By Dr. Matt Morgan, Guest Writer

I’ve noticed that a lot of discussion around the pathway to financial independence and living the “good life” revolves around two powerful, but distinct schools of thought. This division is best highlighted in two very popular financial internet personalities: Pete Adeney and Ramit Sethi. If they were to meet in person, it would probably be like mixing matter and antimatter. Both are highly opinionated, alpha personalities who don’t suffer fools gladly. However, their financial advice can seem like oil and water. Let’s take a look at each of their financial approaches to see if it can reveal something about the way you may want to navigate your way to wealth.


Financial Independence via Pete Adeney of Mr. Money Mustache

Pete Adeney is the founder of the popular blog (MMM). He is currently a 44-year-old who “retired” from software engineering at the ripe old age of 30. His financial philosophy is pretty simple: reduce waste, reject consumerism, pare down and optimize your life to live simply, save as much as you can (>60%), and build investment wealth so you can escape the rat race in 10-15 years. Some of his popular blog posts have titles like, “Living Beautifully on $25-$27K Per Year,” and the “The Shockingly Simple Math Behind Early Retirement.”


Financial Independence via Ramit Sethi of I Will Teach You To Be Rich

Ramit Sethi is the founder of the popular blog He is a 36-year-old with a penchant for creating online businesses. He is an entrepreneur and would-be empire builder. His financial philosophy is to focus on the “big wins” rather than the innumerable small purchases. He admonishes you to create more capacity and expand the pie so that you can “live rich” now. He believes frugality is futile and limited because after all, there is only so much one can save, but earning potential is unlimited. Some of his popular posts include titles such as, “The Psychology of Cutting Back on Lattes,” and “Is frugality about saving money or making you feel less guilty?”


Who Is Right?

So, given the stark differences in their approaches, who is right? Is it better to build your financial reserves ten bucks at a time like bricks in your retirement castle? Is a penny saved a penny earned (or two pennies when you consider taxes)? Or should you transform your yearnings for more wealth into productive energy, build multiple streams of income, and seek to expand the pie? Pete would say, “Not wanting it is as good as having it.” Ramit would say, “If you want it, you should have it.” Pete would say, “Frugality is fun.” Ramit would say, “Frugality is painful and guilt-inducing.”


The Wealth Equation

So, regular readers of this blog know that building wealth is not rocket science. Wealth building actually boils down to a very simple math equation:

Wealth Index = Earning / Spending.

That’s it. And notice that it’s a ratio, so the numbers don’t matter so much as their relative size to each other. Yes, I do recognize this breaks down at very low-income levels, but this is the basic formula from which the rest is derived.

Given this simple formula, we can quickly see the three approaches to increasing wealth:

  1. Increase the numerator
  2. Decrease the denominator
  3. Increase the numerator and decrease the denominator

So, it’s not really a matter of who is right. It’s a false dilemma. Pete is focused on controlling and optimizing the denominator (minimize expenses and eliminate waste), while Ramit is focused on controlling and optimizing the numerator (new streams of income, pay raises, and other big wins). They both have persuasive and fairly dogmatic arguments for why they are right, but of course, they are both right.



Whether you’re more of a ‘numerator’ person or a ‘denominator’ person is really a values question, not a matter of right or wrong. In fact, this type of dilemma is a part of many philosophical conundrums: striving for more vs contentment with what you have, building new vs optimizing current, long working career vs FIRE, and the political debates of growing the economy vs cutting spending.



Reader comments on their blogs are indicative of how these distinct approaches resonate with different personalities:

Here’s a comment from a reader on

“I’m quickly tiring of the New Frugality. I think it is all code for “Americans, adjust your expectations and learn to be happy with less”. I want my America back – the Land of Great Expectations and Lots of Chutzpah to Make it Happen.”

Here’s a comment from a reader on

“I really like MMM’s approach because all I had to do was just analyze what I’m already doing. I didn’t have to start a business, negotiate my salary, do freelance work, or anything like that. I just had to take a step back, and make my current life more efficient.”

You can almost predict the personality types (Myers-Briggs anyone?) from the different responses. Perhaps a ‘numerator’ is more likely a Commander, and a ‘denominator’ is more likely a Logistician. Are you a ‘live for today’ or ‘a save for tomorrow’ kind of person?


Career Frontloading vs Consumption Smoothing

Another way to think of it is in terms of frontloading vs smoothing. Pete is a front loader. He worked his tail off as an engineer for 10 years, saved 75% of his income, and “retired” at age 30 to do other things (including writing a very successful blog that earns a nice return–cue the internet retirement police). Pete’s approach echoes Dave Ramsey about how to live like no one else (i.e. scrimp and save) today so that one day you can live like no one else (i.e. be your own boss without the need to trade your time for money).

Conversely, Ramit has the heart of an entrepreneur. I don’t think he would ever claim to be retired. His approach emphasizes smoothing out his consumption so he can have the “good life” today and into the future. His advice centers on how to get out and hustle to increase your income, so you can “spend lavishly” on the things you love today–don’t postpone your desires until some unknown future date.

