Frugality has become popular as a way to help cope with an economy where jobs, raises and promotions are harder to find and to hold on to than they have been in nearly a human lifetime. But there’s a fundamental problem with relying exclusively on frugality to deal with the high cost of living. You can only cut costs so much and once you reach that level, the only real option is to make more money.
How much can you cut before you can’t cut anymore
I suppose that in theory you could lower your living expenses all the way to zero – if you were willing to go “off the grid”. That would involve living in a tent in the back woods, hunting, fishing and growing your own food, heating and cooking with firewood, and drinking and bathing in a local creek. I don’t mean to insult anyone, but most of us could never live that way, and that means we’ll always have living expenses.
The question is, how far can you cut those expenses? Sure you could lower your housing costs by moving farther from the job market, but then what do you do for employment? You could ditch your car and ride a bike instead, but that would limit your employment opportunities. And then there’s health insurance, food, utilities and all the other expenses that go into modern life.
You can lower all those expenses to some degree, but at a certain point you begin restricting your income earning abilities as well, lowering your living standard to an unacceptable level, and maybe even putting your health at risk.
Even if you could keep cutting costs, there are complications that make it less effective than we might think.
The cost of living is rising – and shows no sign of stopping
Cutting costs would be a more effective strategy if the value of your income dollars remained truly constant, but they don’t. Because of inflation, you can cut expenses and still find yourself with less money.
For example, according to the Bureau of Labor Statistics, the cost of living has risen by 26% from 2004 to 2014. If you earned $1,000 a week in 2004, you’d need to earn $1,262 in 2014 just to stay even! And that’s during a period of what’s considered to be low inflation!
But that’s only half the story; the other half is…
Salaries are stagnating
Yes, some people have seen their incomes rise more than 26% in the past decade, but millions have seen lower salary increases over that time. Many more have gone through periods of extended unemployment in the past few years and have been unable to earn as much as they used to.
Combining income stagnation with inflation is a double edged sword that’s causing many to experience declines in their standards of living. Against this backdrop, they cut living expenses but still feel as if they’re falling behind.
When the only solution is to make more money
When cutting costs is doing little more than keeping you from falling through the cracks, or when it becomes apparent that you’re still falling behind it’s time to add something else to the mix. It’s time to make more money. How can you do this?
Look for ways to make more money with your present employer. Can you work yourself into a promotion? Is there a bonus program available to you that you can take greater part in? Is there a position you can move into that will enable you to make more money?
Get a higher paying job with another employer. If there’s no way to make more money with your current employer, maybe it’s time to sell yourself to a competitor. Failing that, is there another industry where your skills would fit and you’d have a chance to make more money than you are now?
Get a second job. In many fields the job market is tight and increasing income will be problematic. If that’s the case, you may have to look for additional income sources. A second job will not only create an additional income source, but it may also provide you with additional skills that will enable you to get a higher paying full time job down the road.
Start your own business on the side. This is similar to getting a second job, except that you work for yourself. There are all kinds of businesses you can go into that can be done in your spare time and in combination with a full time job. Blogging and freelance blog writing are two that I’m doing, and both are work-at-home situations that you can work at and build at your own pace. Anything related to tutoring is another possibility. Kids need help with school work and music, but adults need help with learning English (or any other language you know), fitness, basic auto repair, computer software programs and just about anything you can think of. Make a list of what it is you’re good at, and give strong consideration to offering yourself out as a tutor.
Cutting costs is important, but once you’ve cut all that you reasonably can, it’s time to look at the other side of your income and expense statement—the income side. If you can make more money while cutting costs, you might just find yourself on your way to a whole new time of personal prosperity – no matter what the economy is doing.
Are you getting frustrated over trying to make your income go farther, only to find out that you really aren’t getting anywhere? Have you worked on making more money as a solution?