but you may prefer to work a few extra hours a week so you can splurge on the ultimate sip.
Everything is in balance. Have a smart budget that works for you and build your broader financial skills by learning to save smart and invest wisely. Advance your career, increase your income and keep moving forward – coffee in hand.
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We are firm believers in the Golden Rule, which is why editorial opinions are solely our own and have not been previously reviewed, endorsed or approved by the advertisers involved. Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool’s editorial content and is created by a different team of analysts. Brittney Myers has no position in any of the stocks mentioned. The Motley Fool has positions and recommends Starbucks. The Motley Fool recommends the following options: Short July 2022 $85 Starbucks calls. The Colorful Fool has a privacy policy.
The Motley Fool is a USA TODAY content partner that offers financial news, analysis and commentary designed to help people take control of their financial lives. Its content is produced independently of USA TODAY.
