Frugality is Just the First Step

credit: Neonbrand on Unsplash

credit: Neonbrand on Unsplash

One of the heated controversies in the personal finance world is whether you should focus on cutting your expenses or increasing your income. Team Cut Your Expenses argues that increasing your income won’t do much if you also inflate your lifestyle and spend more than you earn. Plenty of people have high incomes, yet, they are still living paycheck to paycheck. Team Increase Your Income argues that you shouldn’t “live within your means,” you should “expand your means.”
There is only so much expenses you can cut in your life and who wants to live a life of sacrifice and depravation. Why not increase your income as the potential of that is unlimited compared to saving a few bucks using a coupon. Team increase your income tells you that leaving below your means is depravation and cutting out lattes is unnecessarily, when you can just “expand your means.”

Increasing income by investing it is great but it takes money to make money. You need to be able to save money first to invest it. Building a business always sounds sexy and exciting, but it will most likely take a lot of work and time. There is no shortage of products out there trying to sell you on how you can increase your income. Some are scammy and shady, while others are probably truly trying to help the client. However, increasing your income will always require hard work and often times some luck. This doesn’t mean you should try. You absolutely should try to increase your income.

As frustrating it is to sometimes hear proponents of Team Increase Income bash frugality, sometimes Team Cut Your Expenses can be equally frustrating. Cutting coupons to save 25 cents and reusing dryer sheets is going to help you build wealth. And spending your valuable time doing these tasks will keep you from finding path to finding wealth. Another issue with those who tout frugality is when I read blogs where the writer shuns consumerism and embraces frugality and makes it appear as some unknown magic elixir. They write about how they cut out some costs in their lives a few years ago and will soon retire early. Wow, that easy right? Just don’t buy stuff you can’t afford! Yes, this is great advice but there’s something missing. A good INCOME! There are many who already shun consumerism and are frugal, but are doing it because that’s the only way they can get by. It cannot be disputed that it is much easier to save a large percentage of your income when you have a larger income. While it is impressive to have a high savings rate when other similarly high income people spend it all, it is obvious that Income Matters.

So which side is right? Most people love taking one side and forcefully arguing it. Maybe it’s someone who touts frugality but doesn’t know ways to increase his or her income. Maybe it’s a guru trying to sell you their product which will increase your income. Everyone chooses a side. Most people have an agenda. The real answer, however, is that both sides make valid points. But, why can’t you do both? Why can’t you cut down your expenses while trying to increase your income! With that said, frugality is the first step.

Frugality is the first step because it is much easier. Just follow the rule: Don’t buy stuff you can’t afford and don’t need! Voila! You’ve saved money. Call up internet provider and ask for a discount. Switch to generic brands. Find a more affordable cellphone plan. Cut cable television. Cook meals and bring your lunch to work. All actionable steps which can easily be taken which will save you money not just once but over the long term. No need to learn SEO or WordPress to build a blog telling other people how to make money by starting a blog. No need to create and sell an online course about how to build online courses to sell to people. No need to publish and market a book about how to make money publishing and marketing books. No need to learn the ins and outs of real estate investing. While these skills can be great and something you might want to learn to increase your income, let’s start with the low hanging fruit.

Frugality is also an essential first step if you have debt and/or low cash reserves. It is much harder to increase your income either through a business or investment if you have debt. One of my friends struggling with debt often talks about wanting to invest in stocks or start a side business, but is struggling with a large credit card burden. How are you going to invest money in stocks or invest money in starting a business when you’re in a ton of debt? It would be akin to going for a brisk walk in the mornings as exercise, while eating hamburgers, fries and soda at lunch every day.

Once you’ve gotten your expenses under control, you should focus on income. Obviously, there are things that you can do concurrently, like learning new skills to find a better paying job, looking for a better job, asking your current employer for a raise, or working on a side hustle with low start up costs. However, if you plan on increasing your income by starting a business or investing in stocks or real estate, you’ll need some money. Having your expenses under control will form the foundation for you to increase your income. You will have money to invest in either your business or in stocks/real estate. You will also have an emergency fund as a buffer so that you are not at financial risk if you suffer a setback. That emergency fund will give you the courage to find a better paying job or start your own business.

Are you on Team Cut Your Expenses or Team Increase Your Income or both?

12 thoughts on “Frugality is Just the First Step

  1. Erik

    I’m on team increase your income. I’m a frugal person and don’t spend much money.

    That being said, I want to increase my income so I can save more. Money brings more money. If you can increase your income, you can increase your investments, and increase your passive income.

    Thanks for sharing :)
    Erik recently posted…Better Later than Too LateMy Profile

    Reply
    1. livingrichcheaply@gmail.com Post author

      Yep…increasing your income is ultimately what will bring you wealth. Saving and being frugal just provides a solid foundation.

      Reply
  2. Mrs. Groovy

    I’m on Team Frugality but it all depends on where you are on the consumerism chart, I think.

    I love this — “No need to learn SEO or WordPress to build a blog telling other people how to make money by starting a blog. No need to create and sell an online course about how to build online courses to sell to people…” It’s quite tiring to see all the overnight experts with their hands out. (I don’t mean the ones that legitimately sell value and have put in the work.)

    But still, I can’t underestimate the value of earning more. Here’s a thought to those who’ve yet to cut cable — cut the cord and suddenly you have more hours in a day to learn new skills (and avoid all the commercials telling you that what you have is not enough).
    Mrs. Groovy recently posted…What a Great Way to Start the Week: Choose FIMy Profile

    Reply
    1. livingrichcheaply@gmail.com Post author

      Great point. For those who can’t stop themselves from getting into credit card debt and buying stuff they don’t need…frugality is a lifesaver. But if you’re already a natural saver…there’s only so much you can do with increasing your income. And you’re right about the overnight experts…while they are not all shady and sure some do offer value but if I see another post with Blue Host affiliate touting how much you can make blogging…argh!

      Reply
  3. Damn Millennial

    Solid points, I think that both sides are important. When you are getting started cutting your expenses makes a big impact when the amounts you put away are relatively small. However, as you get your footing and have ingrained those habits its important you continue to seek ways to earn more.

    My number one problem with the frugality only crowd is I think they are limiting their thinking in what they can earn. Don’t sell yourself short be great! If you aren’t there yet keep making an effort and you will see results if you stay persistent.

    Reply
    1. livingrichcheaply@gmail.com Post author

      Good points. And I agree with your critique of frugality ONLY crowd. You can cut your way to wealth. And some savings tactics are really not worth the time. You’d be more productive trying to earn more money. I think some of the frugality only crowd just don’t know that one side so they don’t write about the increase income side.

      Reply
  4. Rachel @ The Latte Budget

    Great post! I work to increase my income because it’s more rewarding than living frugally, and for me, it’s less restrictive. However, I do cut my dryer sheets in half :) If a frugal habit doesn’t take much time, I am all for it.

    Reply
    1. livingrichcheaply@gmail.com Post author

      Thanks Rachel! Yea, I’m a frugal person naturally and when saving a little money doesn’t take much effort, why not do it? But, ultimately you’ve got to increase your income if you truly want to build wealth.

      Reply
    1. livingrichcheaply@gmail.com Post author

      Exactly. I remember reading similar points in posts on your blog. Cutting the $200 a month in spending is awesome because it adds up…it’s $2400 a year! It’s what Mr. Money Mustache would call flexing or working out your frugality muscle. Of course, once you’ve got your spending under control then you should focus on increasing income and starting a side hustle!

      Reply

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