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Conscious spending: How my friend spends $21,000/year on going out

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A few weeks ago, a couple of friends and I were talking about where we want to travel this year, and one of them said something that surprised me. “You probably wouldn’t approve, but I want to go to the Caribbean this year.”

Huh? Why wouldn’t I approve?

I thought about this in a pensive stare for many moments, taking the form of Rodin’s Thinking Man and wishing that I had a pipe and perhaps a tweed jacket. Then I figured it out. Apparently, I’m the personal finance guy to some people. And, I realized with a sinking feeling, to many people, “the personal-finance guy” means “the guy who tells me I can’t do stuff because it costs too much money.”

Nothing could be further from the truth. Now, I will call your ass out when you’re being stupid about money. But I’m not the finger-wagging parent who tells you not to spend money on lattes. Instead of taking a simplistic “don’t spend money on expensive things!!!” view, I believe there’s a nuanced approach to spending. Today, I’m going to tell you about 3 friends who are spending lots and lots of money on things you might consider frivolous–like shoes and going out–but I’m going to tell you exactly why I think they’re perfectly justified.

But first, let’s talk about a couple of things.

Frugality. There are plenty of blogs on frugality. This is not one of them. I think you can have lots of fun debating the minutiae about which grain of rice is cheaper, but it doesn’t really get you much further towards your goals. Also, most Americans are not brought up with the idea of frugality. I’ve been in a car with friends who were so hungry that they had to pull over and get food even though we were only 5 minutes from home.

For me, writing a blog on frugality would be like trying to convince an ankylosaurus to dance a god damn jig. As a result, I don’t believe that frugality is very sustainable for a lot of people. Yes, maybe we’ll stop buying those lattes (or whatever), but something else will take its place. In my opinion, unless there’s a fundamental mindset from a young age, it’s hard to change the I-want-it-now habits. Whether you agree with me or not, that’s why I don’t write a blog based on where to find the cheapest laundry detergent.

Finally, and this is the most important, frugality alone doesn’t get you to your goals. It’s a helpful but not sufficient condition. So I take another approach of trying to write about money holistically, while urging you to make your own decisions about what’s important enough to spend a lot on, and what’s not.

2007 is the year of conscious spending. THE PROBLEM IS HARDLY ANYONE IS DECIDING WHAT’S IMPORTANT AND WHAT’S NOT! DAMNIT! That’s why 2007 is the year of conscious spending, in which I want you to consciously decide what you’re going to spend on. No more “I guess I spent that much” when you see your credit card statements.

I guess I spent that much this month

No. Conscious spending means you decide exactly where you’re going to spend your money–for going out, for saving, for investing, for rent–and you free yourself from feeling guilty about your spending. Along with making you feel comfortable with your spending, a plan lets you continue growing towards your goals instead of just treading water.

The simple fact is that as young people, most of us are not spending consciously. We’re spending on whatever, then reactively feeling good or bad about it. Every time I meet someone who has a prescriptive budget (aka, “Here’s how much I want to spend on X this month), I’m so enchanted that my love rivals Shah Jahan’s for his wife Mumtaz Mahal (look it up).

Today I’m going to write about people who spend a lot on things that most people consider absurd. This article is not a rationalization for absurd spending habits. PLEASE. If you walk away from this article with your hands triumphantly over your head saying “I’M PERFECT!!!” then you are a moron and your parents are probably very sad. But if you look at the idea of conscious spending–of people who have paid themselves first, then used the money they have left over to do what they want with it–then your parents will be very happy and probably live longer. Man, I can’t believe I just used your parents’ longevity to convince you to read.

Ok, let’s get to it.

My three friends

The shoe lover. My first friend is a girl who spends about $5,000/year on shoes. Since expensive shoes cost about $300-$500 each, this is around 10 or 15 shoes annually. “THAT’S RIDICULOUS!!!” you might be saying. And on the surface, that number is indeed large. But I think iwillteachyoutoberich readers can look a little deeper. This girl makes a very healthy six-figure salary. She has a roommate, eats for free at work, and doesn’t spend much on fancy electronics, gym, etc. In fact, her job provides many of the amenities other people pay for.

She loves shoes. A lot. And so, after funding her 401(k) and a taxable investment account (she makes too much for a Roth), she has money left over. Now here’s where it’s interesting. “But Ramit,” you might say, “it doesn’t matter. $500 shoes are ridiculous. Nobody needs to spend that much on shoes! You’re just saying it’s ok because…well, I don’t know. But it’s too much!!!”

I see eloquence does not reign rule today. But I want to take that statement apart. First, I bet most people who are astounded at the price of her shoes haven’t even done what she’s done. To the people who would criticize someone for spending $5,000/year on shoes: Have you funded your 401(k) and started outside investment accounts? Do you keep a strict budget of how much you spend? Second, when you have extra money lying around (extra = after reasonably maxing out your investment options), what’s better: Making a strategic decision to spend on what you love? Or just spending it on random things here or there and eventually watching your money trickle out?

This girl loves shoes. And after planning for her long-term and short-term goals, she has money left over. This is why it’s so surprising that people pass judgment when they see others buying things like expensive shoes. This girl has her shit together. And I think she’s right on.

The partier. My second friend spends over $21,000/year going out. “OH MY GOD, THAT’S SO MUCH*#%(#%(#%!” a couple people said yesterday. Let’s break it down, though. Let’s say you go out 4x/week–to dinners and bars–and spend an average of $100/night. I’m being conservative with the numbers here, since a dinner can run $60/person and drinks could be $12 each. I’m not including bottle service, which might cost $800 or $1,000. (He lives in a big city.) That’s easily $400/week.

Now, this guy also makes a healthy six-figure salary, and he’s similarly invested quite a bit in his 401(k) and outside investments (including real estate). The key here is that he works such long hours that he’s only really free Friday and Saturday nights. And so he goes out. Hard.

In just a couple years, this guy has saved more than almost any of my friends. He’s also spent more on going out than anybody I know. And although $21,000 sounds outrageous on the surface, you have to take context into consideration. For example, look at his spending by percentage: Just for easy calculations, if we assume that this guy makes $210,000/year net, his going-out budget is roughly 10% of his income. For my friends who make $35,000/year, you can be damn sure that they’re spending more than $3,500/year ($67/week) on going out.

The subscription nut. The third friend is a tech guy who has a Tivo subscription, Rhapsody subscription, cable/Internet connection, gym membership, Netflix account, magazine subscriptions, and a couple of monthly online accounts. Now, when I wrote Guess How Much Your Subscriptions Cost?, the point was to highlight how we systematically discount the cumulative effect of our subscriptions. In other words, we forget to add them all up to see the total amount–which is usually a LOT. That’s why companies love, love, love subscriptions.

Anyway, I showed my friend my article, and he just shrugged. I started to get angry and use a line I’ve always wanted to use–“Do you know who I am?”–but he then explained that his subscriptions came out of his entertainment budget, which he’d carefully thought about and revised every few months. And, not surprisingly, he has a savings plan that is automatically deducted from his paycheck.

The point here is that, whether or not I agree with his subscriptions, he’d thought about it. He’d sat down, considered what he wanted to spend on, and was executing on a plan. That’s doing more than 99% of the young people I’ve talked to. Shit, if he had decided he wanted to spend $8,000/year on furry donkey costumes and Faberge eggs, that would have been great. At least he has a plan.

