Why Ramit Sethi Says You Can 'Buy All the Lattes You Want' and Still Save Money

Is subpar sustenance worth the savings?

Pick any personal finance guru TED talk or "how to save money" blog post, and chances are good that at some point you'll hear something about getting rid of those little luxuries in the name of budgeting.

"Making your own coffee at home could save you a bajillion dollars a year!"

Alright, sure, switching from a $5-a-day Starbucks habit to making Folgers at home can help you sock away a decent amount in your savings over time. (More than $1,500 a year, in fact.)

But in the grand scheme of your financial well-being, is switching from your freshly ground, mocha-whipped delights to freeze-dried blocks of coffee going to improve your chances of success?

Rami Sethi, the guy behind "I Will Teach You To Be Rich," isn't so sure. According to Sethi, it's not the little things we should be focusing on -- it's the big-picture things.

You can only cut so much

In a recent Twitter post, Sethi summed it up this way: "Buy all the lattes you want. A $5 coffee is not going to change your financial life. But learning how to automatically invest, how to select the right asset allocation, and how to negotiate a $15,000 raise will. I believe in asking $30,000 questions, not $3 questions."

Here, he's half right. One $5 latte? No, that probably won't decide your entire financial future. A daily $5 latte? That can certainly impact your budget in a much bigger way -- especially if you could be investing the difference.

But he also went on to make another point that I think is also worth adding to the conversation:

"There’s a limit to how much you can cut, but no limit to how much you can earn. Frugality will only take you so far. You can only cut so much! But you can always earn more, and once you learn how, a lot of your money problems will disappear."

And that is, I think, the crux of his position in the entire latte debate. Sure, you could cut out your daily coffeeshop run, but what then? What if that's not enough? Better to focus on diversifying and growing your income, rather than trying to cut out everything that makes life enjoyable.

As Sethi says, "You should spend extravagantly on what you love and cut mercilessly on what you don’t. I don’t believe in cutting back on small purchases. I want you to spend MORE on the things you love."

Why not both?

In the end, both sides are valid. The traditional advice of cutting out wasteful budget busters is sound. If you're struggling to make rent, cutting out expensive coffees in favor of home-brewed will certainly make a difference to your bottom line.

But Sethi is also right. Once you've cut the budget to the bone, what's left? And even if you manage to minimize it all to the point of peak frugality, how long can you realistically keep it up before you, well, lose your mind?

As its name implies, personal finance is personal. Yes, there are broad strokes that apply to everyone. But the nitty-gritty of what works for your neighbor won't be the same as what works for you. They may be able to live off of subpar coffee without taking a major morale hit, but you may prefer to work a few extra hours a week so you can splurge on a superior sip.

It's all about balance. Have a smart budget that works for you and build your broader financial skills by learning to save smartly and invest wisely. Boost your career, increase your income, and keep moving forward -- latte in hand.