Economists have even come up with a boring sounding term for this allocation between today and tomorrow, intertemporal consumption, which is the attempt to explain people's preferences in relation to consumption and saving over the course of their lives.


Implications of the Wealth Equation on Financial Independence

So what does this mean for you? How might you incorporate these different approaches in your life?

First off, readers of this blog can be grateful that this is an academic discussion. As a site for high-income professionals, most WCI readers are sitting on a relatively large numerator. For you, wealth should not be a question of If, but How and When.


Success as a Denominator

So, if you prefer to work to live, not live to work, if you consider your paid profession more of a job than a mission, if you think hassles and regulation of medicine is taking the fun out of it, if you’d like to try a different career but worry that it doesn’t pay enough, if you tilt toward minimalist, if you don’t mind budgets (maybe even secretly like them), if you see more logic in optimizing rather than multiplying, and if you’d rather not start a side hustle or negotiate a bigger salary, then you are probably more of a ‘denominator’ type.

wealth equation

In your case, start by thinking about “how much is enough” and work backward. How much do you need per year to live an adequate lifestyle? Multiply this number by 25x and then work and save like the dickens to get to this goal (front load). When you get there (warning: this can be fuzzy), you’ll have the freedom to cut back to part-time or possibly move on to something more interesting/valuable to you.

‘Denominators’ will especially enjoy books like The Millionaire Next Door and Your Money or Your Life. These books reveal how powerful saving and economizing can be. There is a certain elegance to keeping your life simple, unencumbered, and dare I say, frugal. It’s probably good for the planet too. The blog will resonate with you.


Possible risks of optimizing for the denominator and frontloading your earning are that you may encounter unforeseen circumstances and not live to enjoy the fruits. You could spend your most youthful/healthful time being frugal and then discover that you're not able to enjoy your wealth as much when you’re older (heli-skiing anyone?). You could lose your sense of purpose when you “retire” and feel unhappy despite being financially independent. Furthermore, you’re initial calculations of “how much is enough” may turn out to be too low and constraining as you mature and possibly add family considerations.


Success as a Numerator

If instead, you love your paid work and/or see many opportunities to produce value for others, if you find the idea of multiple streams of income intriguing and motivating, if you would rather earn more than save more, if you enjoy the luxuries of life (big house, fancy cars, wake boats and home renovations (wink), vacation cabins, expensive travel, and consumer spending) then you, my friend, likely tilt toward a ‘numerator.’

In your case, start with what you want and work toward it. Target a high paying specialty in a low cost of living area. Be smart about your expenditures, but focus on “the big rocks” and don’t sweat the small stuff. Build your practice, start a side-hustle, and consider real-estate and other alternative investments. Loosen the purse strings (assuming you’re out of debt and doing all the right things). The sky's the limit because your earning potential is high, and your time horizon is long.

Numerators may enjoy classics like Think and Grow Rich, and The Magic of Thinking Big. And if you haven’t already, you’ll want to check out a fellow numerator,, who will expand your thinking on the many options of enlarging the income pie.

Potential risks to the ‘numerator’ approach are that you may never have “enough.” Yes, watch out for that insidious thing called hedonic adaptation. You may literally ‘spend’ your life seeking more money rather than enjoying time with people who matter most to you and doing things that are most meaningful. You may change your mind about how much you love your career after 10-15 years (the ‘hassle factors’ can burn you out). You may also overestimate your earning potential (numerator) and underestimate your consumption (denominator) and its effect on you future goals.


Creating Great Wealth

Ultimately, life is about deciding how to allocate time and money for what matters most to us. As is said frequently on this site, there are many roads to Dublin. Some folks will want to create great wealth by economizing, saving half or more, minimizing waste, and possibly “retire” early from the requirement of paid work. Others will want to create great wealth by thinking big, working extra hours, and maximizing their income and splurging on some luxuries along the way. And then a unique few, like WCI himself, will do both with impressive results. It’s not about which method is right, it’s about values and priorities. Wealth Index = Earning / Spending. Whether you focus on increasing the numerator or decreasing the denominator or both, you can and will achieve financial success.

What do you think? On your road to financial independence are you more of a ‘numerator’ or a ‘denominator’ or somewhere in-between? Comment below!

[Founder's Note: Matt Morgan, MD is a practicing radiologist at the University of Utah with research interests in machine learning and medical decision support. He splits his time with Elsevier, Inc where he helps build medical software for physicians. He is also the founder of the, a popular and thought-provoking blog that explores how small daily habits make a big difference in creating health, wealth, and wisdom. He presents at national conferences on personal productivity and mindful living. Matt, his incredible wife, and his six kids have had a front row seat to the emergence of The White Coat Investor and he has a valid claim to being the inspiration behind WCICon18 where he served on the blogger panel. We have no financial relationship other than piano lessons.]