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

Love going out but also need to save money? Learn how conscious spending can save you up to $21,000/year on going out.

Ramit Sethi

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. We have a tendency to 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 [email protected]

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 and automatically deduct money from each paycheck.

“I’ll never make six figures in my early 20s”

  • 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 2007, my new years resolution was to make more, save more, and spend more than ever before that 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.

* * *

Conscious Spending: Key Points

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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  1. avatar


    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.

  2. avatar
    Ramit Sethi

    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.

  3. avatar
    Jennifer Lynn

    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 once.

    The key is to discover that delicate balance and uncover a definition of what is meaningful and enriching spending for your own personal values and lifestyle.

    I personally am a huge travel junkie. I hope one day to grace the mystifying beauty of the Taj Mahal. Because. from my perspective, an experience like that would simply be priceless.


  4. avatar
    Cal Newport

    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 settled on was to apply the 25%-split rule. This says, regardless of the check size, 12.5% goes to retirement, 12.5% goes into general savings. The rest is up to us.

    I’m curious, however, about how others budget unexpected income?

  5. avatar

    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.


  6. avatar

    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?

  7. avatar

    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 find something else worthwhile to do with your money. As it is you’re just frittering it away on shallow hedonism. “To whom much is given, much is expected” and all that.

    I’m not worried that these people aren’t saving enough for their retirement, and, like I said, I seriously doubt many other people are concerned about that either. People with healthy six-figure salaries don’t usually garner that sort of concern. What they are doing is contributing to our rampant consumerism, debasing both themselves and our society in the process. Look, we’re human, and not everyone is going to live like a monk or nun, so most people will treat themselves to needless frivolties on occassion. Or the $3 morning latte, or whatever. But this can easily reach a point where the spending becomes obscene, and your friends have long since crossed that threshold. People are bothered by this for the same reason they were bothered by Kozlowski’s $6,000 shower curtain. I’m not concerned for their bank accounts; I’m concerned for their souls.

    On one hand, I agree. For people who are spending entirely on themselves without a care for anyone else, while it might not be our right to criticize you, it’s still sad. But on the other hand, who says that just because people are spending a lot on going out, they’re not contributing to other causes? In my friends’ allocations, 2 of the 3 have charity components. This post is about more than 3 people, but I take your point and respect it.


  8. avatar

    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.

  9. avatar

    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%!

  10. avatar

    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 for discretionary spending aren’t the same for people who make 6 figures (10%) and those who are struggling to pay the mortgage (<1%).

    Could you make your comment box any smaller? If you make it one word small, then I can just read horizontally. 🙂

  11. avatar
    Ben Bach

    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!

  12. avatar

    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 they won’t stick to. However I do think you downplay the fact that for anyone, regardless of income level, being sustainably frugal (meaning, say, one latte a week and shopping at Safeway instead of lattes every hour and shopping at Whole Foods) is a very good idea.

    Let’s take the party guy: He’s obviously stressed from working so hard he earns that six-figure income in his mid-20s and needs to blow off some steam on the weekends. More power to him, I like to party on my weekends too. But $400 a week is a bit much, even with that kind of income. It’s not just the sticker price, it’s that the result isn’t really all that different from having a few friends over, ordering a pizza and buying a couple cases of Bud Light (total cost, let’s say $50ish).

    I guess what I am long-windedly trying to say is that while your general point is correct, what I feel this post neglects is that ESPECIALLY with high incomes our 20s are the years to be frugal. If he were to save even 50% of that 21K anually he spends on booze, that money would work harder for him now than it ever would. It just seems foolish to pass up these best years for compound interest earning when if we acted more frugally now he could perhaps retire at 35 or 40 and spend $1000 a week getting hammered in style.

  13. avatar

    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:

  14. avatar

    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 substantial as the folks described in Ramit’s examples. But you also mention “struggling to pay the mortgage”. Buying real estate in your local area was also a choice which, based on your comment, has limited your ability to accumulate extra money to blow on life’s little goodies. Choosing to rent or buy “a little less home” in a different geographical area could have provided a better financial cushion for free spending.

    It all comes down to personal choice.

  15. avatar

    $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. 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 can go to eat.


  16. avatar

    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, he’s going to want to blow a lot of money… but I think that having lived and experienced and seen the things he’s lived/done/seen, this is a case where spending a little more than is necessarily “comfortable” is appropriate, especially if it’s been worked into a budget a little at a time for several months before the spending (as opposed to charging everything on a card and “worrying about it later.”)

