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Overhyped frugality

In a follow-up post, Sethi argues “frugality” isn’t what made the “Shark Tank” investor a millionaire. After all, you would have to skip 181,818 cups of coffee daily priced at $5.50 each to save $1 million. That’s one cup a day for 498 years.

This isn’t the first time Sethi has targeted O’Leary over his advice on buying coffee. Sethi believes rich people telling average Americans to skip their morning lattes are missing the point.

“I don't mind people becoming extremely wealthy. Just tell the honest truth!” he exclaimed. “It's not f—ing coffee and it's not saving money on iceberg lettuce that got you there.”

He also highlighted the fact that a key ingredient in O’Leary’s wealth building recipe is risk. Like any other investor, the Canadian entrepreneur has put money into ventures that have ultimately failed. Notably, O’Leary claims to have lost the $15 million he was paid to be a spokesman for FTX, the cryptocurrency trading platform that collapsed into bankruptcy in late 2022. Some of that payment, he says, was invested into crypto.

“How many coffees do you have to cut back on to equal that number, Kevin?” asked Sethi.

Instead of focusing on small expenses, Sethi believes it’s much more practical to focus on the bigger picture.

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Sethi's approach

Sethi believes one of the keys to living a rich life is building a budget that’s simple and easy to stick to.

Instead of tracking and mitigating every small expense each day, he encourages people to create four broad baskets for all expenses. The first basket is for fixed expenses such as rent, utilities and groceries. The second and third are for savings and investments. The last one is for guilt-free discretionary spending.

Dedicating fixed percentages to each category should help you create a simple budget that you can deploy consistently. For example, spending 60% of income on fixed costs, 10% on investments and 10% on savings leaves 20% for discretionary spending.

Sethi believes this approach is more practical than tracking the number of lattes and sandwiches you order to-go every day.


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About the Author

Vishesh Raisinghani

Vishesh Raisinghani

Freelance Writer

Vishesh Raisinghani is a freelance contributor at MoneyWise. He has been writing about financial markets and economics since 2014 - having covered family offices, private equity, real estate, cryptocurrencies, and tech stocks over that period. His work has appeared in Seeking Alpha, Motley Fool Canada, Motley Fool UK, Mergers & Acquisitions, National Post, Financial Post, and Yahoo Canada.

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