As I’m studying personal finance literature, I’ve learned that there’s a lot out there on frugality. How to save money on your grocery bill, how to cut your heat bills, how to spend less on holiday presents. As I’ve pointed out before, there’s a certain disconnect here, in that the average family spends 12.4% of its income on food (7% on food at home, and 5.4% on food away from home). If you cut the food away from home to zero and chopped 2 percentage points off the grocery bill, you’d have 7.4% of your income freed up to work with. This isn’t nothing, but it’s going to be hard to, say, climb out of debt equal to half your income on that, or save up for a 20% house downpayment on that, if you’re earning the median family income. And you’ll be annoyed because you’re eating rice and beans and never going out!
That’s why more thoughtful finance writers point out that if you have big goals, you have two more effective choices: cut the big spending (that is, move to a smaller house, get rid of a car), or raise your income. Difficult? Sure. But on the second option, there are many ways to try. I have been reading through a wonderful post over at Get Rich Slowly on all the ways people can boost what’s coming in (the post seems to have taken the author 8 hours and has dozens of links – I love the blogosphere! We get access to this for free!)
The options range from trying to earn more at your current job to moonlighting, to starting a side business, starting a “real” business, or even just selling old stuff. Amanda Steinberg over at DailyWorth was recently describing to me Ramit Sethi’s (I Will Teach You To Be Rich) gig doing courses on how to earn $1000 on the side. The idea is that once you figure out the first thousand, you’ll be in more of a free agent mindset, and know how to ramp this up. Since I’ve pretty much always worked for myself, I can definitely say this is true. I know exactly how I’d earn another $1000 — pitch a few editors and see what comes in (of course this raises the question that if I know this, why don’t I do this? The answer is that I’m not maximizing my income since I’m trying to focus long term on writing books. It’s a gamble, but I’m betting that getting lots of name recognition as a book author will make it easier to sell longer, think-y articles in the future).
Regardless, it’s an interesting thought exercise to ponder how you’d raise another $1000. Especially if you could earn it doing something you didn’t hate, a few rounds of this would mean not having to give up going out to eat on occasion.
In other thoughts:
- There are some parallels with this and the recommendations of the deficit reduction panel. People are howling over their recommendations, but they seem to have realized that if you’re deep in debt, there are only so many lattes (earmarks) you can cut. Better to look at the house, car and other big payments (Social Security, Medicare and defense). That’s where the money is. As a nation we could also try to earn more money, but even with tax increases, that won’t really happen until the economy is growing faster.
- I’ll be hosting a holiday time management webinar on December 2 around lunch time. More details to come on this in the next few days. The holidays can be hectic, but are also great for asking what we’d like to be doing with our time. What traditions matter? What will bring us closer to our families?