    Sometimes you just have to reward yourself. That’s easy enough to understand. I say if it works into your budget and you consciously make the effort to set aside that money in advance, there’s no harm in spending your money in a couple huge chunks here and there. 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, he’s going to want to blow a lot of money… but I think that having lived and experienced and seen the things he’s lived/done/seen, this is a case where spending a little more than is necessarily “comfortable” is appropriate, especially if it’s been worked into a budget a little at a time for several months before the spending (as opposed to charging everything on a card and “worrying about it later.”)

    Sometimes you just have to reward yourself. That’s easy enough to understand. I say if it works into your budget and you consciously make the effort to set aside that money in advance, there’s no harm in spending your money in a couple huge chunks here and there. <3

  17. avatar

    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. Maybe you make 35k a year and only give 2% of your income to charity… how can you be so selfish??? I bet you could live off of 22k a year with some basic comforts, like going to the movies once a month. You should be giving at least 13k to charities. Hell 22k is a ton to live off of compared to a farmer in China who may live off of $100 a month! You know that time you spend every night doing fun things with your girlfriend? Why don’t you go to a soup kitchen and volunteer instead?

  18. avatar

    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.

  19. avatar

    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

  20. avatar

    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:

  21. avatar

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

  22. avatar

    > (look it up).

    > and your parents are probably very sad.

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

  23. avatar

    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 money in this way. It doesn’t matter if you’re lighting cigarettes with $100 bills or buying $300 shoes – many people consider that morally wrong.

  24. avatar

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

  25. avatar
    Joshua Keezer

    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.

  26. avatar

    “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). It’s just more efficient to respond like this.


  27. avatar

    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.

  28. avatar

    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 on the amount that person spends on entertainment every year. Families. Not individuals. And not just in areas where the cost of living is low.

    To add to that, our planet cannot afford a world full of people who consume like this. What kind of ecological footprint do those shoes leave? And everything else they buy? How many fossil fuels are not just going into their cars but being used to ship them goods from overseas? How do you justify this use of resources for shoes you’ll wear only a few times?

    It’s not about needing a budget that tracks every last penny if that doesn’t work for you. But don’t ask the rest of the world to condone this kind of waste. It doesn’t matter how much you plan it out; if you’re spending tens of thousands of dollars on your own pleasure, that’s excessive.

    Forget starving children in Africa. I can guarantee you that wherever you live, there’s a child in your area going to bed tonight without adequate food or medical care while you’re dropping $60/plate on dinner and thinking it’s nothing. If you want to keep doing it, go ahead. But don’t try to justify it. “It’s okay because we’ve funded our retirements!” It’s not.

    And on top of that, shoes, drinking and Tivo aren’t going to make you happy if you weren’t happy already. If there are cheaper places to eat–not to mention something we in the rest of the world call ‘a kitchen’–then why spend this much? Stay home and cook, and invest the extra not just in your retirement but in your community.

  29. avatar

    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

  30. avatar

    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 as you’re living within your means.

    Susan – I’m tired of the “There are starving children in the world” excuse. I do what I can for the community, donate to charities, community service, but why do some people expect individuals whom make more money to be OBLIGATED to donate every extra penny? I’ve worked hard to earn the money I’m making now to enjoy some of the finer things in life. Are you suggesting now, that I go back to Raman noodles for dinner every night and donate all my extra cash? Yes, we should all think of the children, but also think of yourself. Everything needs to be done in moderation.

  31. avatar


    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.


  32. avatar
    Dave M

    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. 🙂

  33. avatar

    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.

  34. avatar

    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…).

  35. avatar
    Catch a Gideon

    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.

  36. avatar

    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.

  37. avatar
    Dennis r.

    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 have money you spend on top for cotton candy and tshirts. But the bottom line is everyone still has to pay to get in.

    People do have different standards of living (and always have) but having a reliable, safe car, clean, safe housing, good (and healthy) food to eat and enough money and time left over to actually somewhat enjoy your life aren’t luxuries these days- people with six figure incomes (in most areas) can easily achieve these with plenty of headroom, whereas those lower on the ladder, are just barely holding their heads above water (“comfort” level) and have to very wisely use the extra.

  38. avatar
    Joel Odom

    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.

  39. avatar
    Jennifer Lynn

    “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 others, isn’t it? We’re all guilty on various levels.

    Maybe it’s time to stop passing judgement on what others are doing, and focus on our own behavior instead.


  40. avatar

    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 supermarkets for left over food based on some political principle. Part of me is repulsed, part of me wants to know if they’ll find it viable.

    Income:$15-25K, rough guesstimate
    Savings/Investment/Retirement: They’d laugh in my face.
    Necessary Expenses: Co-op fees and utilities–so hardly any to eat into an entertainment budget
    Assets: art school degree, household and repair skills that negate any reliance on service occupations.
    Liabilities: below average immune capabilities, bad attitude towards traditionally viable lifestyles, expensive chemical tastes.

