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No one ever gets rich by being frugal

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No one ever get rich by being frugalLately, 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.

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{ 120 comments… add one }

  • Money Infant March 7, 2012, 1:11 am

    I still think making more money is more flexible than being frugal. You can only reduce your expenses by so much. If your expenses are already low then you aren’t going to find much more money to save by becoming more frugal. It is a finite number.

    Income on the other hand can be expanded by millions of dollars. Unless you are already a trust fund baby I’d like to see you get an extra million or two by being frugal.

    I don’t think one is more important than the other necessarily, but barring lifestyle creep once you have your spending in line there is no more you can do on that side of the equation other than maintain. Income can be continually increased though for your entire life if you work at it.

    • Dollar D @ The Dollar Disciple March 7, 2012, 8:55 am

      If your expenses are already low then I would argue you are already frugal!

      The bottom line is that for most people, cutting expenses is easier than making more money. The average person is probably already enjoying many luxuries which could be cut to free up money in their budgets. Cable TV being a fine example.

      My wife and I were paying $150/mo for TV with a DVR and a few premium channels. Cutting that one expense saved us $1800/year and took 10 minutes to make the phone call. How much time would you have to put in to make an extra $1800/year?

      Additionally, that $1800/year in savings translates into less money needed for retirement! At a 4% withdraw rate, $1800/year would require $45,000 in retirement savings to sustain. How long would it take you to save $45,000?

      Both are important, don’t get me wrong! Cutting expenses is definitely limited since you cant cut them down to 0. But cutting expenses should be the *first* focus because it’s easier for the vast majority of people.

      • American Debt Project March 8, 2012, 9:08 am

        I agree, I’ve always been able to earn money (it’s not my desired income level, but enough to be able to provide for myself) but I’ve never been focused on reducing expenses. Cutting down expenses to my current income is helping me focus on making more money and knowing that I will actually be able to save that money or use it to pay off debt. They go hand in hand but being less wasteful makes a huge difference in your financial situation. That’s been my experience!

      • K.C. March 14, 2012, 8:26 am

        With average income, my wife and I retired at 56 by focusing on the expense side of the ledger. Our income went up and down over the years as one or the other of us left jobs to start businesses, go back to school, or care for loved ones. We kept our standard of living at the same level over the years, so when we had more income, we saved a lot, and when we had less, we saved less. By focusing on the expense side, we always managed to save regardless of the level of income.

        When chasing additional income, it is very tempting to want to reward oneself with increases in standard of living for the sacrifice and additional effort expended to earn more income. As has been pointed out, this lifestyle inflation can trap a person into needing even more income to realize financial independence. There are costs associated with chasing additional income, time costs, health costs, relationship costs, and monetary costs.

        Most people realize additional income during the natural course of their lives such as pay raises, bonuses, insurance claim proceeds, income tax withholding refunds, cash gifts, and so forth. Whenever we received extra income, we saved it. Over the course of 30 years, it made a big difference in our total savings. However, it was frugal living that allowed us to save consistently, month in and month out. That consistency is what allowed us to reach our goal.

        • retirebyforty March 14, 2012, 12:40 pm

          That’s great! I love how you explain it so concisely.
          Focusing on the expense side will give us breathing room when the income decrease.
          It’s easy to assume that you can always increase your income or that you can keep working so most people do not figure out how to live when they can’t work anymore.

      • Tony March 19, 2012, 3:32 am

        “How much time would you have to put in to make an extra $1800/year?”

        In fact it’s better than that. Here in the UK you would lose about 30% in tax and National insurance contributions on earned income, so saving $1,800 a year from taxed income is actually equivalent to a $2,400 pay rise! For 10 minutes work that is not a bad return!

        On the wider point you do need both in my experience, but you need to focus on ramming down expenses *first*. Once you have that under control you can focus on the “earning more” aspect, which basically comes down to making yourself more valuable, or creating something you can sell that has value to others…

      • Andy @ theFIREstarter.co.uk October 23, 2013, 2:38 am

        “If your expenses are already low then I would argue you are already frugal!”
        I was thinking exactly the same thing Dollar D!

        Also “Income on the other hand can be expanded by millions of dollars” seems to be a dealt out as a rather throw-away statement for such a big claim.

        Also “I’d like to see you get an extra million or two by being frugal.” – And what would you do with those extra millions? It is a fact that we do not all need £3 million in the bank to retire and be happy, although if you work hard for it and get it then kudos to you of course.