* * *
An analysis
I know a lot of people are going to start screaming at me for things they disagree with, so I want to try to take it step by step. Then you can send your criticisms to youarestupid!!!@iwillteachyoutoberich.com.

Most of us are not consciously thinking about our spending. By that, I mean we’re not being proactive about planning where our money should go. We’re going through our 20s doing whatever, and inferring our spending patterns from the bills we get at the end of the month. We not only lack a prescriptive budget (“I want to spend 20% on my retirement account, 10% on savings, 20% on going out…”), we even lack a descriptive budget (“where the hell is my money going?”). (More about budgets and asset allocation.) And so I completely understand the sickening feeling we get when we see our bills, or the guilty feeling we have when going out to a dinner with friends.

We’re also looking at surface characteristics and making stupid judgments. ‘You spent $300 on jeans!’ ‘Why do you shop at Whole Foods?’ ‘Why did you decide to live in that expensive area?’ I know we all wonder these things about our friends because I do, too. And, in fact, most of our judgments are right: Because young people are not carefully considering their financial choices in the context of their long-term goals–e.g., we’re not paying ourselves first and we’re not developing an investment/savings plan–when you think your friend can’t afford those $300 jeans, you’re probably right. I’ve tried to be less judgmental about this. I’m not always successful, but I’m trying to work on the fact that the sticker price doesn’t matter–it’s the context around it. You want to buy a $1,000 bottle of wine? And you already saved $50,000 this year at age 25? Great! But if your friends are going out four times a week on a $25,000 salary, I bet they’re not consciously spending.

The friends I wrote about above are an exception to most people our age.

They have a plan. Instead of frivolously spending money without a holistic goal, they took a few hours, wrote down where each % of every $ should go, and then built an infrastructure to do it automatically. They spend less time worrying about money than most people! These are people who already know about ING and their credit cards and basic asset allocation. They’re not experts, but they got started a while ago.

To me, this is an enviable position to be in, and it’s exactly what iwillteachyoutoberich is about: cutting costs on what you don’t care about, and spending extravagantly on the things you do. The problem is, we all want to have it now, so we make short-term decisions. We also use simplistic goals like “Oh, fine, no more lattes!” I hate when people say that, because (1) it’s usually thought of as a panacea, and (2) for the people who have to make that pledge, it’s usually such a part of their routine that hoping for long-term behavioral change is hopeless. What if I suggested that you could be doing what one of these friends are–spending whatever you planned without thinking twice–and it would make perfect financial sense? And you wouldn’t feel guilty about it?

I know that sounds good. But the catch is, there are no stupid, simple secrets like “no Starbucks.” You need to work to change your spending habits for a year, or maybe 2 or 3. Would you be prepared to work that long to get to a place where you knew exactly what you’re spending, and you could spend extravagantly on the things you value?

You can. It takes a plan. And it’s really as simple as that.

“But Ramit…”

“These people probably spend hours every day managing their money”
Nope. I asked them how much time they spent, and not surprisingly, it’s just a few hours a month. Two of them set up an automatic infrastructure so that money is automatically moved from one accout to another as paychecks come in. Once you set your infrastructure up, you’ll spend less time managing your money than most people do. And you’ll have more of it, too. The simplest way to do this is to set up a high-interest savings account (more about ING/setting up your accounts) and automatically deduct money from each paycheck.

“I’ll never make six figures in my early 20s”
THAT’S NOT THE POINT!! PLEASE DO ME A FAVOR AND DON’T GET CAUGHT IN THE DETAILS. That’s exactly what I wrote about in The Shrug Effect. Here are some better suggestions:

  • Think about it by percentage (“what percentage of my income am I spending going out?”).
  • Think about it in terms of goals (“how much do I need to save for a down payment on a house in 5 years?”).
  • Just look at yourself and say, what am I already spending a huge amount on? And what would I really like to be spending on? A good way to do this is to say, If I had all the money in the world, what would I like to do? Then figure out how to do it. But remember, pay yourself first instead of just spending on things you want.

Still, there is some truth to what you said. If you’re making $40,000, your lifestyle is just going to be different than someone making $190,000. That’s just a fact. But whatever your income is, I guarantee you can live better on it by having a spending plan.

“Yesterday, you wrote that you just moved to San Francisco and you’re paying 2x the rent. Why would you do that? Shouldn’t you live beneath your means?”
Good question. I still am. In my 2007 resolutions post, I wrote that in 2007, I’ll make more, save more, and spend more than ever before this year. I created an asset allocation to save and invest more money (both in the stock market and in my own businesses), and then I looked at what I had left over. And I consciously decided that the higher rent, parking, eating costs, etc, was worth it.

One additional point is that money isn’t just here to be saved and scrimped and pinched. It’s here for us to enjoy. And I love living in SF. When you consciously spend, you can say “it’s worth it” after having actually considered the alternatives using numbers, not foofy emotions.

“I have identified a fatal flaw in your reasoning. Yes, your friends may have maxed out their 401(k)s, but they could still invest more. And since every dollar we save now is worth a lot later, your dumb friends are actually losing tons of money!! HAHA!!”
Touche. Yes, technically you could always save more. But when your money becomes oppressive to you, that’s when you stop respecting it. If I were saving 95% of everything I was earning and not enjoying any of it, would I really have an incentive to respect my own self-set goals? As someone commented earlier today, personal finance has a lot more to do with “personal” than with “finance.”

And so, as a personal example of my finances and decision-making for moving to SF, I definitely could have taken the extra money and put it towards more investments. But after making my asset allocation, I’m happy with how much money I’m putting away. I don’t want to blindly just save more and more with no good reason. Conscious spending is about putting your money in the best places that make the most sense for you.

* * *
I think the comments on this post are going to be very interesting. I want my major takeaway points to be very clear:

1. Conscious spending is about making a plan on how you want to spend your money.
2. Most of us are not spending consciously–we’re just spending whatever and then getting the bills at the end of the month.
3. Why should we spend consciously? If your plan is forward-thinking, you’ll be able to pay yourself first by automatically saving/investing part of each dollar that comes in. You also won’t feel guilty when you go out, or buy shoes, or whatever, because it will be an explicit part of your goals. And if you structure your system to pay yourself first, in a few months, you’ll start to see it add up. Imagine where you’ll be one year from now.

Thanks for reading. And please tell your friends.

 

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128 Comments on "Conscious spending: How my friend spends $21,000/year on going out"

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bigfoot
bigfoot
9 years 8 months ago

Nice.

I have one question: why refer to ING and ING only?

Nowadays, ING is trailing the high-yield savings accounts. The truth is there are over 30 savings accounts that offer 4.5%+. There’s really not that much of a difference between them.

Ramit Sethi
9 years 8 months ago

I don’t have a strong opinion about which high-interest savings account people use. I’ve heard good things about HSBC and Emigrant Direct. I just happen to have an ING account, so if people want a referral click here.

When I signed up, the 0.3% difference was not really that big a deal to me (they change all the time). I’d rather go with what I know / am comfortable with. So, bottom line, I’ve heard good things about all the big high-interest savings places, and if you like another one, you should go for it.