    2). The Princess Pauper: She inherited upwards of $5mil (by my estimates) and stuck it up her nose in less than 5 years Current living situation is one of the worst I’ve seen (health compromising), but can’t get out in any traditional way b/c neither the money nor the credit is there. There are a lot of scavenger and scrap metal-types that would help her, but I don’t know if she’ll accept that kind of life or if she feels that more is owed to her.

    Income: High $20ks- Low $30ks
    Savings/Investment/Retirement: Yes, if she doesn’t know about it.
    Necessary Expenses: Rent, utilities, food, private school bills
    Assets: friends in high places
    Liabilities: hardheadedness, odd debt like parking tickets and fees for squatting and bank fraud, inability to get a bank account, above doing basic household and repair tasks, poor health

    3). The Gambler’s Wife: Husband has a monthly online gambling budget of 1/4 the monthly income. He’s a skilled card player, but there are months where they don’t pay some bills. She feels helpless sitting at home being a mom and is thinking about sneaking out and finding a p/t job or working from home. With kids, I don’t know how this’ll get her in black, but I can imagine that part of her motivation is her husband’s control of the purse strings. I want to know whether independence, equal say and the ability to justifiably disapprove of her husbands’ gambling will eventually triumph over paying the bills.

    Income: Mid 20Ks
    Savings/Investment/Retirement: 401k
    Necessary Expenses: Heat=25% of monthly income, I’m sure there’s more. It’s also a subscription heavy household.
    Assets: Youth, good attitudes, work benefits, low cost of living in the area
    Liabilities: pain associated with lifestyle, commute, (I hate to say it) kids.

  41. avatar
    free as a bird

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

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

  42. avatar

    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.

  43. avatar

    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 purchases).

    People who buy, for example, $500 shoes may feel that such purchases reflect their good taste and the fact that they have worked hard to be able to buy such items, and thus “deserve” them.

    However, to other people (and I am one of them) these same purchases illustrate the buyer’s ostentation, materialism and, often, lack of self worth.

    There are other ways to interpret your phrase “conscious spending”: both in a socially conscious sense and as self-conscious. By the latter I mean considering how your spending and consuming reflects your values, how it effects your relationships, and how it may be disguising your feelings about yourself.

  44. avatar

    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.

  45. avatar

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

  46. avatar

    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 end it’s saving pennies. In the end, I cut corners so that at the end of each semester i will have 5 dollars instead of negative 200 in my account. And then i come to realize that at this rate i will be 30, finally getting my first job, and literally have 0 dollars to my name. So i guess what i’m saying is that i feel like saving for the future is not always a realistic option. I could probably save 100 a semester but in the end the money will be worth one roundtrip ticket to some place i didn’t go to in my 20’s all so that when i’m 65 i will have 1000 extra dollars. i am making excuses, so whatever, question asked.

  47. avatar

    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?”

  48. avatar

    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.

  49. avatar

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

  50. avatar

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

  51. avatar


    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 are as easily soiled by success as you would imply.

  52. avatar

    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.

  53. avatar

    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. We know that “a” mentioned above is not true.

    4. This means there is some fundamental currency system fault, otherwise “2” mentioned above cannot happen.

    5. BTW will it be possible that someone is printing “fake currency”? and cheating the society?

    6. We need to define fake currency :: A currency is “fake” if the issuer does not “guaranty redemption” of the currency.

    7. Now take out a currency note, do you see “Promise to pay bearer value of Currency” statement, ever wondered what it means? Do you know how the currency issuer is going to calculate the “value” so that redemption obligation can be fulfilled?

    8. For any currency to be valid and to represent “value” the issuer should mention “what” they will “pay” and “how much”. Basically they should mention the redemption formula.

    9. If the redemption formula is not mentioned on the currency then such currency is fake isn’t it?

    10. Only “fake currency” system can make huge “wealth disparity” like we see today, got it?

    Now god has given you 10 lessons in basic economics go teach it to the masses……..

  54. avatar

    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 make myself happy?

  55. avatar

    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 best thing to do.

    And $21,000 sounds like alot because it IS alot! Don’t try to tell me that $21k is a trivial amount just because it only represents 10% of this guys salary. If Bill Gates only spent 10% of his income on beer, would that be ok?

  56. avatar
    Hendy Irawan

    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!! 🙂

  57. avatar

    “I’ll never make six figures in my early 20s”

    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 other needs.

