Pinching Pennies Or Squeezing Big Returns: Which Is The Ultimate Path To Wealth?

Just a few weeks ago, an old-fashioned friendly rivalry developed in the land of personal finance blogging.  One of the heavy hitters, Ramit of issued a challenge to another top blogger, Trent of At stake was $1,000 to the winner’s readers’ favorite charity.  At odds were the two writer’s ideas on saving money and building wealth.

Ramit’s Take

Ramit encourages readers to focus on the big stuff – things like reducing fees and interest rates at your bank, and negotiating/shopping your car insurance.  Makes sense; after all these are often the “big” expenses that really add up in our budget.  Shaving 20% off of these types of expenses can lead to big savings.  And the effort required to find these cost savings might be better placed here than in some lesser expense category, such as food or household utilities.  As Ramit puts it:

I don’t have any issue with frugality, except that I think Americans are horrible at it and, for my audience, it’s a hopeless battle of telling them to say no to things — “no more lattes! no more eating out! no more enjoying life!” — which never lasts.

Ramit’s take is a popular one. His book, I Will Teach You To Be Rich, became an instant #1 best-seller at when released a few weeks ago. His advice resonates with young people, particularly those fresh out of school and looking for ways to save big and earn big.

Trent’s Take

Trent takes a different approach, overall, even though both bloggers have many ideas in common.  At The Simple Dollar, Trent often shares frugal tips such as how to make your own laundry detergent, homemade bread, and a number of other goodies.  He also shares many tips for finding ways to live cheap.  In fact, his book, 365 Ways to Live Cheap, is a mini-encyclopedia of cost-cutting tips.

Many of these tips require some time to pay off.  For example, Trent and I both advocate installing a programmable thermostat to reduce utility costs, particularly at night or when the house is empty during the day.  Programmable thermostats are not cheap, and they require a bit of time to install.  However, the benefits continue to pay off as long as the thermostat is in service – which should be for many years to come.

My Take

In short, I believe both bloggers are correct, and by combining their philosophies one could become very wealthy over the course of a lifetime.  It’s also worth noting that those of us who chose to live frugal do so for reasons beyond fiscal fitness.  Frugal living is about using less, or just enough, and recognizing the feelings of contentment that frugality generates.  It is about being better stewards of our resources – all of our resources.  It is about assigning value in the form of life energy to the things we purchase.  It is not a financial plan; it is a way of life.

I continue to be a fan of both sites, and their writers (and their philosophies).  While the “challenge” was diffused after Trent’s response, the arguments live on in the personal finance community.  Save more or earn more?  Be cheap or be frugal?  I say, take a little of what’s best from both.

With that I’m off to enjoy a latte – and yes, I’ll be using a coupon.


  1. Ramit is demonstrating the true path to being “rich.” He is selling stuff to others who want to be rich and who want to get there with a minimum of sacrifice. Nothing wrong with that but I hope his book has a chapter on making money by selling stuff to the masses and convincing the blogosphere to help promote it.

    Trent is also selling but in a more subtle way: He is selling his own story.

    Kudos to both of these successful entrepreneurs.

  2. I too have been enjoying the discussion (and Ramit’s latest April fool’s video). I think Ramit’s ideas are better suited for the masses. Like he says, people aren’t good at changing, so why try to beat them over the head with stuff they’ll never take to? Stuff that they read and say “WHat??? I’ll never do that!”

    But I think there is a huge market for what Trent advocates too. THe hardcore savers who want to keep finding more ways to save off everyday activities.

  3. The question that matters (in my view) is — What are you saving FOR?

    If you get that one right, you will be able to figure out whether you want to save on expensive stuff or on cheap stuff or both or neither.

    The big lack today (in my view) is that everyone knows that they should save more but few have a clear idea re what they should be saving FOR.

    Most say “for retirement.” I don’t view that as a good answer. For most of us retirement is a distant goal. It doesn’t motivate. Those who really save are almost always saving for some less distant goal, even if they don’t realize it. Most who save do so because they like the feeling of financial freedom that is enjoyed in the current day. So that’s the true saving goal.