Ali
Ali
3 months 19 hours ago

I want 1,000 $ . o learn at the university
T
Is it one help me

Jennifer Lynn
9 years 8 months ago
Indeed, a wonderfully insightful post. What is frivolous spending for one person is quite different for another. It all boils down to perspective and desire. For those who are strong advocates of socking away almost every penny they have, or depriving themselves of small, enjoyable luxuries – this on the surface may seem like an admirable goal. But given the choice of being filthy stinking rich in my old age, or taking a more subtle approach by making wiser financial decisions while still nurturing my passions … well, I know what I would choose. We are, after all, only young… Read more »
Cal Newport
9 years 8 months ago
Great post! It took my wife (then girlfriend) about a year to move me away from my repentent monk style of budgeting — after buying something big stop spending money until you feel you’ve sufficiently atoned for your sins — and toward something akin to the concious savings you describe above. One wrinkle: I write, sometimes for professionally, and I also do the occasional consulting gig. The result is unexpected checks come in every once and a while during the year. The question is, what should you do with unexpected income? Save it all? Blow it all? The technique we… Read more »
MissPinkKate
9 years 8 months ago

How many people in the country, really, make over six figures? Your examples border on the ridiculous.

That’s not the point of the post. The same thing holds true for people who make $20,000 or $40,000, just at different levels and for different things.

-Ramit

James
9 years 8 months ago

I totally agree. It is all about being conscious about what you spend.

Why be miserable and frugal if you have do what you love and still be wise with your spending habits?

Joe
Joe
9 years 8 months ago
Although many people might have trouble articulating it, I suspect that the judgment doesn’t come because your friends are spending recklessly — if they’re saving appropriately and sticking to a budget, *obviously* they’re not being financially reckless. The judgment comes from the fact that they’re spending so mcu and so *selfishly*. $21,000 a year on parties?? $5,000 a year on shoes?! Gimme a fucking break. Why not give a little to the local homeless shelter instead? And to fight malaria in Africa, and feed starving children in India? And if you’re already giving to those causes, give some more, or… Read more »
Jenn
Jenn
9 years 8 months ago

Right on. I couldn’t agree more.

I am way too impulsive with my spending and the guilt bites me in the butt in the end.

If I spend on something I’ve planned for, the guilt part never comes around.

It’s the sitting down and making myself plan and stick to the plan that’s the hard part.

Becca
Becca
9 years 8 months ago

This is great.

But I was going to say the same thing about ING. I have an ISA account through Northwestern Mutual that automatically deducts money from my checking account each month. It averages 4.7%. And hsbc direct is offering a whopping 5.05%!

Bran
9 years 8 months ago
Your theory is great, “Spend whatever is left over on whatever you want.” But in practice, it doesn’t convert to those of us with smaller incomes. You suggest that we just think of it as percentages, but the percentages for discretionary spending aren’t the same for people who make 6 figures (10%) and those who are struggling to pay the mortgage (Your theory is great, “Spend whatever is left over on whatever you want.” But in practice, it doesn’t convert to those of us with smaller incomes. You suggest that we just think of it as percentages, but the percentages… Read more »
Ben Bach
9 years 8 months ago

Hey Ramit

Awesome post. As a guy with a penchant for expensive shoes (prada sport and Donald J Pliner are my two favorites) I completely agree. I have friends making 10% of what I make who think its ridicolous to spend 500$ on shoes, yet they have a $5K TV in there rental apartment with 80$/mo cable. Incredulous!

Great Blogging!
Benjamin

j
j
9 years 8 months ago
I really liked the article, but I came away feeling like I agreed with some parts and thought otehrs were a bit silly. The fact is, you’re pretty much right. If people know enough to manage their money, save a good chunk of it and make a healthy income, then why not go blow some cash for fun with what’s left over? It’s more or less the reason they’re earning all that money in the first place. I think you’re right on when you tell people that prioritized spending is more important than assuming an across-the-board Spartan spending regimen that… Read more »
Nagel
9 years 8 months ago

Everyone is different. People will spend money on what they want and that is fine, but you need to have some left over to save for a rainy day and retirement.

Budgeting is one of my 2007 financial resolutions:
http://finance.webaplex.com/12/financial-resolutions-for-2007

Mike
Mike
9 years 8 months ago
It comes down to personal choices. Higher salaries provide avenues for bigger spending. If these people have their shit together, as Ramit indicates, then more power to them for spending extra income at will. If it makes them happy and doesn’t hurt others, it is their choice. Regarding Joe’s comment, some people don’t feel the same satisfaction about giving to charity that they feel from “selfish” spending. Right or wrong, it still comes down to choice. Regarding Bran’s comment about the numbers not adding up at lower salaries, sure, a person with a smaller paycheck’s “free” spending won’t be as… Read more »
Carlin
Carlin
9 years 8 months ago
$60 for a dinner. If I ever visit San Francisco and go into a restaurant, I’d probably die. $60 in the Midwest will buy you a very good meal. Cost of living differences amaze me. I would imagine that your friends live near you, around San Fran or whatever. Be curious to see what the equivalent of a $100,000 salary there is in the Midwest. Salary.com says about $60,000. Sound right? — I don’t know about the comparison, but to be clear, $60 counts dinner and drinks for a pretty nice place. There are also tons of cheap places people… Read more »
Lis
9 years 8 months ago
I have to admit that I am one of those people who just saved and saved and saved without ever spending on little luxuries here and there. An interesting twist is that I married someone who never saved a dime and had credit card debt from luxurious spending he couldn’t afford. Interesting? Well needless to say, I budgeted and budgeted and we got out of debt within a few months. Now we’ve set up our ING account and we’re saving for that “rainy day” when he comes home from Iraq. I have to be perfectly honest.. When he comes home,… Read more »
Tropical
Tropical
9 years 8 months ago
I wish I could make a descriptive budget, but I HATE minutiae and tracking things! Prescriptive is a little easier–if you know what you make, you can easily set a fixed amount to pay yourself first (or second, if you tithe, the first 10% goes to God). Then among the remaining 80% or whatever, it doesn’t much matter whether you spend the ‘padding’ on shoes, or eating out, or subscriptions, as long as you can pay the credit card bill in full every month. To the sourpuss bitching about six-figure incomes not giving more of it to charity—it’s all relative.… Read more »
J
J
9 years 8 months ago

http://money.cnn.com/2007/01/24/pf/millionaire/derico/index.htm?cnn=yes

Have you read this article? While the woman is doing a great job saving….she seems to really be doing it the hard way. Investing rather than paying off all debts right away, and paying with a credit card can definitely rack up extra cash. I just thought it was an interesting article.

Ranjan
9 years 8 months ago

I’m amazed at the amount of thinking u do in writing that post.

U talk about conscious budgeting and also doing what u want to do in life. Well said, but most people like me have trouble balancing them. Obviously there’s a thin line separating them and u hv to learn to balance them yourself. Thanks for pointing it out

Jonathan
9 years 8 months ago

Great article. I do agree that we should focus more on “conscious spending,” rather than just cutting out our lattes (although I don’t think that’s horrible advice either).

I think being frugal can be helpful. It’s all about stopping the habit of spending money on crap that doesn’t add any value to our life.

Ramit, check this link and book out. Maybe you’ll like it: http://www.homeeconomiser.com

Alex
9 years 8 months ago

Thank you so much for including entire post in rss feed!

anon
anon
9 years 8 months ago

> (look it up).

> and your parents are probably very sad.