    It’s also incredibly condescending. A lot of us poor people engage in “conscious spending” out of necessity – you don’t get the luxury to say “I guess I spent that much this month” when you’re in danger of incurring overdraft fees.

    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.

    Now given the name of your blog, I’m pretty sure you’re not this stupid; I hope you don’t expect your readers to be. So many expenses (rent, health care, food) simply do not work as a constant percentage of salary. Both the $210K and $35K earners may be spending 10% of their income on “going out”, but the latter may be spending 50% on basic needs (food, shelter), while the former spends only 10%.

    By treating these incomes as qualitatively equivalent, you come across as yet another spoiled rich kid who’s clueless about people whose situations differ from his.

  58. avatar

    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 hard work they’ve put in to get where they are. That should be another topic, people DO work hard to make over 100K/year while in their 20s, if it’s not finance then it’s studying to be a doctor. They all work their asses off.

    Oh yeah, and if that girl is buying $500 dollar shoes, it’s probably bc those $30 dollar shoes aren’t going to get her through the day at work! I spent $100 on a pair of SAS shoes for my mom and she abosolutely loves them! 🙂

  59. avatar
    Lazy Man and Money

    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 accounts or any future savings. I had an emergency fund, but by the time I got back on my feet it dwindled.

    So I have to points of caution for these people. 1) Prepare for a day when the job might not be there. I realize they might be smart people and have great degrees. I did too, but if there’s no jobs, there’s no jobs. I hope these people are prepared for this scenario.
    2) I hope they like everything else in their life. For instance, I hope the shoe person likes having a roommate for the companionship and isn’t buying shoes to make herself feel good that she didn’t kill the roommate for music too loud or anything like that. I assume that it’s not a problem. I hope that these people love their jobs to the point that they’d do them even if they didn’t pay as much money. Otherwise, they switch some of their luxury item for freedom, something that many people would do.

    These people sound like they are very smart, very organized, and have a plan put together. As long as they aren’t overlooking something, good job!

  60. avatar

    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.

    The second list is your “wish list” – it’s all the things you saw that you wanted to spend money on, but didn’t.

    Rank the items in each list from most wanted to least wanted.

    Now look at the expenditures you made that you wanted least, and the expenditures you didn’t make that you wanted most. Circle all the items on the first list that you desire less than something on the second list. Circle all the items on the second list that you desire more than something on the first list.

    What I found when I did this is that I could “swap” items around and end up with more of what I wanted most for the same amount of money. Would I rather have a nice dinner out and watch broadcast television, or cook something at home and buy a DVD? Would I rather have sodas with lunch all week or see a movie the weekend? It really doesn’t matter which you prefer – the point is just to get a feel for whether you’re spending your money on what you want.

  61. avatar
    John from LA

    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.


  62. avatar

    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.

  63. avatar

    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? school? I’m interesting in business and finance but still unsure what I want to major in.

  64. avatar

    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: Why do we condone people having children when they do not already have the means to support them? You criticize people who have worked diligently through school acquiring valuable skills and then spend lavishly on themselves, ignoring those who more directly put those children in the awful position they are in: their parents. Why should it be anybody else on the planet to have the responsibility to feed those kids other than those that created them?

  65. avatar

    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.

  66. avatar

    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.


    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 you could write it up and we could read about it on your blog?


  67. avatar

    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 the point of view you project, we live by it. But let’s be honest, do you really wish to win over the minds of the average 20-something young American professional by citing the salaries and expenditures of your 6-figure friends? Admit it — this article was more about you looking cool for associating with America’s upper crust than actually making a sound argument about financial planning.

    Putting your own flattery aside, wouldn’t it have been more prudent to cite examples of young professionals making $50k and spending 5% of that on shoes instead of the numbers you chose? You could have kept the salary/expenditure ratio the same and cited a more believable example.

    Most of your readers have had a difficult time wrapping their brains around a job that would pay sig fig’s. They’re obviously not doctors or lawyers or IT professionals like you and I. But don’t they deserve to benefit from your article just the same? I went to school in the midwest and now live in California. I was talking to an old sorority sister about how my husband and I just bought a 3 bedroom townhome for $680k. She fell silent, probably thinking I was that god-awful moron with sad parents. She (a school teacher) and her husband (a state trooper) bought a 4-bedroom single family home for $225k in Michigan. I’ve heard of parking spots costing more here in California than the price of her new home. But regardless, this reminded me that the country is vast, and most of its inhabitants know of a life far different from the one you & I are familiar with. I can’t think of one person in my entire family or extended network of friends who makes less than $75k. But I am still aware of the huge disparity between incomes and know that the point you attempted to make was a universal one, though plagued with examples unfathomable by 90% of America.

