How does someone achieve financial security or even get rich? Is it by earning a lot or by scrimping, exercising thrift and saving a lot? Bloomberg Opinion writers Nir Kaissar and Barry Ritholtz met online to debate.
Nir Kaissar: Anyone lucky enough to earn a steady, living wage -- and there are tragically too few -- can attain financial security, and maybe even get rich, by saving and investing their money. It doesn’t require deprivation, contrary to popular perception. But it does require sustained and disciplined frugality, a state of mind anyone can cultivate and I would argue everyone should.
Frugality, as I mean it, is the pursuit of a full life with the minimum consumption necessary to achieve it. It’s a habit of always asking whether less is more, or at least good enough. Is life any worse without a daily $5 latte, or a new car every two to three years or a 6,000 square-foot house? The answers will necessarily be different for different people; the important part is asking the questions.
And many are asking those questions now that coronavirus has stripped life to its bare essentials. I suspect some have discovered that they consume more than they need or even want. The pandemic spending recess is an opportunity to reset.
Perhaps some might even find that a simpler life is also a richer one, both literally and figuratively, as I believe it is.
Barry Ritholtz: I am not, nor have I ever been, a fan of “sustained and disciplined frugality." With that said, here's what to keep in mind:
1. Focus on the big things; the little things will take care of themselves
2. We all only have so much internal discipline, a consequence of limited mental bandwidth. Don’t fritter it away on things that don't matter very much.
3. Spending should always be a function of what you can afford, not a slavish devotion to some puritan ideal.
4. Money can bring security, comfort and happiness, but beyond a certain point returns on having more of it diminish rapidly.