Save Your Way Rich or Earn Your Way Rich? Personal Finance Bloggers Weigh In

It is early summer and my intake of iced coffees is increasing by the day. A grande at Starbucks is $2.78 in New York City, and on a good day, I can knock back two. That's $5.56 more than I usually spend each workday, or almost $30 a week. It's justified, I tell myself, because no one makes iced coffee at home. But how much should I be sweating these small purchases?

The home economics of coffee is a popular theme among personal finance writers. Who doesn't cringe when thinking about spending in the neighborhood of $1,500 a year to feed a caffeine habit? The debate goes like this: How much should we be minding our small purchases versus focusing on big gains, like earnings, in order to stay out of debt and get rich? I turned to some of the blogosphere's most popular personal finance writers to learn more about the save versus earn debate.

The Simple Dollar: 'Don't Trust Your Gut Reaction'

Trent Hamm, creator of The Simple Dollar blog (and author of the book by the same name), has chronicled his own journey from financial Armageddon (his word) to solvency. His appeal is as an anti-hero of personal finance, and his down-home strategies like DIY-laundry detergent are legendary. But his emphasis on frugality may put some on the defensive. Who can compete with a man who blogs cheerfully about finally wearing out sports sandals that he has worn since 2003? Eight years in the same sandals? Mine get ripe after three months.

Hamm's position on the save versus earn debate is centrist. Saving on small things is a great way to put out a fire if you're in a financial crisis, he told me, but in the long term, increasing income is important.

"You have immediate effects from the choices you make every day. Turn off the lights in your basement. That is a choice I can right now to save 50 cents," he said. "I can make a good presentation at work, but I am not going to earn more money right away."

Yet as we continued to discuss the question, it became clear that it wasn't the obvious things, like coffee or lipstick, where my real savings might come from. It was from the things I wasn't even thinking of.

"A lot of people think certain things are 'must have,' and they don't even think they can get rid of them. The best example is your car. You can't imagine not having it. But can you can use public transportation and get everything you need by your house?" Hamm continued. "You need to look at everything and ask if it is really untouchable."

His advice for frugality newbies is to take savings behavior -- riding the bus, buying one less coffee -- for trial run and see how it feels. "Don't trust your gut reaction," he said about getting over initial resistance. Right now, my gut reaction is still clinging to my twice-daily joe habit.

Get Rich Slowly: Mental Balance, Conscious Spending

Next I called up J.D. Roth, another inspirational hero of frugality, who created the blog Get Rich Slowly. As we spoke, Roth was making the two-and-a-half mile walk home from the gym, part of his personal campaign to drive less. Like Hamm, he pointed to the immediacy of savings that cutting back on 'extras' can bring you. However, Roth also acknowledged that saving has its limits: People can only cut out so much spending in their lives.

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"There is a point where you can't cut out anymore and you are still not able to make ends meet or save," he said. "Then you have to boost your income."

Roth's personal finance formula has combined both saving and earning more (through writing), which helped him get out of $35,000 in debt over the last five years. He takes a Zen-like approach to his financial life and mentions both mental balance and conscious spending as core principles. Roth said one reason he racked up so much debt is that he didn't know what was important to him. "I just bought what I thought I could get away with," he said.

His financial soul-searching led him to prioritize. Now, his savings philosophy is to cut back hard on the things he doesn't care about so he can focus on what's important to him, like travel. On Get Rich Slowly, he writes about how starting small in your spending cuts is a way to strengthen your frugal muscle. From there, you can move to bigger savings, such as cutting out recurring monthly bills, like the cable or subscriptions.

"It's a matter of practice and accepting the fact that you fail from time to time and you make mistakes," he said. "But you learn not to let them derail you."

Ramit Sethi: 'You Can't Out-Frugal Your Way to Being Rich'

Lastly, I called up Ramit Sethi, who has built a small empire around his best-selling book and blog I Will Teach You How To Be Rich. Sethi's personal finance campaign didn't start with a mountain of debt, but rather a strong drive to make money. Now he teaches others how to do it.

"I love making fun of stupid latté advice because it requires incredible will power and produces very little results," Sethi said. One the big problems with saving $6 on iced coffees today, he told me, is that the same $6 is usually spent elsewhere on another consumer product tomorrow.

He compared frugality to a fad diet. "It seems to be within your control ... and the strategies are really simple. A lot of people will make great changes. ... But they will change for a week and then yo-yo back," he said. "It can make sense about containing expenses, but you can't out-frugal your way to being rich."

Deep down in our psyches, Sethi argued, is a lack of willpower that makes it difficult to sustain a frugality campaign, like giving up daily lattes (or iced coffees). "One of the best ways to meet money goals is to earn more money," he said. "It's more challenging to get started earning more money, but the rewards are huge."

He offers three quick pieces of advice that are especially important for new graduates: negotiate your salary, get the right bank accounts, and start investing early. "Don't wait for the mythical day when you will be rich," he said.

"The ultimate question is what does rich mean to you? We found that the No. 1 reason people want to make money to have the 'option' to quit their job."

So what did all this information on the save versus earn debate mean for my iced coffee habit? My new strategy is a hybrid of all three bloggers' advice: I'll try drinking one iced coffee instead of two, rethink my financial priorities and perhaps invest the money I save. I might even switch to iced tea. And make it at home.

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