    Instead, your point would have served a greater purpose, and received a healthier response, if you had cited examples of friends earning between $40-$60k annually, and spending a proportionate percentage on those very same luxuries you cited. Or perhaps you could have kept your friends’ salaries at $100k-$200k and cited expenditures easier for the average human being with a soul to swallow. Instead of shoes, your friend could have spent $6k on suits for work. Instead of $21k on alcohol and dinner, your friend could have spent the money travelling across the globe visiting impoverished nations. And your friend that spent his money on TiVo and cable? Well he’s your average American who loves to retire to mindless TV and movies after a hard day of work, but to give him a salary of $200k? You just killed your most believable anecdote.

    If readers can’t look past the examples and words you chose to make your point, have you even made a point? I personally liked your article, mainly because it made me chuckle, but you have completely distanced yourself from the average reader by citing unlikeable characters who earn ungodly salaries, only to be seen as selfish and inhuman instead of the prudent money-savers they are.

  68. avatar

    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, Ramit. My boyfriend makes like $15K a year. While this is obviously his choice, as he’s still a student, he is just scraping by and honestly can’t save any of his income and can only stay out of debt, with a few nice meals out on the town a year.

    However, for most 20-somethings, like me, making a reasonable salary, Ramit’s philosphy is one I wholeheartedly agree with. I put away about 20% of my income before I ever touch it – auto investments go to a MMA, my company’s plan and my own Roth. The rest goes to the bank. After I pay off my monthly dues, I have the rest to play. And for that, to each his own – maybe you want to save it for a rainy day, but if going out is your thing, go out. Personally, I like travel and photography, so my fun money goes to those. What you choose to do with your money is of course up to you.

    Ramit’s saying be responsible first, and then, instead of being miserable and a slave to money, use it to be happy.
    Why else are you working so hard to make money? If you have enough to live off of, and you have more that you’ve never touched, maybe you should consider that you won’t be around forever to spend it. I believe in being prepared for the future, but live in the now.

    Your 20’s, in disagreement with a comment above, aren’t a time to be frugal. They’re a time to enjoy the health and vitality you still have. I am still single and have freedom (and time!) to spend now on adventures that I won’t have 15 years from now. So why not live it up?

    I’m confident that if the rug is pulled out from under me, I’ll have a little nest egg that will support me, and I’ll be much happier that instead of being afraid of my money, I made some awesome memories and accomplished my life goals when I did have the means – now, not later.

    You’ll always have another later to plan for. You only have one now to live it up.

  69. avatar

    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.

  70. avatar

    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.

  71. avatar
    j.d. candidate

    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.

  72. avatar

    “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.

  73. avatar

    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 achieve their dreams, but I also want to have a luxury holiday in a 7-star resort on a tropical island and a great city apartment with 180 degree views and lots of original artwork.

    And honestly, the latter probably compels me more. If you find that disturbing, if your belief systems are such that ‘being rich = being evil’, then maybe you need to reconsider what you are doing on this blog. Because this inherent conflict suggests that you will probably sabotage yourself in your effort.

  74. avatar

    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.

  75. avatar

    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.

  76. avatar

    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. 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 everyone else rich. NJot to mention the sales tax you pay. Small amounts of savings add up to large amounts over time – then you can spend spend spend.

  77. avatar

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

  78. avatar
    Mary C.

    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!

  79. avatar

    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 starving person in the world, and to give to every other good cause that needs donations. So give what you can, whether you are wealthy or not.

    In some parts of the country you can still buy a nice home for under $200,000. In my town the cheapest smallest single family home is about $600,000.

    It’s all relative.

    So make saving your first priority, give to charity regularly, buy a home and have it paid off before you retire- or even earlier. Then spend any money left over if it makes you happy.

    One poster pointed out that those high paying jobs may not last. This has happened to a lot of people. So build up emergency savings as fast as you can too.

  80. avatar

    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 nights out with your friends. But you don’t have the huge savings account that you could have.

    I enjoyed my twenties, and spent money frivolously many times. I never had the money for $500 shoes, or $200 bar tabs. But I spent a large proportion of my income on that type of thing. As I’ve gotten older (I’m 29 so not that much older : ) I’ve been forced to understand the value of money. The thing is that $500 shoes don’t buy you a lot of pleasure. And the fun you have at the bar you could have in much cheaper ways, like at parties with friends. A six figure income isn’t that much money. If you already have millions in the bank, and earn six figures, than the expenses that you mention are a drop in the bucket. But for your friends that isn’t the case. They may be doing better than many of your peers, but I hope that they have time outside of their careers to breathe, contemplate the big picture, and make sure that their spending really lines up with their priorities and values. It may line up–a lot of people really love luxury items.