    When we get clear about our goals, we gain clarity on the other questions too.


  4. I think it takes a little of both. What can you do to further eliminate your expenses once you take care of the bigger ones? All the little and easy ways. For me I don’t have any credit cards or a house payment. So I can’t get cheaper interest rates since I don’t have those payments. I can attack my grocery bill monthly. I also changed our lights to CFL bulbs and have noticed a nice savings. I also turn off the power strip before going to bed each night. Many of my little changes have added up to bigger savings. Some are more immediate than others, but they all add up. I don’t deprive myself of some the guilty pleasures. I don’t have many, but I do enjoy our DVR. We save money on things that don’t matter to us so I can spend money on things that do matter. I believe it’s all about balance and priorities.

  5. I appreciate both points of view. My approach is to look at things as ‘consumable’ items versus items that last longer. I will clearly ‘pinch pennies’ when buying food or hygiene products. My mentality is, once used will not be used again, so I will try to save every cent I can. On the other hand I’ll pay a little more for items that will be usable over a period of time, such as a car, television, house, clothing, etc. Or if I have to travel a great distance to save just a few cents, I go with the store I’m currently in. Sometimes you can spend a lot of time and money to try and save a few cents. In all of my monetary decisions, I attempt to determine, what is my return on investment.

  6. I like the idea of attacking it on all fronts. But I think Rob’s point is excellent. If I’m clear on my objective, tactics unfold.

    Having said that, my experience is that our biggest challenge is often staying in our “adult”. The adult inside knows what good choices are. The “child” inside us wants what he wants when he wants it.

    Most of us have the knowledge we need. When I remain aware of my childish side, I’m able to make better financial choices.

  7. Rob is on the right track…. anything you do that might “save” you money or “free up” cash flow, doesn’t really matter unless you have a purpose for the saved money and extra cash flow. Without a deep, meaningful purpose, one is most likely to “consume” rather than “conserve” the benefit.
    “Saving for retirement” is only meaningful if you have an idea when you’ll retire and how much you’ll need by then and how your decision will contribute to that goal, and you have a strategy or plan to follow.
    The same applies to those who refinance their mortgages to take advantage of the lowest interest rates in history. If you do not have a purpose and plan behind the decision, you are probably wasting your time and your money.
    I have found most people who refinance to lower rates without a strategy end up consuming the benefit and not changing old habits. Most are soon left with nothing but bragging rights to having a great interest rate, because the financial benefit was absorbed by mis-consumption of other debt.
    A meaningful goal, a plan to acheive it, along with good discipline and habits create the foundation one needs to create and preserve their wealth.

  8. I follow Amy Dacyczyn take on this issue. That is to follow Ramit’s advice first, and then go on to tackle Trent’s sort of discipline. Basically, you should definitely plug the biggest holes in a sinking ship first. But there might only be five or six big holes to plug. Then you might have hundreds of tiny holes. Saving big money in one fell swoop is great, but chances are you can’t manage that more than a few times per year. On the other hand, there are hundreds of little ways to save day in, day out, for years on end.

    So yeah, sweat the big stuff first. When you’ve got those things under control, then you can sweat the small stuff. That’s my approach anyway. I don’t think it’s an either-or situation; it’s a matter of prioritizing.

  9. I am frugal because I don’t believe in being wasteful. On the other hand, I do buy high quality ‘luxury’ items on occasion. I bargain shop aggressively for them.

    I also follow some old fashioned things that my depression grandmother used to do, like using vinegar as a cleaner and a fabric softener. I cut up my own chickens. Does it save me money? Sure. But there are other reasons as well. I have sensitive skin and vinegar doesn’t irritate my skin the way fabric softener does. Vinegar as a cleaner for my kitchen counters doesn’t irritate my lungs the way bleach does. Cutting up my own chickens is often fresher and tastes better than mechanically separated chickens, and I can use the chicken bones to make stock. Chicken stock is the secret to the difference between homemade and gourmet!