    • retirebyforty March 7, 2012, 9:07 am

      It sounds good to make more money in theory, but not many people can do that. Are you making millions of dollars/year?
      I still think it’s more important to be frugal. Once you are living comfortably without spending a lot of money, then you can focus on earning more.
      I guess it’s a matter of prioritization.

    • Steve March 7, 2012, 12:01 pm

      That’s the lure of the “earn more” side. Theoretically, your income can go up indefinitely (if not infinitely) and your expenses can only go down to zero. But in practice, your income potential is not really unlimited. In fact, your ability to spend money is actually less limited than your income potential. You can always spend all the money you have and then some. So, while earning money is nice, unless you pay attention to your expenses, you’ll never get ahead.

    • Finance my Money March 8, 2012, 11:02 pm

      I agree with this. The typical household in the US is taking in $50,000 a year. It is very hard to become rich with this kind of income especially if you would like to buy a modest home or even send your kids to college. The rich aren’t exactly worrying about this. Most of perception is based on the post World War II boom stock market where people can sock away a few hundred bucks a month and in 30 years, thanks to compound interest, everyone would be a millionaire. We can run the numbers since 2000 and realize that pinching pennies into a millionaire status is not exactly an automatic path.
      Being frugal has such a bad connotation in our consumption obsessed society. When we look at debt figures we realize that most people are not frugal and living way beyond their means with either credit card debt, student debt, or housing debt.

      Increasing your income comes from investing in your most important asset. You as a person.

  • Michelle March 7, 2012, 6:19 am

    I think it’s definitely a combination of both. Making more money is definitely important though.

    • retirebyforty March 7, 2012, 9:08 am

      I agree. Perhaps I should have focus on the priorities of these things instead of saying which one is more important. They are all equally important.

  • Niki March 7, 2012, 6:33 am

    It’s fun to say things like your earning potential is limitless and in theory it is, but when reality sets in being frugal and being wise with how you spend your money will always be an option. Over a lifetime of keeping an eye on your spending you can become wealthy, it’s not a fairy tale. I don’t think it’s pessimistic to say I’ll never make $350,000 a year, it’s being realistic. My husband is in the military unless he gets promoted to a five star general (never gonna happen) that is an income we’ll never achieve, but the military has a great retirement and health benefits and we make a very decent income that I am able to save a lot of. 🙂

    • retirebyforty March 7, 2012, 9:09 am

      Great point! Thanks for sharing. That’s how I feel also.

  • Christa March 7, 2012, 7:12 am

    I agree: both being frugal and investing are necessary to make future riches. Those who are able to earn more can benefit even more by investing that additional income, as long as they don’t succumb to lifestyle inflation along the way, just as you said.

    On the flip side, though, I do agree with Money Infant that if you’re already mega-frugal, the only way to invest is to make more money. Then side income can come in very handy!

    • retirebyforty March 7, 2012, 2:22 pm

      It’s a tough question and everyone will have to figure out their own answers.

  • Kevin @ Thousandaire.com March 7, 2012, 7:48 am

    It depends on your goal. If you want to be RICH then you better focus on making more money. If you want to be comfortable, then just make sure you spend less than you make. I don’t think there’s just one answer here.

    • retirebyforty March 7, 2012, 2:23 pm

      I think you’re making a lot of sense. Being rich is not indefinite though. You can be rich for a few years like Antoine Walker. I think I’d rather be comfortable for a longer time. 🙂

  • PK March 7, 2012, 8:18 am

    How about: Spend less than whatever income you make and you’ll be better off… but to be rich it’ll take limited spending and a larger income.

    For ‘rich’, I’d concentrate on the earning more income part while also not letting lifestyle inflation erode all of the additional income you receive.

    • retirebyforty March 7, 2012, 2:24 pm

      That makes sense. Rich is so difficult to define so I suppose everyone has a different definition.

  • WorkSaveLive March 7, 2012, 8:27 am

    I’ve coached quite a few high-income earners that struggle with finances due to lifestyle inflation. It baffles me that their solution is to never cut spending or become frugal. Their answer is always that they’ll make more money.

    The problem with that philosophy is that it is uncertain. If you cut spending (become frugal) that is a tangible and realistic change you can make instantly.

    Everybody can cut back spending – the problem is there is only so much you can cut. But if your only solution is to make more money, then you’re going to run into issues.

