Warning, extreme frugality may cause the following problems:
- Boring conversations at dinner parties or on dates
- Being considered a cheapskate by your spouse and friends
- Bouts of insomnia, while thinking of ways to save money
- Funky smell from that homemade soap or deodorant
- Missing invitations to events where they split the bill
Stepping Off the Frugal Path
Many of the posts from Personal Finance bloggers are about climbing out of debt, strict budgeting and living a frugal existence. This appeals to a very small percentage of the population, most of whom are PF bloggers. I’m taking a stand against this. I’m calling B.S. on the lifestyle police and giving frugalistas the finger.
I don’t want to clip coupons or shop in thrift stores. And, I don’t want to have to count my dimes or create a monthly budget. I don’t want to dwell on my bills or my expenses. Most of all, I don’t want you to waste your time on this either.
I have a much better plan. I want my finances to be fun. I want to check my investments and dream of where they will be in twenty years. I want to see my income steadily rising. I want a bigger budget for fun and entertainment. I want to invest more of my income and pay less in interest. I want to enjoy the money I have worked so hard to earn. Most of all, I want you to have this lifestyle too.
Why Being Frugal Doesn’t Always Pay
I understand there are people of limited means who must be frugal in order to survive financially. Twenty years ago, I was one of them and I knew every frugal trick in the book. The reason I wrote this post is because I spent years of my life scraping by just to make ends meet. I firmly believed I was doing the right thing at the time by limiting my expenses and I was very proud of my frugal accomplishments. But, now I know I was definitely on the wrong track.
I should have been working much harder to increase my income. Instead, I was expending most of my energy working long hours for low wages. And, I was squandering my mental talents on creative ways to save on every expense. This approach cost me a lot of time and money during my 20s and 30s. I still live a pretty frugal lifestyle for my tax bracket, which allows me to invest 20% of my net pay. But, I am way happier now that I have sufficient income to enjoy my life. My family is much happier as well.
Reasons to Increase Your Income Instead
Savings are finite, while income is virtually unlimited.
- It’s not possible to cut 100% of your expenses, unless you mooch off others or live in a homeless shelter. It would be difficult for most people to even cut 10% of their expenses. But, it’s very possible to raise your income by 10%, 100% or even more. In fact, I have more than quadrupled my income in the past twenty years. And, I don’t work any harder than I used to. I just get paid a lot more for my efforts. In a way I am very lucky. But, I made a conscious effort to boost my salary and it worked. I wish I had thought of it sooner.
There are economies of scale with a bigger income.
- You will pay higher taxes, but your budget allotments will increase as well. For example, I always pay myself first by putting away a percentage of my net income. Obviously, the amount of money I was able to save grew a lot as my income increased. So did my allotments for food, clothing, travel, transportation and entertainment. As the pie gets bigger, so do the slices.
Many of your biggest monthly costs are fixed.
- Unless you inflate your lifestyle, your fixed expenses will become a smaller percentage of your income. For example, my mortgage payment is the same as it was 13 years ago (actually it went down), while my income has more than doubled. This allows me to comfortably pay extra each month on the loan. Insurance, property taxes, utilities and other fixed costs are also much more affordable on a higher income.
Savings are incremental, while raises are exponential.
- Would you rather get a 5% raise or save 5% in expenses? After taxes, it may seem like the 5% savings is a better deal. But, your income will be up 5% every year and this could add up to a lot of money over time. When you get your next raise, it compounds on top of the old one. So, regular increases in income tend to grow exponentially, just like investments.
The Bottom Line
The bottom line is that you must keep a lid on your spending. But, this doesn’t mean you should become preoccupied with being frugal. It is much more efficient and enjoyable to use that energy to increase your income. As your income rises, it’s OK to increase your spending, as long as you eliminate debt, avoid payments and save for your future.
This post was featured on the Carnival of Personal Finance. If you aren’t familiar with the COPF, it’s the premiere carnival of its kind. If you want to skip the junk posts and read informative articles from knowledgeable bloggers, this is the place.