    I don’t think that I would have this reaction if your friends spent money on things that do bring meaning to life, like education and travel. And maybe it is an unfair value judgment on my part. A lot of bloggers these days are writing about how college is a waste of money : )

  81. avatar
    Mrs. Micah

    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 you go.

    Anyway. I’m not quite the sort of person you’d swoon over when it comes to budgets, but Mr. Micah and I are working on crafting our first as a couple. This is our second month-aversary of being married. 🙂

    Like the blog.


  82. avatar
    Fabulouly Broke

    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? Life is all about choices – either you choose to work 100+ hr workweeks, or you choose to work 40 hr work weeks, and enjoy your time after work and on the weekends, but you end up earning less. Although if you factor in overtime, the 100+ hr people probably earn the same or a bit less, per hour, than the 40+ hr people.

    C. It’s not like they’re spending $21,000 a year in entertainment, with nothing in investments, savings, or retirement. Like I said in A), it’s their money. They have decided that that’s all they want to save in investments and savings, and the rest is how much they want to spend on entertainment or clothing. They have a budget, they know where the money is going, and they have their heads out of the sand. Those are the basics of personal finance and money management.

    As for WHAT they do with their money (be it spending it on entertainment, or if the same family spent it on their kids), that’s their decision, and not anyone else’s to criticize…

    Great post, I’ll be back for more. I really like your style of writing.

  83. avatar

    “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?

  84. avatar

    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 it seems to other people) amounts of time and/or money on.

  85. avatar

    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 of hardly spending that would last me maybe a month and then i would probaly just shuck it all. Each person is different so each plan needs to fit what realistic they can live up to, but such sloganistic financial advice of don’t drink starbucks really draws away from the truth about wealth and that its in saving not in not spending.

  86. avatar

    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.

  87. avatar

    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% in, I can do what I want with the rest of it.. Thanks Amit.

  88. avatar

    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 and frequenting titty-bars/expensive lounges (See “Monkey Business” for a more detailed account). I would rather you have said that spending a small percentage of your income on “meaningful” pursuits is justified but should not necessarily change as earnings change, rather than feeding our consumer-driven culture with the idea that the more you earn, the more you can spend. In other words, its OK for your female friend to like shoes because she earns a lot, but not OK for my girlfriend to like shoes because she cant afford it as a TFA teacher. But as soon as my girlfriend transfers to the Carlyle Group, KKR, or Blackstone, then she can like nice shoes. In this post you have very much taught your readers how to become “rich,” as the term refers to material goods, but have impeded them on their process to becoming “wealthy,” or the accumulation of valuable, long-term assets that are of low-medium risk.

  89. avatar

    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 would suffer a huge beating. People would lose jobs. Families right here would go hungry. The price of goods would rise, and so on. Thus “wreckless hedonists” actually play their part in sustaining our economy. Everytime the lady mentioned in the blog buys a pair of shoes she is supporting countless jobs and an economy that depends on them.

    Another problem I have with idealistic philanthropy is that non-profit orginizations have been known to squander funds. When you give money to a charity it’s actually not clear where that money is actually going. They may not spend/invest the money wisely and they may not even be given the opportunity to do so.

    Personally, though this is the first time I’ve reached this website, the author’s philosophy falls in line with my own understanding of how money should be used. Ultimately, people should be conscious about what they’re doing and should not refrain from claiming a happy life if they’ve worked for it. In doing so they are benefitng everyone including themselves, and we must remember that having a happy experience is also important for oneself.

    My own personal philanthropy ethic: save, invest, live happy, and when you DIE give money to charities, scholarship funds, and heirs.

  90. avatar

    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.

  91. avatar

    For those of you struggling with coming with your own budget system, 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.

  92. avatar
    james - LO, RE agent & investor

    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 payment and his credit is shot now.

  93. avatar

    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 role models for me to follow as far as money goes.

    Anyway, after UCLA, I lucked out and found a decent paying job (about $42K in 1998). It wasn’t astronomical but it was enough to get me on my way to paying stuff off especially considering I lived at home. I did yet one more absolutely stupid thing: I leased a new car after a lady in an SUV backed into my old Celica and creamed it. I didn’t want to put any money in my 10 year old Celica, but I certainly did not need to pay $500 per month on a leased car! Please don’t ever do this. It’s dumb and just a waste a money–unless you can write it off for business.