    • retirebyforty March 7, 2012, 2:25 pm

      Thanks for your comment! I think most of my friends are like that. Nobody wants to cut back because it’s no fun. I think working harder and making more money is much more difficult than cutting back.

      • WorkSaveLive March 8, 2012, 12:09 pm

        I agree with you completely!

        Where we are in our lives we don’t mind doing both, but if I had to choose I’d be more than happy to cut back. I could downsize in home if I NEEDED to. I guess that is what frustrates me about many big spenders: they want what they want and they enjoy the “high life” too much to say goodbye to it.

        They’re defined and trapped by keeping their image and making sure others maintain a good perspective of them.

        • annie May 12, 2012, 11:17 pm

          I’m the “frugaler” and my husband is the spender. We are not on the same page when it comes to spending. I was taught at a young age to save (do girls save better than boys do??), and he wasn’t, so he will not cut back because “it’s no fun.” He feels that since he earns all our money (which he does) and I’m the SAHM to two kids, then he can spend his money any which he can. I disagree with that logic, but that’s how it is in our home. If I didn’t manage our finances, I know we’d be in worse shape. 🙂 And our young sons know that mommy is the saver.

          • retirebyforty May 14, 2012, 1:59 pm

            Sorry to hear that! It is difficult when the two partners have different spending philosophy. Luckily, we are both pretty frugal so our finance is ok. Just keep working on him a little at a time. 🙂 Good luck!

          • Erich March 27, 2014, 11:20 am

            Ask your husband if he loves his job so much, he’d like to spend an extra 10 years working that he did not have to. If there’s nothing he’d rather do with his life than work his current job. depending on your age this could be longer.

  • Epicfinances March 7, 2012, 8:37 am

    It’s a balance to me.

    I view it this way, you have a baseline amount of unavoidable expenses — Rent / basic food / water / etc — After that point is all “save-able” if you are frugal, but if you income is low enough, there is literally nothing to save. I feel like I am doing a decent job of being frugal myself, I probably could pull back $200 or $300 a month if I really tried but honestly I would rather increase my income.

    • retirebyforty March 7, 2012, 2:27 pm

      That baseline is probably around $75k as that mark the peak happiness level for many people. I guess it depends on where you are in life.

  • Dollar D @ The Dollar Disciple March 7, 2012, 8:58 am

    As I said in my reply to Money Infant, I think spending less is more important. It’s easier and has further benefits for an early retiree like yourself!

    • Money Infant March 7, 2012, 9:48 am

      It’s easier as a beginning, but can only take you so far. Maintaining a frugal lifestyle isn’t too hard once you’re used to it. And it takes very little time. Increasing your income is something you can work on for the rest of your life and can see continuing benefits. It isn’t one or the other, it is both, but once you get your spending down to a certain level you have no other option but to increase your income. One is quicker and easier to implement, the other is a longer term solution. Both together are very powerful.

      • MoneySmartGuides March 8, 2012, 7:01 am

        It is both increasing your income and limiting your spending. If you continuously earn more and spend more, you are always in the same boat – never gaining nor losing ground.

        I agree with Steve, you can only cut your expenses to a certain point. Once you cut the cable and switch to solar power for your electricity, where else are you going to cut expenses? At some point, you have to turn to increasing your income. There comes a point where changing your lifestyle so that you can save $50 over the course of 5 years isn’t a good investment of your time. You would be better off learning a new skill to increase income. That income will most certainly earn you more than $50 over the course of 5 years.

        • retirebyforty March 8, 2012, 12:14 pm

          I agree with you and Steve. You can only cut so much, but I think you can only earn so much too.
          It’s not easy to keep earning more and more every year. We still have to do both though, life is tough.

      • Dollar D @ The Dollar Disciple March 9, 2012, 8:21 am

        There’s no denying that both are important!
        But in my opinion, for the “big win”, cutting expenses and keeping them cut should be the first step. More income without lowering expenses keeps you in the same position.

        I still think that people tend to downplay the difficulty of making more money. Most of us can’t walk into our boss’s office and demand a raise. Blogging is a job and takes months if not years to develop a solid income. Buying cashflowing assets takes cash and therefore time to develop as well.

        Cutting my cable bill took 5 minutes and the impact is instantaneous.

        I definitely believe it should be Spend less -> Earn more, in that order.