Wow. Someone got out the wrong side of bed this morning!

Tom
Tom
9 years 8 months ago
So how is that brand new car, Ramit? Lost it’s new car smell? Being dinged up parking in the city yet? This post doesn’t really surprise me – you’ve never claimed to be frugal, and certainly the blog reflects that. I think the reason why these purchases / costs outrage people is really more that most people consider this kind of spending wasteful. It isn’t really about how much money it is or what percentage of income it is. There are all kinds of emotions attached to money, and to many people it’s just out and out wrong to spend… Read more »
Enrique
Enrique
9 years 8 months ago

This is one way on becoming wealthy. Work, save, and hopefully enjoy what you do.

Joshua Keezer
Joshua Keezer
9 years 8 months ago

Perfect timing! I was feeling bad about bidding on and winning an eBay auction for an autographed copy of a comic. But this also comes on a week were my wife and I just reorganized our budget to prepare ourselves to begin putting money towards savings account and is within our entertainment expenses.

Dusty
9 years 8 months ago
“If you walk away from this article with your hands triumphantly over your head saying “I’M PERFECT!!!” then you are a moron and your parents are probably very sad.” This really made me LOL. I have a few friends whose parents are probably very sad. Great article, and I definitely agree with a lot of what you’re saying. What’s the deal with people putting “-Ramit” at the end of their comments? I thought they were quotes from the article, but I couldn’t find them above. Just curious. — They’re my responses to comments (this is Ramit responding to Dusty’s comment).… Read more »
Kimber
9 years 8 months ago

I do believe in saving money in areas that are not important (frugality) because money is limited. But in the areas that are important, it should be spent.

For the hubby and I, its travel. We bought a less expensive house so we could still afford to travel. I’d happily save the $5 line drying laundry so I can buy a crepe in Paris. Yes, we spend a lot in travel (10% of our before tax income) but we do so consciously.

Susan
9 years 8 months ago
I really can’t condone this. Not because I’m a frugal person, though I am. But because this isn’t just lack of frugality, this is waste on the largest possible scale. How does someone who makes six figures justify drinking $12/glass drinks to the tune of a person’s entire salary for a year while there are people in this country who can’t afford to feed their children? It doesn’t matter if they’re already giving to charity. If they’ve got enough left over for this, I guarantee they aren’t giving enough. I’ll say it again: Whole families in this country are living… Read more »
Enrique
Enrique
9 years 8 months ago

Ramit is describing people in the upper income bracket of our society. Maybe the top 10%. The ones that make $100,000 or more. They are probably single and without children

vly
vly
9 years 8 months ago
Excellent article, Rammit. I’ve just recently started reading your blog, and you bring up great points in this article. While I’m not making $200,000 a year like you’re partying friend, I can definitely relate to him. I whole heartedly agree with your analysis. I work hard, have investment property, max my 401(k), dump money to my ING account, and whatever I have left I use to enjoy life whether it be going out or spurlging on the latest gadget. Saving money for the future is important, but not at the expense of enjoying your 20s and 30s – as long… Read more »
Eric
9 years 8 months ago

Ramit,

What do your friends do for work that pays them so much money at an (apparently) young age?!?!?

Most of the people I know who have high-paying jobs like this work in finance, consulting, and tech.

-Ramit

Dave M
9 years 8 months ago

Susan – your comments sent chills up my spine. You are SO right on every point! If I did make 6 figures (which I don’t), I certainly would not fritter away my good fortune like Ramit’s friends are doing. That’s just me I guess.

Ramit – I’d LOVE to know what your friends do for a living to earn them 6 figures in their 20’s…?? That sort of thing has always fascinated me. Apparently, IT was the wrong career choice. 🙂

Jonathan
9 years 8 months ago

I agree with both sides.

1. If your finances are in order and you have money to spend on ‘silly’ things you enjoy, that’s not really a bad thing.

2. However, even if I was a billionaire, I would not buy $1,000 shoes and all that other nonsense. I don’t enjoy having useless material possessions.

Kimber
9 years 8 months ago

This money that they’re “wasting” on $12 drinks is not being flushed down the toilet, never to be seen again. The purchaser is helping to pay the server’s salary, the bartender’s salary, the restaurant manager’s salary, heck the person in the plant making the drink’s salary.

Its funny, I bet the same people who are outraged at the expensive drinks shop at Wal-Mart and complain about the minimum wage being too low. The guy serving $12 drinks is NOT making minimum wage (the tips alone…).

Catch a Gideon
9 years 8 months ago

Right on Ramit! I am very frustrated by the personal finance bloggers who talk only about ways to save money and essentially reduce quality of life.

Obviously it is important to save and plan for the future, but it is also important to enjoy now. If you can afford to spend $21,000 on what you enjoy every year, then more power to you.

John
John
9 years 8 months ago

Susan – that’s not really fair at all. Ramit only gave you a small insight into the lives of his friends, it is really impossible to make any rational argument about their contributions to society. Not to mention this site is designed for “self-development”, not societal ills. Please take the flame elsewhere.

Ramit – excellent piece. I track my spending more lately, but without purpose & I often fall victim to whipping out the plastic & going over-budget (mostly on impulsive purchases). This really creates a framework to help me get off that gerbil-wheel this year.

Dennis r.
Dennis r.
9 years 8 months ago
Tropical I think that your argument is missing the very valid point that there is a clear line between living in comfort and living in luxury. It’s not strictly a percentage issue, and those numbers you’re throwing out are definitely exaggerated against the argument you’re attacking. No one suggested anyone donate a third of their income, but someone making less would DEFINITELY feel it more. I think of it sort of like the cost of admission at a theme park- you have the base price of your ticket, which grants you access, your basic rides and whatever- and then you… Read more »
Joel Odom
9 years 8 months ago

Thanks for the interesting post. You are a good writer, but I would dissuade you from using so much profanity. I think that you will find that it alienates much of your audience and distracts from your point.

Jennifer Lynn
9 years 8 months ago
“Its funny, I bet the same people who are outraged at the expensive drinks shop at Wal-Mart and complain about the minimum wage being too low. The guy serving $12 drinks is NOT making minimum wage (the tips alone…).” What is ironic about this statement is that anyone shopping at Walmart is condoning outsourced sweat shop labour. Does it give you satisfaction buying a pair of cheap shoes a little child slaved over for your benefit? My point isn’t to attack people who shop at Walmart. But instead to prove that it’s always easier to point the finger and criticize… Read more »
J
J
9 years 8 months ago
Hey Ramit, I have 3 stories of my own that make me wish for a pipe and a tweed jacket. I don’t know if I agree or not, but there seem to be some life lessons some where in the mix. 1). The Scavengers: A certain group of people I know believe in acquiring (not always buying) everything second hand. Their reasons for this range from the 3 Rs of environmentalism, a belief that many things were made better in the old days, artistic sentimentality and pure frugality. Lately, they’ve been talking about casing the dumpsters at bakeries, restaurants and… Read more »
free as a bird
9 years 8 months ago

Ramit and friends who, like me, are on incomes lower-than-6 figures…

You may want to check out savemoneycanada.com –free online directory of cheap and free options, free e-newsletter re: making real gains while simplifying, etc.

