The Great Debate: Being Frugal Vs. Big Wins
Happy Money Monday, Tandem fans. Want to start a fight between personal finance advisers? Ask if it is better to live frugally or engineer the bigger financial items in your life. Over at TwoCents, Kristin Wong, summarizes to pros and cons of each approach:
“Big Wins” Vs. Frugality
While frugality sounds like a simple enough concept, other financial experts argue that minimizing spending isn’t the way to wealth. In a piece for the Huffington Post, personal finance author Ramit Sethi argues that you should forget frugality:
The classic advice of cutting back on lattes is the best example of personal-finance ‘experts’ run amok. Not only does the advice not work — most people fail to cut back on their caffeine because it’s an important pleasure in their day — but even if it did work, $3 a day doesn’t add up to much! You could focus on far more important things, like automating your money or negotiating your salary. For example, negotiating a single $5,000 raise early in your career would be worth over $1 million over your career.
Sethi talks about “big wins.” The idea is to focus your energy and time on the areas of finance that will make the biggest difference in your bank account. Sethi names seven big wins:
- Automate your finances
- Start investing early
- Improve your credit score
- Land your Dream Job
- Negotiate a raise
- Earn money on the side
- Negotiate your rent
Yes, each of these areas is easier said than done, and they take time and energy—which is sort of Sethi’s point. He argues that, instead of focusing in being frugal, you should maintain your energy on these big wins.
There is so much good stuff here, you really should check out the whole article.