Self-made millionaire Ramit Sethi: Cutting out avocado toast won’t make you rich — here’s what will

FAN Editor

Millennials tend to catch a lot of flak for their lifestyle choices. The perfect example: avocado toast.

“A little while ago, you may have seen an article going around telling you the only way to be a millionaire is to cut back on avocado toast,” says self-made millionaire and personal finance guru Ramit Sethi. “Now, suddenly, a million millennials in Manhattan started crying because they couldn’t go out to brunch six days a week.”

By now, you’ve probably heard the flimsy criticism that millennials are less likely to buy a home than previous generations because they’re supposedly spending too much money on avocado toast and other so-called frivolous foods. Well, Sethi tells CNBC Make It the idea that cutting out avocado toast will suddenly make you wealthy enough to afford a home is “horrible” advice.

“Think about the numbers,” Sethi, author of I Will Teach You to be Rich, says. He points out that the national median home price is roughly $245,000, which would require a down payment of about $50,000, along with the likely subsequent mortgage payments.

“Do you know how many avocado toasts you’d have to forego to get just a 20 percent down payment? Is it 100? Is it 1,000? No it’s over 2,500 avocado toasts,” he says. (Avocado toast can reportedly set you back anywhere from $2 to $18 per slice.)

In other words, you would have to be eating a lot of avocado toasts to think that cutting them out of your diet would help you save enough money to buy a home.

But the bigger question, Sethi says, is, “Why are we talking about avocado toast and real estate? Why is buying real estate in America the sign that you have become rich? Why is that? Is it, perhaps, the massive multi-billion dollar agenda of the Realtor industry, which tells you that the only way to be perceived as successful is to put all of your money into buying a house?”

Sethi isn’t advocating against buying a home, necessarily, but he does think it’s more important for millennials to think carefully about which investments make the most sense for them.

“My take for you is, number one, think about what your rich life is. For a lot of people, particularly young people, the idea of being anchored down to a new massive cost like a house is not their idea of a rich life.”

For anyone considering whether to buy a home or rent property, Sethi has told CNBC Make It previously that it is important to “run the numbers.” He advises you to take into account your own finances and the average cost of buying versus renting a home in your area. With those numbers in hand, you can decide if it make more sense to buy a home or, perhaps, invest the money you save in the stock market.

More importantly, though, Sethi says cutting down on indulgent purchases won’t help you become wealthy, because “you can’t cut your way to growth.”

“There’s a limit to how much you can cut, but there is no limit to how much you can earn,” Sethi says.

Here’s his advice for growing your income to potentially set you on the path to becoming a millionaire:

“You’ve got your salary, negotiate it. You’ve got time after work — don’t tell me you don’t have time, the average American watches five hours of T.V. a day — start a side business, go full-time if you want. But, think about how much you can grow and earn versus how much you can cut and protect, and that is how you start crafting your own rich life.”

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