Nony-mouse
Nony-mouse
9 years 8 months ago

I think I know what Ramit is saying….I have become a slave of my money. I am 31 years old and have saved up slightly more than $300K. It hurts me to spend $5 on lunch at work. I dont seem to be enjoying my money. I hate what I have become. I pick up furniture from dumpsters. I think I need help. I live like crap! I am embarrased at inviting people over coz my apartment has cheapo stuff.

I need to change and enjoy my money.

mjh
mjh
9 years 8 months ago
Ramit, I enjoy your blog very much and enjoyed reading this post and its related comments. I do agree with the point that sound personal finance is not about living like a monk all your life. Life is for living, and if you’re making good enough money that you can plan for a secure future and enjoy some of the finer things in life, then good on you. But the point has been made that sometimes those “finer things” are in fact wasteful and obscene (though this does depend on how the person in question purchases, displays and values such… Read more »
brittany
brittany
9 years 8 months ago

Ramit, I agree completely. I pay a small amount of my income (Ramit, I agree completely. I pay a small amount of my income (<25%) in rent, which is very low by NYC standards. However, me and my fiancee love to cook, so people would probably gag if they saw our grocery bills. However, we have chosen to live with a smaller apartment than what we can afford, spend more on high-quality ingredients, and save for retirement.

It’s a choice we consciously made, and I am glad every time we cook that we did.

Jon
Jon
9 years 8 months ago

heh… I look forward to being a PhD student for 4 years…..rrright

Cristina
Cristina
9 years 8 months ago
While i do agree with alot of what you are saying in theory (be aware of where you money is going) i wonder how you would suggest someone who does not make six figures find realistic ways to save. I am a Phd student and i make under 20,000 a year after taxes (yes even poor students get taxed). I find myself cutting corners by eating in all the time, drinking from a flask instead of buying, using half the daily amount of conditioner i’m used to, and others sorts of things. I even use coupons sometimes but in the… Read more »
James
James
9 years 8 months ago

It’s funny . . . often the people who are outraged by high spending of others are those who have not been in the position to spend that kind of money themselves. They cry about excess and unreasonableness, as if they know.

If and when they do reach that position, they stop complaining about the spending habits of others because they realize it’s their goddamn money. People who make $40k: would you consider it reasonable if a man from Africa decried your spending $300 a month on rent because it was so “excessive?”

Mike
Mike
9 years 8 months ago

Cristina (Post #45), it sounds to me like you are already investing in your future… by working on your PhD. Likely, with that kind of education, you’ll land a career here in the near future that will provide better means for saving money for retirement. Kudos to you for getting the education. It will pay you in dividends soon enough.

scribo
scribo
9 years 8 months ago

Um, yes, James, if I were spending $300 on rent in Africa.

Greg
Greg
9 years 8 months ago

Great Post, I just subscribed to you blog. I am moving to San Francisco or Berkley in the coming month as well.

Tom
Tom
9 years 8 months ago
James: Mine was the original post about the waste of $500 shoes. A bit about me – I’m a physician who also has a real estate brokerage. I made well over $300k last year, and my net worth is somewhere upwards of $1 million. I think we’re all entitled to our own opinion – about whatever we care to have an opinion about. No one was tearing up these people’s credit cards or banning them from stores. Anyway, I have reached “that position” where I could spend that kind of money. I still think waste is wrong. Not everyone’s convictions… Read more »
sfwriter
9 years 8 months ago

What a well-thought out post!

Your posts always get me thinking about how I spend my money since I’ve had quite a bit leftover strangely enough making $30K a year. Looking at it in terms of percentages really helps when I notice Ive spent $100 on groceries for myself.

Thanks for reminding me it’s okay to spend money on things you love and value. I forget that when I think of how little money I make.

Juixzee
Juixzee
9 years 8 months ago
Looks like you don’t even understand the basics of economics…… ================================================== 1. In a “free market economy” where violence is not used to usurp wealth, the wealth distribution will be well spread out 10% rich people, 80% middle class people, 10% poor people. The majority middle class people will control 80% of the wealth. 2. Any deviation from the above as is happening in US economy 7% rich people own 80% of the wealth/property then there is something terribly wrong. The reason can be a. There is violence and usurpation of wealth. b. There is a currency system fault. 3.… Read more »
Josh
9 years 8 months ago
I’m impressed by the diversity of opinions this post has generated. After visiting many third world nations and even living in one for a while, I can say it is tough for me to justify spending that much on dinner and drinks. I do see Ramit’s point that many people need to spend some of their money on things that they themselves value. But it’s a slippery slope for me because where do you draw the line? Other people need money A LOT more than I do but it is okay for me to spend it on meaningless purchases to… Read more »
Laz
Laz
9 years 8 months ago
Retirement is not the only way to pay yourself in life. You act like as long as you pay the bills and save for retirement, then it is ok to piss away $100,000 on gumballs because it makes you “happy”. There are so many other things a person could do with extra income besides rampant consumerism: owning your home outright, saving up seed money for a business, donating to charity… some of these things might make a person MORE happy than owning a pile of merchandise. Just because you can afford to waste your money doesn’t mean that is the… Read more »
Hendy Irawan
9 years 8 months ago

Wow, you definitely have lots of readers…

But your articles are so great & high quality !!!

As of now I’m managing my stuff using software, from Money 2004 to (now) Money 2007 Home & Business. Have tried Quicken (2005 & 2007 Home&Business) but the transition didn’t go smoothly…

Overall I’ll be keeping in touch with your blog!! It’s so useful!! 🙂

jfpbookworm
9 years 8 months ago
“I’ll never make six figures in my early 20s” THAT’S NOT THE POOINT!! PLEASE DO ME A FAVOR AND DON’T GET CAUGHT IN THE DETAILS. That is, in fact, the point for many of us: that “conscious spending” when you make $200,000 a year is not just quantitatively, but qualitatively different than “conscious spending” when you make $20,000 a year. The former can typically meet his/her basic needs, and is simply deciding what to do with the excess income (save, or spend on luxuries; if the latter, which luxuries); for the latter, any saving or luxuries comes out of meeting… Read more »
Yinyang
Yinyang
9 years 8 months ago
Great post. I’m tired of hearing people saying that this type of spending is bad. Some people want to go out, some people like shoes, that’s ok, that’s their choice! For me I like to spend my money on travelling and on eatting fine meals. Those are things that I take into account with my budget and refuse to live without. I think it’s interesting that there are people who are suprised that these folks can make over 100K in their 20s. It’s definitely possible, especially in finance and consulting. I don’t think some realize the amount of hours and… Read more »
Lazy Man and Money
9 years 8 months ago
I think it’s great that they are spending that much money. I was making over six figures at age 23 at a hot Internet company. I went out and got a new $30,000 car as my luxury item. I had it in my budget and still maxed out my retirement accounts and things like that. Then things changed. The economy changed. Internet companies were laying people off and I was a victim. Suddenly my income dropped quite a bit – to around $30K a year. I had enough to pay off the car, but not enough to fund any retirement… Read more »
jfpbookworm
9 years 8 months ago
As much as I complained before, I do engage in “conscious spending” (on a much smaller scale; I make nowhere near the amount these folks do). Here’s a little thought experiment that helped me focus on whether I was optimizing my discretionary spending: For a time period (I tend to go with a month), make two lists. The first list of all your “discretionary” expenditures – that is, things that you bought that you didn’t immediately need (what constitues “need” is up to you, but for these purposes it’s better to be overinclusive), and the amount you paid for them.… Read more »
John from LA
John from LA
9 years 8 months ago

I find it somewhat disconcerting that your friends are described in such an ambiguous and general way that it is not clear if they are even real people. There are no descriptions of their jobs or any details that would make it seem like they are any more than mere theoretical abstractions.

