No, it’s not about the latte—well, at least according to New York Times bestselling author and entrepreneur Ramit Sethi. I will teach you to be rich. He says we shouldn’t focus on questions like how much our coffee costs and instead, on bigger questions if we want to increase our bottom line. He wrote continued Twitter:
“In 2022, stop asking $3 questions and start asking $30,000 questions. Stop worrying about coffee. Focus on: increasing your savings rate, automatic investing, asset allocation, negotiating your salary/more earnings, fees (cc debt, mortgage interest, 1% advisor fee).” (Good news on that front, too: Many savings accounts are now paying more than their years, and you can see the best savings account rates you can get now here.)
Sadhak says Sethi is on to something – although they don’t always agree with everything he says. Cristina Guglielmetti, a certified financial planner at Future Perfect Planning, says the examples Sethi gives will have a bigger overall impact than cutting small expenses, but she recommends making some changes.
“Housing and cars take up a large portion of people’s disposable income. Get it organized and you not only free up cash flow to save or invest or pay off debt, but you also set your lifestyle expectations for later,” says Guglielmetti.
And while it’s a mistake to nickel and dime yourself and ignore the choices that will really move the needle, Gugglemetti supports safe spending numbers for small lifestyle expenses that allow you to achieve your big goals. “You need to spend some time finding that number, or have a planner help you do it; the goal is not to have rigid limits on different categories, but to actively decide how your money will be allocated,” Guglielmetti says.
In terms of prioritizing big-picture items, Bankrate chief financial analyst Greg McBride says, “Increasing your earning power, increasing your savings rate and properly allocating your investments are essential ingredients for building wealth over time. Reducing fees will streamline your efforts and keep more of those savings in your own pocket rather than someone else’s.” Check out the best savings account rates you can get now here.
For his part, Chris Chen, a certified financial planner at Insight Financial Strategies, says the two most important items on Sethi’s list are increasing the savings rate and investing automatically. “They both have to do with the rules of compounding, whereby money invested earlier will grow more than money invested later,” says Chen.
What’s more, Chen offers this simple advice to help people achieve this goal. “Increase your contributions to your retirement plan. It’s automatically withheld from your paycheck so you don’t miss it and automatically invested in your investment choices so it can grow. There are many studies that document that automatic withholding and investing people works for,” says Chen.
But don’t completely ignore the little things, says Andrew Feldman, a certified financial planner at AJ Feldman Financial: “There’s a lot to be said for balance between money and happiness, and if a cup of coffee or a certain little thing makes you happy, there is. A lot of value,” says Feldman. Check out the best savings account rates you can get now here.
Not everyone agrees with Sethi. While it’s generally true that focusing on where you live and what home you buy can have the most significant impact on your life, it’s also true, says Kimberly Palmer, personal finance expert at NerdWallet. What are the seemingly small choices we make every day? What we buy and how we buy have a big impact on our money over time. “Small shifts like cooking more instead of ordering out or replacing an unnecessarily expensive auto insurance policy with a cheaper one can have a big impact on your financial health,” says Palmer.
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