Frugality is practically THE staple topic of the personal finance world. Hundreds of posts come out each week telling us how to save money on this or that expense, how to cut costs with more do-it-yourself efforts, where to get the best rates and rewards on credit cards, how to cut your taxes?you name it. And I confess that I regularly write of such topics myself. But at some level at least, it seems like we may be doing a disservice by focusing so heavily on only one side of the personal finance ledger, while giving short shrift to the other major component: income. I’m not saying that frugality isn’t important, but rather that earning more money is more important than frugality.
I?ve actually seen the earning more vs. frugality debate written about in a few places, buried among the scores of posts written on frugality and thrift. Maybe the reason is that frugality is easier to write about than making more money. What ever the reason, more balance is certainly needed.
Here are two facts inherent in the earning more money vs. frugality analysis:
1. Expenses can be cut only so far, short of ?living off the grid?
2. Income, at least in theory, has no limit
The bottom line is that while frugality can enable us to maintain our current financial status, only by increasing our income can we elevate ourselves.
The limits of being frugal and why some things are more important than frugality
As you?ll see in the final section of this post, I?m not anti-frugal at all. But at the same time, it?s important that we consider the limits of what being frugal can accomplish.
In and of itself, frugality doesn?t enable us to move forward. It?s mostly an effort to make living on our current incomes more tolerable. That?s a noble goal of course, but if you want more out of your life, being frugal alone isn?t the magic bullet that will take you there.
One of the major inherent limits of frugality is that it often is a trade off between our time and our money. Perhaps the primary reason any of us would be spendthrifts is because it?s a lifestyle that emphasizes convenience. Paying more money often means we get what we want faster and with less hassle.
Frugality requires time, time to look for better deals, to do research, to spend fixing things ourselves. The spendthrift has none of that to contend with, and while he will have demons of his own to face, the frugalista is not without a few demons either.
All that time spent looking for deals and fixing things is less time available for income increasing activities.
In addition, there?s a circle-the-wagons aspect of frugality that doesn?t lend itself well to reaching out into income expanding ventures. The mindset that serves frugality so well is often in direct contrast to the thinking required to make more money.
Why earning more money is more important
A millionaire computer entrepreneur in the Atlanta area was being interviewed by the local newspaper in one of those ?how I did it? articles. This guy come from a modest middle class background, started as an ordinary computer geek, worked harder than his peers, broke out on his own and built his own company.
Within a few years, his company was grossing several million dollars per year, and if I remember correctly, his multimillion dollar fortune came when he sold the company sometime in his late 30s.
I always find those real life rags-to-riches stories fascinating, but what I remember most about this one was a single comment he made, that I?ll paraphrase from memory?
?We don?t realize what we can accomplish once we break free from the constraints of being middle class. Once I broke out of that, there was nothing stopping me.?
Being middle class myself, and thinking that to be a good thing, I had to think about his comment a bit. He didn?t elaborate on ?the constraints of being middle class?, but I think it?s not too hard to figure out what he meant.
Fitz at Ready to be Rich gave an excellent analysis of the differences between the thinking of the rich and the middle class in The Real Gap Between The Rich and The Poor Is Not The Money.
He explains that the true difference between the three economic classes?rich, middle class and poor?is in the way they think about money and about life in general. The middle class is concerned mainly with security, comfort and paychecks, while the rich are focused on opportunity, freedom and delayed gratification, among other things.
The rich move forward because they?re purposeful in their drive to do so. The middle class tend to stay where they are, not because they don?t want to move ahead, but more because their primary drive is to keep what they have. This is similar to the mindset of the frugal that we discussed in the previous section.
The best of both worlds: doing both
Here?s my take on the balance between earning more income and frugality: for most people the relationship should be symbiotic, with one endeavor supporting the other.
Frugality should be used not only to enable us to live within our means, but also to get the fullest benefit from it while using the increased budgetary freedom in support of our efforts to make more money.
What can frugality do to help us to earn more money?
- It can free us from the stress of living on the edge of financial oblivion, of never knowing exactly how we?ll cover next months expenses. Stress interferes with what ever we plan to do; remove it, and the possibilities are endless.
- If we get really good at it, to where we can live on substantially less than we now earn, it might enable us to quit a job we don?t like in favor of a job or business venture we feel passionate about, even if it doesn?t pay as much as we make now. If we truly like what we?re doing, the chances of making more money may increase.
- It can enable us to save a sufficient amount of money that we eventually have enough to either invest in a business venture or a least to live without fear of losing our jobs.
- It can enable us to pay off our debts and to live debt free. Absent debt, we can live a cash-and-carry life that can free us up to do most anything we choose. That kind of independence usually leads to good things.
Frugality just for the sake of learning to live within our means can be a road to nowhere, a never ending quest to keep our heads above water. But attaching a higher meaning to it by connecting it with a future goal can energize the effort and provide us with the higher financial purpose needed to propel us on the way to true financial independence.
If you’re looking for a way to spend more time earning income to help your cash flow, check out my post, The Freelance Blog Writer Side Hustle. Even if you?ve never written professionally in the past, this post will help you get started converting your passions and interests into an income earning business that you can work in from the comfort of your own home.
Do you think that frugality is a goal all it?s own? Or do you think it?s an effort that should support other financial endeavors?