They’re real. I kept their details confidential because they requested it.

-Ramit

Filip
Filip
9 years 8 months ago

1. Only an individual knows best what’s best for themselves. To this end, you can’t ever help people, no matter what you tell tell them or how well meaning your words are. Even reading your blog is conscious decision somebody has to make.

2. It can be real difficult to go from a backward looking “budget” (ie. getting bills and paying them), to a forward looking budget (ie setting money aside before you receive the bill, and getting it to pay itself). It takes an enormous amount of savings and willpower. You should write a more comprehensive article on the transition.

Rhaize
Rhaize
9 years 8 months ago
Excellent article. Conscious spending is very important but I think you could have used better examples. Early 20s friends making 6 figures? Know your audience, most people here that visit your site daily, are not making 6 figures or most likely anywhere close to that value. You want to relate to them, by bringing up young people making 4x as much as they are and spending it frivolously is not going to make them happy, most are probably jealous. Hek, I just turned 20 and still in school and I’m jealous! What do your friends do? What’d they major in?… Read more »
Freelove
Freelove
9 years 8 months ago
What are the socialists’ responses to comment 34? (Specifically the first paragraph.) If you still think “Damn the economy, damn capitalism and the greedy self-centered actions that guide it; people with this much money owe it to everybody else”… my next question is do they owe it their fellow man to work at all? What if they decided to live modestly, cutting their expenses dramatically and then decided that they don’t really need to work their 75 hour per week jobs. Is working only 10 hours per week to support a more frugal lifestyle a morally conscionable action? Next question:… Read more »
mojohealy
mojohealy
9 years 8 months ago

I think Rhaize makes a valuable point. Though you used these examples to illustrate your point and to encourage a vigorous discussion, the three wealthy examples you used could be a little alienating to the majority of your readers.

(A side note: have you done any research into who your readers are?)

I took the time to read your post and consider the basic points you made, but it was largely irrelevant to me as I’m spending about 70-80% of my income on living expenses right now.

rkt88edmo
rkt88edmo
9 years 8 months ago
The tease is much greater than the pay off. Tease : my friends spend $$$ and it is ok, how can that be? Pay off: They have very high incomes, but that is not the point. YAWN. I thought it was going to be a club owner, a fashion expert/designer, and a media maven of some kind, but I was wrong. Maybe you could have included more about how exciting the tease was and how boring the pay off was and that little easy boring steps beforehand allow us to make very exciting financial decisions afterwards. — Interesting comment. Maybe… Read more »
bella
bella
9 years 8 months ago
This article is the perfect example of a good argument made poorly. Ramit, if you were a lawyer representing an obviously innocent client, the prosecution would have eaten you alive and sent your client to life in prison. You make a valid point — a point that I myself have been preaching to friends for many years — but you do so in the most alienating way possible. My husband and I are 20-something young professionals (well, he’s technically 30 holding on to 29 for dear life), making similar salaries to those cited in your article. We not only respect… Read more »
Corinne
Corinne
9 months 28 days ago

I have been scanning through all of these comments to help me articulate how this article made me feel/think. This hits the nail on the head, so thank you!!

Kayla
9 years 8 months ago
Ramit – I’d say well done on your examples – seems to me you were after comments and inciting people to point of anger, and you got it:) To those who are upset about the 6 figure income, you’re arguments (most of you) are valid, but Ramit got what he wanted as a blogger here, which wasn’t to “associate with the upper-crust” or the “alientate his readers” but to use a devil’s-advocate example to illustrate his point – to the point of being extreme (although a real life one, too). But look at the big picture. I agree with some,… Read more »
Wanda
9 years 8 months ago

I can see how the examples will get people riled up, but I think the “conscious spending plan” part is still something useful for me to think about.

amillionby40
9 years 7 months ago

I absolutely agree with your thoughts about conscious spending. I personally struggle to not become so involved in saving that I never enjoy life. It’s important to have balance.

j.d. candidate
j.d. candidate
9 years 7 months ago

I am very impressed with the manner in which you analyzed the financial habits of your friends. I am 22 and although I am a law student (which translates into extremely indebted) I am interested in investing. Unfortunately, I was a political science major and I know less about investing than I know about Tax at the moment (lol, just a little law student humor for you). Anyway, I was wondering if you might offer some resources or words of wisdom for a novice such as myself.

Natalie
9 years 7 months ago

“Every time I meet someone who has a prescriptive budget (aka, “Here’s how much I want to spend on X this month), I’m so enchanted that my love rivals Shah Jahan’s for his wife Mumtaz Mahal.”

You would love my husband’s budget! =) His goal is to retire when he’s 40 (he’s 28) so he makes sure to put away for retirement and keeps a prescriptive budget.
Because of his conscious spending habits he can spend money on the things he loves.

Maxine
Maxine
9 years 7 months ago
Considering the title of this blog is “I will teach you to be rich”, I’m finding it very amusing that so many of its readers seem to have a problem with reading posts about rich people and their money habits. If people are honest with themselves, half the reason why they want to be rich is so that they can buy and do all the things they want. To suggest otherwise and make claim to higher ideals is plain, self-delusional bullshit. I want to be rich. And sure, I want to help the less fortunate and maybe help some people… Read more »
bigbuddha
9 years 7 months ago

Great post … as with all things … balance and moderation is the key … saving and important is important but also enjoying the fruits of your labour are as well.

Nick
Nick
9 years 7 months ago

Good article. If you think this does not apply to a lower income person, there’s no other way you will be convinced. Because your still probably spending a HIGHER percentage on stupid *things* than you should. And percentages work on any dollar amount if you didn’t already know.

miserman
9 years 7 months ago
I like the post because sometimes you have to spend money to get what you need, but all those shoes? come on. Other people are living in mansions due to her spending habits. If she saved that money over time, she’d (later) be able to buy shoes from interest income. http://www.stopspendingmoney.com shows you how to save money on big ticket (and small ticket) items to improve your own bottoms line – Once you are a millionaire – then go out and spend to your heart’s content, but living in debt to support frivolous habits makes no sense and just makes… Read more »
NIUIcePrincess
9 years 5 months ago

i liked this post. i linked back to it in my blog where i will talk about my own experience with conscious spending. Thanks!