    A year and half go by and I haven’t really downsized my debt much. I eventually move up to the Bay Area to take a job for a tech company and made quite a bit more money. The trouble was that I had to pay rent now that I wasn’t living at home. I signed up for credit counselling and they got some of my interest rates lowered. I decided that since they were charging me a monthly fee, I would go on the attack and pay them off as quickly as possible. I busted out excel, setup my plan over the next few years and went at it. I lived very lean for those years. My roommate was in the same predicament so we scrimped together. TV which was very cheap was our friend. In the end, those lean years where I budgeted down to the dollar (cents are always rounded up if I paid out for something and rounded down if it was income), lived off of about 1/3 of my income while everything else went to pay my debt down, and had some close shaves where I had less than a buck in my bank accounts with a few days to go until the next pay check.

    I not only did I pay everything off early even by my plan’s estimate, I was able to pay for my wedding, buy two new cars (note: not lease) that I’ve paid off early and plan to keep for at least 10 more years, and saved up near 100K in retirement and cash accounts. I, my wife, and her parents live off about 1/3 my gross income today (I make about 3 times what I did when I started out of college) and save the rest. I sock away about 1500 each month into my 401K, about 666 into my wife and my IRA accounts and about 2000 in cash or so each month. We don’t really buy stuff and are pretty much the anti-consumer. Tivo helps in this regard as you can watch what you want and avoid commercials for the most part. We don’t buy DVDs (library), we don’t buy music (legal free downloads and my work provides that), and we don’t buy clothes, shoes, or just about anything very often. If we do, we first check garage sales, free giveaways, and outlets first. We don’t go to malls ever. We do eat out about 3 or 4 times each week and usually spend between 20-50 on each of those meals. I buy lunches at work for under 7 or 8 bucks and I get a nice cup of coffee each weekend.

    Also, we started taking inventory of our “consumerism-legacy” and started yard sales to get rid of most of it. We’ve made a couple thousand getting rid of old books on Amazon, selling stuff on ebay, and doing good old fashioned yard sales.

    Right now, my current goal is to grow my income and savings over the next 5 years. My wife is still in school and doesn’t earn much since she spends most of her time studying.

    There’s really no moral to my story. I don’t really pass too much judgement on folks who make a good living and spend some of their money on things they like. I have a weakness for random geekery that I pick up every now and then on ebay (legos come to mind). I do however worry about over-consumption because it has lead to some of our most pressing issues today.

  94. avatar

    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.

  95. avatar

    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.

  96. avatar

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

  97. avatar

    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 of $21K per year partying (though I don’t spend anywherenear $5K on shoes simply cuz I’m a straight guy). I know the typical PF blogger would feel superior to me, he’d think that even though I was earning more in one year than he earns in a decade, that I was some sort of idiot who spent all my money and had a terrible net worth. That type of thing has happened over and over on PF blogs where their is this air of superiority amongst the frugal. Well I have a seven-figure net worth, each year I save more than most people will save all their lives. The point is to stop making assumptions about people based on their spending, there is a lot more to it. People with high incomes generally don’t earn those high incomes because they’re stupid, most of them know what they’re doing.

  98. avatar

    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 times. You buy yourself and a girl a drink and that’s $30 right there. You also probably paid at least $20 cover to get into the place (they probably didn’t charge the girl). So that’s $50 just for entering a club and having 1 drink. You’ll get the tab up to $200 in no time. Then if you do things like bottle service you’re talking about $600-$1000 easily per night or much more.

  99. avatar

    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).

  100. avatar

    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.

  101. avatar

    you’re hilarious! xD

  102. avatar

    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 been inspired to ‘get off my butt’ and do better for myself. I figured if i can do so well on a crappy salary, think of the real bucks and progress I could gain if I could get over my aversion for full-time work. Wish me luck, guys.

  103. avatar

    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 cash away, and she used the rest of it to do whatever she wished to do.
    She liked fashion, or maybe the fine craftsmanship of proper shoes. (ie: not payless/plastic.) Maybe it was the prestige that comes from women’s socialization. (Don’t tell me you all have never interacted with the junior league and know that you’re ostricised if you don’t look like they do.) Regardless of her reasonings, she took her extra cash and used it for a specific goal.

    What do you use your extra cash on? (cigerrates? Books? your snoopy collection? your kid’s shoes? wait… you can’t buy shoes with your extra cash! can you?)

    Your ingenuity in creating this post is admirable.
    Please continue with your writings.

  104. avatar

    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.

  105. avatar

    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.

  106. avatar

    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 will pick a country with more financial freedom.

  107. avatar

    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. 🙂

  108. avatar

    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.

  109. avatar

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

  110. avatar

    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?

  111. avatar
    Manda B

    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 (investing), vegetables (financial responsibilities), dairy (charitable giving), and meat (school and career improvements).

