Embarking on our journey to pay off six figures of debt on a small salary was overwhelming to say the least. In fact, at the time we started our debt payoff, our total debt was more than three times my husband’s annual pre-tax income. When we set our debt-free date for just over three years down the road, some people thought that we weren’t very good at math (to put it nicely).
We knew that the numbers didn’t add up when we set our goal. We set the goal with faith that we could increase our income. Making more money was clearly part of our master plan for paying off our debt in a hurry. Still, we knew that just making more money would not solve our debt problem.
Won’t making more money solve my problems?
In some cases, the solution to financial problems is simply making more money. But often, the amount of money that you make isn’t what is keeping you from your goals. The solution to your debt or lack of savings isn’t as simple as earning more money.
Don’t get me wrong, increasing your income can be part of the solution to your financial woes, but there is more. Making more money will not fix your problems if you can’t manage the money you have. While earning more income could really propel you toward your next goal, if you squander away all the extra income you earn, then you’re not in a better position than you were.
That’s where frugality comes in.
Some times the idea of frugality gets tossed aside to focus solely on earning more income. After all, why bother pinching pennies when you could just go out and earn more instead? Wouldn’t that be a more productive use of time and energy?
One of the favorite arguments is that there is always a cap on how much you can save by being frugal. There’s no way you can save more than you earn. Earning, on the other hand, is not capped. There is no upper limit to how much you can earn.
Frugality is worth more than you think
Sometimes frugality gets a bad rap. Thrifty habits are mocked. It’s these habits, though, that let you keep your money. Before you worry about making more money, learn to do the best with what you have now.
Maybe you’re currently living paycheck-to-paycheck. What you earn barely takes you through to the next time you get paid. Or worse, maybe you are spending more than you earn already. If you carry any debt, then that is (or at least was) the case.
The key is to reduce your expenses so you can live on less than you currently earn. That might sound overwhelming and you might wonder where you would even begin. That’s why I wrote Frugal Fresh Start. I wanted to help you start from wherever you are and build frugal habits in a logical, manageable way. In the 28-day challenge you will learn to trim your expenses and manage your money in a meaningful way.
Once you learn to live well below your means and make the most of the money you do have, you’ll be ready to put additional money to good use. You’ll be in a better position to earn more money. When you raise your income but not your standard of living (i.e. keep the frugal habits you built), you will have extra funds to put pay off debt and put toward your goals.
Attitude matters
Attitude makes a difference. Don’t convince yourself that you are frugal because you have to be. If you feel forced to be frugal because of your situation, when the situation changes (i.e. you start making more money), the frugality will go out the window.
Decide to be frugal because you want to. Making frugality your choice will make your life much more pleasant. It’s like deciding not to say, “I can’t afford that.” Don’t surrender your ability to choose because of your circumstance. You’ll be much happier if you make frugality your choice.
Making millions does not a millionaire make
Sure you won’t become a millionaire without making millions, but earning millions doesn’t guarantee you’ll be a millionaire. There’s a big difference between making millions and being a millionaire. The difference is that the millionaire keeps his money.
Bankrupt celebrities are proof that making millions does not a millionaire make. It’s keeping millions that makes you a millionaire.
Start with frugality, but don’t stop there
I’m grateful that we strengthened our frugality muscles before increasing our income. It would have been easy to let our cost of living gradually rise with our income if we hadn’t already set frugal standards and a concrete goal for ourselves.
It’s true that frugality has its limitations. The amount you can save by being frugal can’t exceed the amount you earn. Being frugal can go a long way to helping you achieve your financial goals, but earning extra once you have frugal habits will definitely expedite the process.
While earning more won’t solve your money problems by itself, when combined with a frugal lifestyle, additional income can go a long way to paying off debt or establishing a nice retirement account.
What do you think?
- How do you balance frugality and increasing income?
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And when more income comes your way, it’s a great opportunity to painlessly add to your savings or debt reduction goals. Even a small raise can feel big if you increase your 401K contribution or save it for a specific purpose. If that small raise goes into your regular checking, it’s easy to spend without thinking.
My brother always says, “if you can’t manage your resources when they are few, you won’t be able to manage your resources when they are many.” I agree with you. I think paying off debt is actually more about the right mindset than it is about how much money you make.
Your brother is right! 🙂 It’s good to learn to manage your resources now, at whatever financial place you’re at. People are probably worse at managing their money when they have more of it (compared to when they have less of it). When you have less you have to be more intentional about it.
I really like this post. My biggest problem with David Ramsey is the whole “live like nobody else is living now so you can live like nobody else can live later” or however he puts it. That really isn’t effective because the same problem that caused debt – wanting stuff – is still there. If you want less and you learn to be satisfied with what you have, it’s much easier. It’s also a lot cheaper!
Very good point Becca. We need get to the root of the problem and teach ourselves to want less, not just try to suppress the raging spending monster inside ourselves. 🙂
Really interesting post! We have definitely run into the problem that making more money facilitates spending more. It can be the little things like nicer clothes, lunches out with coworkers, or big things like housing. We relocated to Sydney for my husband to take an awesome job that also paid 30% more than his old one. However, we are also paying almost double the amount of rent from our previous location (it doesn’t help that Sydney’s housing market is crazy inflated), so in the end our total take home pay is the same.
We decided to move for a quality of life upgrade (time off, maternity leave, beach access), not to save money but it is surprising how hard we still have to work on keeping the money in our pockets.
Erin, I’m an American and I’ve been living in Australia for almost 20 years now. If you need any tips feel free to ask; I can answer pretty much any question you throw at me. There are some hacks to living here that took me quite a while to figure out. Living in Australia doesn’t have to be expensive; in fact when we were back in the US last year we were shocked at how expensive everything was and how much cheaper everything was over here (except for frozen burritos – those are definitely cheaper in the US). Of course it helps that we don’t live in Sydney! However often it’s a matter of knowing where to look, when to buy, etc.
I’m pretty good at this stuff by now, so if you need a hand, just ask!
I choose to be frugal not because I have to but because I think its the best way to live. We have a good business but things can change in the blink of eye.I want my children to learn how to survive no matter what their income is and hopefully not struggle. I don’t want them to be completely dependant on the grocery store to eat. I also want them to learn to waste less and make good choices. Frugality makes me feel more in control instead of the world controlling me. It also just feels good to see how little I can spend. It’s like a challenge for me. It makes me feel proud of myself.
I like the way you think Jennifer! 🙂
Great point about making sure your attitude is in check, and CHOOSING to be frugal, not having the attitude that you are forced to be…because you are right, it will never stick if the situation changes. I also loved that section of your awesome ebook, Frugal Fresh Start. 😛
Thank you Liz! So true! 🙂