Mary C.
Mary C.
9 years 4 months ago

I really liked this post. I enjoy your posts too. Doesn’t matter what you spend your money on as long as you can affort and you are saving for your other goals. People who judge others spending can be really annoying. I had a friend who couldn’t understand why would occassionaly spend $4-5 at Starbucks but who didn’t have any problem dropping $20 on drinks at a bar. Doesn’t make any sense!

maura
maura
9 years 1 month ago
Some people who think spending $500 on shoes is excessive may have other equally expensive hobbies. I know people who have several cars, RVs, ATV, and motorcycles. Other people spend money on travel, eating out, jewelry, and…designer shoes. Someone who is supporting a family of 4 on $35,000 a year may think that this spending is excessive. But there is someone else supporting a family of 4 on $20,000 a year who thinks that $35,000 a year is real wealth. Even the people in the top 1% wealth bracket in the US do not have enough money to save every… Read more »
Liz
9 years 25 days ago
Interesting post. I saw it from the link on The Simple Dollar. I just hope that your friends don’t regret their spending later. When you make 6 figures, especially right out of school, it must be relatively easy to max out the retirement and put money to savings. The thing is, that time goes on, and you realize after two years that you hate your job. Or you get married and want kids and want to stay home with them. Or a family member gets sick. And you have a closet full of expensive shoes, or half memories of drunken… Read more »
Mrs. Micah
9 years 25 days ago
Very thought-provoking. I think your friends are justified–because I know that if I had that much money and used it responsibly, then I’d probably want to spend a whole lot on quilting materials. (I find that particularly justifiable since I give most quilts away or sell for charity.) But deep down it’s a hobby and I’ve just found creative ways to use it to further my passion for making the world better. An important part is that your friends are enjoying their lives. Life is so much better that way, and if repsonsible spending on shoes is the ticket, there… Read more »
Fabulouly Broke
9 years 23 days ago
A. It’s your money. You earned it. They earned it. They can spend it however they want, without having to ascribe to the idea of “starving children could be saved for $400/week!, How DARE you be so selfish!”That’s just BS. When *YOU* start making that much money, THEN you can talk about spending all of it however you wish – saving children, polar bears, the earth, etc. B. These guys and girls are probably i-bankers, who spend many many many many hours at work, and only have Fri/Sat to really let loose. Did *you* want to ascribe to that lifestyle?… Read more »
OdayJuarez
OdayJuarez
9 years 14 days ago

“You can have your pie AND eat it too!”

It’s true you don’t have to impovish yourself to save, but this entire post seems like a diet add claiming you can lose hundreds of pounds eating cake.

Obviously you cut/budget the big expenses first, but the impression I got was somehow just through the magic of keeping track of it, you can spend lots of money stupidly, and that’s a perfectly fine idea.

Selling people feel good feelings about stupid decisions to what end?

Dara
Dara
9 years 10 days ago
No, it’s not just about keeping track of the money, it’s about actively planning what you are going to spend it on. If you only make enough to pay the bills, then you plan on that. But if you have a 6 figure income, even if I think spending 5k a year on shoes is stupid, so what. The woman earns enough to be able to allocate $5K a year on shoes without neglecting necessities/savings/charitable contributions/etc. Good for her to be able to afford her expensive hobbies. Heck, most of us have some hobby that we invest irrational (or so… Read more »
oliver
9 years 5 days ago
this is probaly one of the best financial advice articles i’ve read. I think the advice books that cite don’t drink latte or don’t buy new shoes as ways to gain wealth are doing a disservice. Its not about not spending, but instead being a conscious spender. What i do is i decide how much i plan to save per month and then whatever is left over i may spend on going out etc. the key thing is i don’t deprive myself but instead make a sensible savings plan that i can adhere to. If i set out unrealistic plan… Read more »
Antonio
8 years 11 months ago

Simply put…it’s not what you make its what you spend. Using the 5Ps of finance…proper planning prevents poor performance…will help a person develop a conscious saving/spending habit.

Linda
Linda
8 years 11 months ago
The best post so far.. I must say I always come back onto this website and read it again to put my mind into perspective. I always tend to debit my way through the weeks without realizing how much I’m spending and on what. But you make a good point about the % allocation. Put 60% here, 10% there and 20% into savings. WIth this plan you will for sure be able to put money away, and I do every pay into my ING account. I know I’m saving each month now, and as long as I put my 20%… Read more »
Reuben
Reuben
8 years 11 months ago
I am a first-time reader. I think the recommendations in this post reinforce the American idea that earning more justifies spending more, the very idea that creates “rich” people and not “wealthy” people. The only reasons your friends could afford their spending habits was their high income and work-aholic lifestyles, which, combined, meant they each had plenty of money and little time to enjoy it. For example, the “going out” guy who spends $21,000 a year on going out is likely an investment banker and is trying to temporarily assauge his occupation-induced feelings of discontent by drinking himself into oblivion… Read more »
dereque
dereque
8 years 11 months ago
I totally disagree wih the person who was outraged regarding what he/she percieved to be wreckless spending which should be aimed at philanthropic causes. I had these same opinions a couple years ago but gradually I realized that the “everyone should give their extra money to causes” mentality seems to me to be quite invalid. There are many flaws with this kind of thinking. But the major flaw is that it negates the positive economic impact that “wreckless, hedonistic” spending actually has. If a large majority suddenly stopped putting their money towards “wreckless, hedonistic” pursuits and into philanthropy, the economy… Read more »
Justin
Justin
8 years 11 months ago

Lay not up for yourselves treasures upon earth, where moth and rust doth corrupt, and where thieves break through and steal. Matthew 6:19

Mat 6:21, For where your treasure is, there will your heart be also.

Sbrara
Sbrara
8 years 11 months ago

For those of you struggling with coming with your own budget system, Expensr.com is a great place to start. I am not affiliated with the site in anyway, but I just started using it (featured in Business 2.0 mag).

You can compare your savings and spending allocations with your peers, income level, sex, etc.

http://www.expensr.com

james - LO, RE agent & investor
james - LO, RE agent & investor
8 years 11 months ago
Life isn’t about how much you make, it’s how you spend the money you make. I’ve seen people making 30k a year be “richer” than those making 150k a year because they spent their money smarter. They didn’t buy new cars every 2 years, they didn’t buy expensive foods and they didn’t buy the new furniture, instead paid off credit cards, bought a affordable house and drove a slightly used, reliable car. When hard times came the smart 30k guy had thousands of dollars to fall back on, while the 150k guy lost his car, struggled to pay the house… Read more »
Tommy
8 years 11 months ago
Hey Ramit, I’m glad you have posted on this subject and I wanted to relay my personal finance history: Back in the college days, I got myself deep into debt (Like $30,000+!!). I did this mainly because no one really spoke with me about personal finance and never laid down the “this is how money and life work” sort of things. I mean, my folks lived a very modest life but they made a lot of very very bad choices with their money–I only realize this now that I’m almost 33 and looking back on things. They certainly were no… Read more »
Laura
8 years 10 months ago

I loved this article when I first read it months ago. Now I have no credit card debt and I’m happier. My next goal is to pay off my car loan as sson as possible. Thanks again.

Lars
Lars
8 years 10 months ago

The commenter Susan sounds like a communist. If people choose to spend what you consider wasteful that’s their own choice. Beside, spending money on $12.00 drinks keeps bartenders/servers employed. I’ll take a $2.50 PBR myself.

Making someone like that out to be a sinner because they consume/spend/enjoy more than they need is straight from the communist playbook.

rackgen
rackgen
8 years 10 months ago

Nice & wonderful post.. living a cheap stake so that you can die rich.. thats insane. Keep it coming ramit!

