Living frugally versus increasing income – which is better? The experts don’t agree, that’s for sure. Which do you prefer?
I find it really interesting that many blogs I read focus on frugality, while others are centered on increasing income.
I’ve read both Rich Dad, Poor Dad and Secrets of the Millionaire Mind, where I’ve learned a lot about money and what it means to change how you think about money. Both are focused on increasing income. I’ve mentioned how Grant Cardone said in an interview that “you get rich connecting with opportunities that can produce and multiply money. You don’t get rich saving money… Missing opportunities is what costs people money.” Similarly, Ramit Sethi has a chart comparing being frugal to increasing income that you can see here. His chart suggests that increasing your income is far better.
Conversely, many blogs and experts advise that the only way to win with money is to live within or below your means (i.e. to be frugal). In The Millionaire New Door, Thomas J. Stanley writes that although millionaires have a high income, they have a frugal mindset and live well below their means (most are not buying and spending lavishly like we see in the movies).
I think the two approaches are very different. That’s not to say you can’t be frugal and try to increase your income. But in general, the mentality of each is quite different. So, doing both requires two separate approaches. On the one hand, living frugally requires managing money, living below your means, saving, and maybe budgeting. On the other hand, increasing your income demands hustling to earn more, which requires thinking big and knowing how to make more money (whether that’s by getting a new job, side hustling, investing in the market, starting a business, or investing in real estate).
Here’s a look at the differences between living frugally and increasing income.
When I say “penny pinching” I’m talking about living frugally. Living below your means; reducing spending and managing your current income to meet your financial goals.
Saving and living frugally teaches you a thing or two about managing money, not to mention discipline. By spending less, you can stick to a budget, save more, and make it easier to reach your financial goals.
Another important point here is that regardless of much your income increases, you still have to manage it and live below what you make if you want to be rich. If you make a million and spend over a million, you’re still in trouble despite your high income. So, regardless of your income, you’ll have to spend within your means, which requires some sense of being mindful and intentional with your money, including managing it and being frugal.
There are a few downsides to penny pinching. First, you’re always saying “no” to yourself and you can’t do what you want to do. Second, there’s a limit to how much you can save or invest based on your current income. It’s hard to save $1,000 / month if you only make $2,000 / month, for example. You’re limited based on your current income. And maybe you really want a latte every day and to take a vacation every year. The anti-frgualer would say that you shouldn’t say you “can’t afford it”, you should instead say “how can I afford it?”.
When your goal is to increase your income, you’re focused on making more money so that you can do more of what you want (whether that’s saving or spending).
And hey, wouldn’t it be great if you took home $1,000 more every month or got a $5,000 raise this year? I don’t think anyone would disagree with this. The idea here is that there are opportunities out there in the market place for you to earn more money, and you’ll be able to get rich by seeking these opportunities instead of focusing on saving $3 on a latte.
That’s what those on the increasing income side of the argument believe. We live in a good ole capitalist country where money is plentiful; we just have to figure out how to get it in the marketplace. It’s simple. Simple, not to be confused with easy.
The argument against focusing on increasing your income is twofold. First, not everyone is in a position to increase their income (whether they don’t know how or whether they can’t). And second, even with an increased income, you still have to live below your means to achieve financial success, so learning how to manage your money and practicing frugality is more important because you can apply it to any income and be successful.
Which is better?
Given the pros and cons of both living frugally and increasing income, I’m not sure one is better. Naturally, I’m a spenderand really enjoy the hustle of working, so I’m more inclined to seek opportunities and want to increase my income. But this is just based purely on my personality, not on any ideals. Because I’m a spender, I make sure to budget and manage my money strictly (so I don’t spend it all!).
I’m wondering… What do you think?
Do you have a mindset where you’re cutting back and never spending? Are you giving up the latte and skimping on restaurants?
Or, are you hustling so much to try and get your income up? Are you side hustling and negotiating raises?
What about both approaches – managing your current income and cutting back, while seeking those big wins and opportunities that will increase your income?
Do you think you’re naturally more inclined to have one of these mindsets, or do you think it’s possible to have both, equally?
I think this topic is really interesting, if you can’t tell! 🙂
Penny Pinching and Income Increasing Blogs
For your enjoyment, here’s a list of blogs focused both on pinching pennies and increasing income.
And here are two articles with opposing views on the topic that I enjoyed reading…
Read Ramit Sethi’s argument for earning more here.
Read Retire By 40’s argument for being frugal here.
photo by freedigitalphotos.net
photo by freedigitalphotos.net