When Is It Better to Be Frugal? When Is It Better to Earn More?

One thing I love to do is to browse through random personal finance blogs. I’ll jump on links from one blog to another, just to see what a new voice will have to say. Doing this helps me get a pretty good idea of the various perspectives and ideas that are out there. It also helps me notice a few “groupings” of ideas out there as well.

For example, I notice that, often, personal finance bloggers are either wholeheartedly about frugality or they’re all about entrepreneurship and earning more money. They’ll write only about their ideas and sometimes even take swipes at other perspectives (I often see entrepreneurship blogs making fun of frugality).

Frankly, I find this completely silly.

There are times when frugality is the best option. There are times when focusing on increasing earnings is the best option. Most of the time, there’s no reason not to try and do both.

For example, the effects of frugality are more immediate than the effects of building your income. When you make a choice to not buy something or to find a less expensive way of doing something, you start reaping the rewards from that choice immediately. That money goes from being spent to residing in your pocket right now. Thus, if you need immediate relief, frugality is the superior tactic.

On the other hand, frugality has a limit. There’s only so much you can cut before you start having to make seriously life-altering choices.

At the same time, the ability to earn more is limitless. There are always potential avenues to earn more money. You can get a second job, start a business, ask for a raise, and so on and so forth. Unlike frugality, there is no cap. You can always earn more. You can’t always cut more.

However, the value of your actions isn’t always clear when you’re trying to earn more money. Yes, it’s clear how much more you’re going to earn if you take a second job, but what about a decision to start a business? What about raising your skill set? It’s essentially impossible to interpret what those actions will earn for you. They might earn nothing. They might earn a lot. With frugality, you can almost always calculate how much you’ll save.

I tend to think that the biggest differences between frugality and increasing earnings come with your perspective and focus on life.

In my eyes, frugality shines best in the short term. If you’re in a financial panic after, say, a major car repair, frugality will help you. If you’re saving for a goal that’s a year or two down the road, frugality will make that goal possible.

Similarly, frugality is superior when you need precise numbers. For example, if you’re trying to figure out how to come up with a car payment, building your skill set for a better job is irrelevant. On the other hand, eating every meal at home can quickly provide the money you need for that car payment.

On the other hand, increasing earnings shines over the long term. Building your skill set doesn’t pay off today or tomorrow. Neither does networking, nor does starting your own business. These types of things need consistent effort and time to grow into earnings in your pocket, but the rewards they reap often greatly exceed those earned by frugality.

Increasing earnings is all about growth. Growth is often unpredictable, but the rewards of growth are tremendous, pushing you upwards to new heights.

What’s better? My take is that tactics from each side are useful in a successful life. Poor spending choices, for example, make it harder for you to make challenging decisions that can increase your earnings. It’s very hard to make an entrepreneurial leap, after all, if you’re not frugal.

The destination of financial independence is the same no matter which path you take.

Trent Hamm
Trent Hamm
Founder of The Simple Dollar

Trent Hamm founded The Simple Dollar in 2006 after developing innovative financial strategies to get out of debt. Since then, he’s written three books (published by Simon & Schuster and Financial Times Press), contributed to Business Insider, US News & World Report, Yahoo Finance, and Lifehacker, and been featured in The New York Times, TIME, Forbes, The Guardian, and elsewhere.

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