    I can’t lie–I am actually a bit of a socialist. It’s really not an insult to believe that we all have a responsibility to help serve our fellow man and that people are entitled by birth to free and adequate healthcare or food to eat. And the amount of money these two spend on their hobbies give me a bout of sticker shock (I am a social worker in St. Louis and at $10 an hour, it takes me about three months to earn the $5000 that his friend carrie bradshaw spends on shoes every year).

    But the point he is trying to make is that extravagance is subjective, and that it is possible to spend what many consider to be a large sum and frivolous amount while still being financially responsible.

    In my example, it’s musical instruments that I lovingly pursue. I do not play any musical instrument proficiently. But it has always been my passion and my dream to learn to play the violin. So a year ago I began renting and taking lessons. This year I will continue with my violin lessons, and also begin learning to play piano. I am in the process of purchasing my first decent piano, a Kimball console which costs $1200, from a music store.

    Many people reading will have one of two reactions: “1200 for a piano! That’s ridiculous! I wouldn’t spend that on an instrument I couldn’t play! I wouldn’t even spend that on a car! I could get a better deal on craigslist!” or “1200 for a piano! That’s ridiculous! How can you expect a decent piano for 1200 dollars! It probably doesn’t even look nice!”

    I find myself somewhere in between. As I said, $10 an hour doesn’t go very far–in fact, that bad-boy is on 6-month layaway. And I will admit it’s not a Steinway baby grand. But it’s extremely hard to play an instrument you do not have access to. And it is much much better than other models like a spinet.

    Not knowing much about pianos, I am at a real disadvantage when it comes to purchasing one from craigslist or from any other independent owner. Buying a lemon could cost me thousands of dollars that I can’t afford just because I tried to do it quick and dirty. By buying from a music store, I get a warrantee, maintenance, delivery, and Free Music Lessons all included in the price.

    For my income it is a relatively extravagant purchase, but because of the added value of buying on layaway from a respected dealer, I can justify and plan around the expense. Plus, it is not just a hobby or an experiment but an investment. As a newlywed planning for a family, I cannot help but see a piano as an exciting way to introduce my future children to the joy and excitement that music brings. And I can always upgrade to a more expensive, higher quality instrument in the future.

  112. avatar

    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’ money. 11 years ago in graduate school I made $18,000 a year at my full time, 40+ hour a week job not including the one evening per week I worked an extra shift in the ER – for free. I got paid 2 checks a month which was approx $600 each check. My bills were about $1000 a month before food and I made $1200 a month. I still managed to not take on any school debt that year, save a wee bit and eat out twice a week…once a week before my ER shift at a healthy place for different Asian cuisines, and once a week for ridiculously delicious burgers and beer with my friends at a great bar in Memphis called “The Poor and Hungry”.

    I do the same things now except the wine is much higher quality and the restaurants do not use duct tape as a decoration (ok, some of them do – I still love these kinds of restaurants!). Friends were of similar mind then – Now, my husband and set of friends are similar. We all make money, we all save and we all choose where to blow money and have a blast together.

    I love eating out and trying new restaurants and cuisines so much I even set culinary goals when I travel. That fact will never change. However, flexing the level of restaurant to fit the circumstance can change – that’s the easy part.

    Very well done! Bravo! I can’t wait to read the book!

  113. avatar

    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.

  114. avatar

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

  115. avatar

    Unexpected money? I personally save it until something that I really like appears. But as a general rule, I would transfer 30-40% in a savings account and the rest in another account for personal usage (meaning things I like to do). It really depends. I do buget my expenses monthly, but it really depends on how much you earn. I live in Romania and have no debt from university education since here state universities have many free places, but in the future I will probably have to take out a loan if I want a house in Bucharest. I will never be able to buy a house with cash if I don’t seriously bump up my earnings. Another thing is that here the system works like this: part of the contributions for my state pension are redirected to a private pension as well automatically ( this is by state law). So I will have 2 pensions: a state and a private one. I am 26 now, but I worry about the future. I need more information about investments because I don’t know about that. My savings account gives me an interest though.

  116. avatar

    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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  123. avatar

    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!!

  124. avatar

    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?

  125. avatar

    I want Mony

  126. avatar

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

    Is it one help me

  127. avatar

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

  128. avatar

    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 are creative enough. Do not fear the future and have faith that no matter what obstscles you face in life, you will ensure success and happiness into your life. Stay positive my friend. Cheers!

  129. avatar

    I have a strange excersise. It is reach out the most influential to me and I choose you Ramit. Iwas thrilled the other day, you really replied my email. Thanks a lot.!!!
    From a skinny Vietnamese guy.