HedgeNYC
HedgeNYC
8 years 10 months ago
I’m glad to have found this blog and this post. I read some PF blogs and am always mildly irritated by them. Like Ramit’s friends in finance I’m a high-income earner (over $500k) and at a fairly young age of 30. In my mid 20s I was earning around $200k-$350k. It’s the nature of the business I’m in. I worked hard to get here, went to one of the top schools in the world, and beat out tons of other Ivy League over-achievers to get my job. So I like to enjoy what I have. I spend well in excess… Read more »
HedgeNYC
HedgeNYC
8 years 10 months ago
Another thing worth mentioning is that $21,000 per year on going out might give you sticker shock but it’s not really a lot if you think about it. He goes out twice a week on Friday and Saturday nights, that’s over 100 nights per year of going out so it works out to spending about $200 when he goes out to party. If you live in places like NYC, SF, LA, etc. that isn’t a lot to spend on a night out especially considering you’re often going to be buying drinks and stuff for a girl and/or some friends many… Read more »
brooklynchick
brooklynchick
8 years 7 months ago

I totally agree with all the principles in the post, but have to echo others – how could charity not be mentioned? I plan that percentage into my budget as well (about 2% of gross).

Tage
8 years 4 months ago

I totally agree with you in the fact that people may give up their lattes or whatever they are “wasting money on”, but there will always be something else. I also like how you focus on knowing where each penny of your money is going. Often times, people do not realize how much money that they are actually spending on certain items throughout a month- and it all adds up.

wanna-be-rich
wanna-be-rich
8 years 3 months ago

you’re hilarious! xD

g00d2bfree
g00d2bfree
8 years 3 months ago
Enjoyed the site. I’m an absolute slacker and only work when I have to (part-time). Although, I am college educated, I tend to do jobs where I don’t have to think too much. I am like this but, I am still a brilliant saver. I have a boyfriend who pays for rent but, I maintain private health insurance, money into my superannuation (my countries version of 401Ks) each month ($100 ain’t much but, its been adding up over time), some designer wear and a savings account. With no help from him. After spending about 3.5 hours reading this site, I’ve… Read more »
Figment
Figment
8 years 3 months ago
The response to this article have amused me to no end! yay for exploring the archives! I cannot help myself from commenting though… People, this is money. I grew up in Palm Beach. My neighbors owned polo teams. I’ve watched royalty play more than once. 5k on shoes, when there’s that kind of money involved is NOTHING. That, however isn’t the point. What is the point, is that the girl worked and she worked a whole lot. She lived in a place that she could afford, she ate food, she paid her travel expenses. She put a whole bunch of… Read more »
Foxie
8 years 2 months ago

Just stumbled across this article. I LOVE it. I get so much flack sometimes when people find out it’s my absolute number one dream to own a Ferrari one day. And then they think I’m completely crazy when I talk about the *multiple* Ferrari’s that I want to own, and the Porsche that I love and plan to have as my daily driver. They all think I went off the deep end. I just see it as planning to match up my money with my passions. And one of my passions is high end, exotic, well built gorgeous go-fast cars.

Birdie
Birdie
8 years 14 days ago

Hi! Found you through Fabulously Broke in the City.

The post was insightful (and I found that I identified with having already allocated cash to places without thinking about it)…

Just thought I’d say hey, and kudos.

Fred
Fred
8 years 7 days ago
Love the article as well, even though I already know the name of the game (budgetting). Seeing the numbers here, I feel that we Belgians (EU) do not have the same control over our expenses, because of higher tax withholding, and that’s a pity! (subtract 60% from your gross income and add 7k to arrive at your net income; 21k/35k in my case, which is good pay for a graduate). I admit we see back some of those taxes (no expensive medical insurance or education) but my point still stands. I am planning to move abroad and of course I… Read more »
GreenReaper
7 years 11 months ago

Speaking for the furry lobby, there are indeed people willing to spend multiple thousands (in a few cases, even a few tens of thousands) of dollars on those costumes. Both they and other fans get a lot of enjoyment out of them, and it typically keeps the money in the US economy, which is more than I can say for buying a lot of tech stuff from China. 🙂

Greenie
Greenie
7 years 10 months ago

Hmmm, I wonder how these friends, or HedgeNYC are doing now… and if they ll think spendstiing 21K/year on going out is a good idea. “Wreckless” [sic] indeed.

Robert
Robert
7 years 10 months ago

Interesting post. I’m just curious as to why so many people had to drag ethics into finance.

Kudos
Kudos
7 years 10 months ago

Ramit – Kudos to you for having a demographic you target with your blog and sticking to your guns. I definitely appreciate your articles on career motivation.

For those of us who are not quite as well off as those examples you give, lets try to think of this as motivation to increase our earning potential instead of another reason to sound off on someone else. Maybe the effort you spend flaming his examples could be better focused?

Manda B
Manda B
7 years 8 months ago
Just here to toss a couple of pennies into the well. Although this article is kinda sensationalist (Cosmo man-catching tricks and tips come to mind), I think the point he is trying to make is about the importance of a Balanced financial diet. Planning and discipline does not have to mean sacrificing every little thing from which you derive pleasure. Even the food guide pyramid has a place for fats and sweets. Ramit’s post is showing that, his friends are able to enjoy the fats and sweets (discretionary spending) along with their balanced expense diet of whole grains (work), fruits… Read more »
Karen
7 years 6 months ago
I think all of this is absolutely brilliant. Habits are habits and people can change – but it is hard. I am a corporate psychologist and I know how hard it is for people to change. They can and I think it is worth making sure derailing things are taken care of, but lets face it – it is hard. Everything you say here can be applied to 1000 other examples from food to exercise to work/life balance. My story (similar to many others) fits your model exactly – I am a consultant, work for myself and make plenty o’… Read more »
Bob
Bob
7 years 3 months ago

Nice discussion. People getting bent out of shape about the spending habits of Ramit’s friends are missing the point completely. There are a lot of different kinds of responsibility. Ramit promotes financial/fiscal responsibility. The charity advocates promote social responsibility. Financial irresponsibility riles Ramit up. Social irresponsibility riles others up. The two are neither opposing or related, and it’s pointless to try to argue about one to when someone else is arguing about the other. Each has there place, and this blog is the place for financial responsibility.

Jakitt
Jakitt
7 years 2 months ago

girls not only love shoes, they also love costly cosmetics.. and they are looking for sb to buy her these trivial things

Daniel
11 months 24 days ago

Why is the term frugal synonymous with being miserable througjout these posts? I’m a 25 year old banker at a small local bank, who doesnt make quite a lot. However, I’ve found a way to cut my expenses drastically, earn on average 8-10% on my investment that I contribute to monthly while it compounds, and live on a strict $15 a day allowance. Its a great feeling knowing that I’ll be able to retire early while working toward financial freedom. Being frugral is by no means disheartening.

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Heartweaver
Heartweaver
7 months 26 days ago

The entire article can be summarised into a sentence: if you have the means to afford something and deliberately put the money aside for that purpose rather than spend on impulse, by all means, do it.

It’s common sense, isn’t it?

Ali
Ali
3 months 20 hours ago

I want Mony

Ali
Ali
3 months 19 hours ago

I want 1,000$ .To learn at the university

Is it one help me

Brian
Brian
2 months 13 days ago
Alina, it seems you are disciplined with your money which is a great start. Investing is a business anyone can learn through by being taught by the right successful enteprenuers, research and of course experience. Having capital readily available and being disciplined with money is definitely an advantage and one of the many characteristics successful investors have. Considering a majority of truely wealthy people are entreprenuers, investors and business owners, I would say are on the right track in wanting to learn more about investments. As I learned, do what you love and the money comes with it if we… Read more »
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