Lately, I’ve been reading articles by writers who carelessly toss out – you can’t get rich by being frugal. They emphasize the earning side of the equation much more than the spending side. Of course, it would be much easier to become rich if you make $350,000 per year, but I think the spending side of the equation is even more important.
If you are reading this blog, then you are a rare breed who is trying to improve your finances. It’s simple, right? We just have to spend less than we make and then invest the difference. This one sentence is loaded, so let’s take it apart.
Spend less. There is a reason why ‘spend less’ is the first thing in that sentence. For me, ‘spend less’ is the #1 lesson that we need to learn. Anyone can be frugal and keep lifestyle inflation to a minimum. When I first started working, I didn’t make much money at my entry level position and I was able to keep expenditures under control. I have always been frugal and never built up any consumer debt. Being frugal is the key to having any money left over to invest.
Earn more. Making more money is very important if you want to become rich. It’s much easier to build wealth if you get promoted and earn more money every year. The problem is, most people succumb to lifestyle inflation and spend more money every year as well. This is where being frugal comes in. If you can minimize lifestyle inflation while earning more every year, then you will eventually become rich!
It depends on how much you can save to invest each year, but I still think being frugal is the key. It doesn’t matter how much money you make if you spend it all. This is why we always hear about bankrupt NBA players and musicians. If they live a regular lifestyle and invest the difference, they would be well off for the rest of their lives.
Anyone can do it. It takes some effort, but it’s much easier than earning more and more money. The top 1% of Americans make about $350,000 per year. The rest of us earn quite a bit less than that. However, 100% of us can be frugal and save money if we put some effort into it.
What do you think? Which one is more important – spending less or making more money? For a regular Joe like me, the only way I can get rich is by being frugal since I don’t think we’ll ever hit that top 1% income tier.