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?
So true! I often think about how much energy I’m putting into cutting out certain expenses, and wouldn’t that energy be better spent on marketing myself and bringing in new clients? A work in progress, as always.
@Emily- exactly. We all have some fat we can trim (case in point: recurring fees for services I’m not using). We all have to live within our means. But it may be easier and more pleasurable to expand those means than to keep looking for ways to cut.
It’s always nice to read this perspective. Frankly, there is nothing else I want to cut out of our lives. Your book, Laura, gave me the confidence to take on more work, even as a mom of two small children, and I’m realizing I would much rather use childcare and be able to live a reasonable life, than to be always skimping just so I can always be with my kids. There is balance to be figured out, sure, but making more money is much more realistic than living on less.
Yes, no one really always wants to be with their kids!
But we all do like to see them a good amount every day.
I just finished a The Happiness Project, which reminds you that sleep, eating right and just taking things in stride are big parts of say being more optimistic and energetic. I’m going to make sure to slow things down a bit and refocus… Sleep eat, parent and then just really hone in on how I want to spend my workday. This can make you more productive. I run a small business though and I do think that it is important to constantly be going over your spending — not to just never do anything fun, but to make sure your spending reflects your lifestyle, and what makes you and your family happy. .
Soo we are going to make the extra effort to use bulk shipping — saving my business maybe $200 a month — but yes that $200 does count for something — more hours I can have my assistant — maybe take my daughter out during those long winter months to some special indoor (aka not free things) etc.
But for example nitpicking everything — the airline that charged me $25 for my checked bag and then I realize they made a mistake — should I call back and try to get them to refund me my $25. Or just let it go….
Spending some money is part of being happy — just that we live in such a wasteful society.
And it is very very frustrating to have to pay taxes that seem to climb and climb when the average family is focused on living within their means. It would be more effective and politicians would definitely get further say cutting defense spending …. or just being more efficient. I really don’t agree with cutting social security unless THEY ARE GOING TO GIVE ME ALL MY SOCIAL SECURITY TAXES BACK — then I am all for it, but unfortunately some conservatives want to cut social programs and keep spending – the point is for the gov to stop spending — and it is unclear that a new party in power is going to be any different from the ones we’ve had. And definitely not clear that gov spending has ANYTHING To do with entrepreneurship or what you are talking about here.. in terms of making the average American wealthy…
@Cara- yes, I’m not sure I trust any politician of any party to not spend everything that comes in.
On the $200 front — I think what you’re talking about is important, spending money on things that matter to us. It improves your life to boost your assistant’s hours. It does not improve your life to pay more than necessary to a shipping company.