Ramit Sethi Shoots Down $5 Questions In Favor Of $50,000 Questions: 'I Know Coffee Is More Expensive'

Like many financial gurus, Ramit Sethi believes you should track your spending, use your money wisely, and invest for long-term wealth. However, he doesn't believe you should penny-pinch along the way. He believes in living a rich life as you build wealth, and he criticized a common trend in the personal finance industry where people talk about how much a daily coffee habit costs.

"I know coffee is more expensive," Sethi stated in a recent TikTok video, explaining that he doesn’t want to hear people talking about how spending $3 per day on coffee is costing your financial future. 

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Instead, he framed the conversation around $50,000 questions. Asking questions about your biggest expenses can lead to the most savings. These are some of the expenses Sethi encourages people to look at instead of their daily coffee consumption.

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Focus On Your Housing Costs

Sethi likes to look at the numbers, and if you look at anyone's financial profile, you'll see that most of their money goes toward housing. Whether it's monthly mortgage payments or rent, most of your money is probably going toward housing.

People who drink coffee each day can stop drinking coffee on weekends to reduce their coffee spending by 28%. However, that won't be life-changing for your finances. Getting your housing costs down by 10% will be more significant than abandoning your coffee habit altogether.

You can reduce your housing costs by living with a roommate, downsizing, or moving to a more affordable area. You may have to make short-term sacrifices to reduce your housing costs, but if you're really looking to save money, you should start with the biggest line items.

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Assess Your Car Payments

Car payments are typically right behind housing as people's largest expense. Although a good 10% to 15% of your monthly paycheck is a good range for car expenses, many people spend close to 20% of their monthly paycheck on auto loans, gasolin, insurance, and related costs.

You can reduce your car payments by avoiding car leases, as you'll never own a car outright if you keep making lease payments. An auto loan gives you the path to full ownership, but you don't have to borrow money to buy a new car. Opting for a used car can help you save a lot of money while getting a quality vehicle.

Finally, you may have too many cars. Not everyone needs a luxury car, and just because you can afford it doesn't mean you should buy it. Sethi would be a fan of someone buying a luxury car that makes them happy as long as they have their finances in order. If you're living paycheck to paycheck, you should probably get rid of a luxury car and choose a more affordable vehicle instead.

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Small Expenses Add Up

Sethi regularly encourages people to track their spending. If the daily coffee habit isn't worth it, then you should remove it from your expenses. Unused subscriptions, impulsive spending, and other purchases that don't make sense also fit in this category. 

Every dollar matters, but if you want to save money, focus on the biggest line items in your budget. Housing and car costs are the top two items for most people. These two spending categories make up more than half of most people's budgets. 

Regularly monitor your expenses and get rid of the small things that don't make sense. However, Sethi is against sacrificing your happiness and living excessively below your means just to save a few extra dollars. Just make sure you are asking yourself more $50,000 questions and fewer $5 questions.

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