  • frugalportland March 7, 2012, 9:21 am

    Warren Buffet is frugal, but that’s not how he got so wealthy. I think it’s a matter of lifestyle. I make quite a bit less money in Portland than I did in DC, but I have more. Even those of us who make $40,000 or so are wealthy by comparison to more than half the world, but without being frugal, we can feel like our expenses are always tight at the end of the month.

    • retirebyforty March 7, 2012, 2:28 pm

      Thanks for your input. Warren Buffet has a good head on his shoulder and would still be happy with less money as well. 😉

    • Art Guy September 2, 2014, 12:26 pm

      IMHO Warren Buffet is wealthy because of how he thinks about things. He seeks, in general, to have his money make money, and so that results in frugality as he doesn’t waste money on depreciating assets, and he analyzes his investments (spending) with ultra conscious intent. And in the same way, Pete at MMM is wealthy with an income of <30k & Jacob at EER is wealthy at even less income. As to lifestyle, all three men live in reasonably expensive locations in the U.S. In my opinion, practice of frugality is a better starting point for most people as it breaks the cycle of unconscious spending.

      • retirebyforty September 2, 2014, 2:59 pm

        Actually, I’m pretty sure Pete is making a lot more money than $30k/year. Jacob also has a full time job now, right?

  • Sam March 7, 2012, 9:27 am

    I have a feeling being frugal is an excuse if we have difficulty making more money.

    • retirebyforty March 7, 2012, 2:29 pm

      Not everyone can be Financial Samurai. 😉

    • Dollar D @ The Dollar Disciple March 9, 2012, 8:23 am

      There’s plenty of examples of people making > 200k who have a hard time making ends meet. Clearly, a big income is not the only component to building wealth. “It’s not how much money you make, it’s how much you keep”

  • Invest It Wisely March 7, 2012, 10:09 am

    Can I disagree? I think that both making more money and spending less is important, and I also believe that yes, a high savings rate will lead to prosperity, if not necessarily “rich”. See: My frugal manifesto, over at Financial God. 🙂

    • retirebyforty March 7, 2012, 2:30 pm

      Sure, we like dissenting opinions here at Retire By 40. Prosperity is pretty close to rich. It’s a pretty thin line there.

  • Bethy @ Credit Karma March 7, 2012, 10:15 am

    I think it’s definitely an equation, but I’m hard-pressed to decide which is more important. You have to have a frugal attitude, no matter what your spending level. I admit, I’ve succumbed to “lifestyle inflation” over the years, but I’m also actively working to build additional income.

    Perhaps each of us should reevaluate our frugal + more income = wealth equation every so often to see where we’re lacking. You can only be frugal to a point, but, if you’re smart, you can always increase your income.

    • retirebyforty March 7, 2012, 2:32 pm

      Is this really true? – if you’re smart, you can always increase your income.
      Are you making 350k/year and are in the top 1%? If not, then are you just not smart enough? It’s not easy to keep increasing your income.

  • Steve March 7, 2012, 12:25 pm

    Neither earning more nor spending less is more important than the other. You have to do both.

    Spending less will not make you rich without earning more, because you can only reduce your expenses so far. But earning more will not make your rich without spending less (or at least making sure to spend the same), because you’ll just spend all your money and have none left.

    Another way to look at is that you should focus your attention on the activities that give you the biggest bang for the buck. Imagine that you put every possible “spend less” or “earn more” activity on a giant list. You could assign each item a dollar amount and a time estimate. You would then sort the list by dollars earned per hour of effort. It is quite likely that the top 10 on that list would have a mix of un-spending and earning activities. This is going to be true for anyone who’s not at the extremes of the spending or earning bell curves.

    So, IMHO “Should I focus on spending or earning?” is the wrong question. You need to focus on both.

    • retirebyforty March 8, 2012, 11:32 pm

      That sounds like a terrible chore. 🙂
      You are right about the need to focus on both. I still think the first thing to learn is to be frugal and then focus on earning more afterward.

      • Steve March 9, 2012, 9:05 am

        Making a list of every single thing you could do to earn or save money would be something you could do to earn or save money. Therefore it would go on the list. But I am sure it would end up really low on the sorted list – especially since it would take an infinite amount of time.

  • Kurt March 7, 2012, 12:53 pm

    I think you’re right on: Controlling “lifestyle inflation” is the key.

    How about this for a simple test to separate the rich-to-be from the lifestyle inflators: Upon a bump in income (raise, bonus, tax refund, etc.), ask “Are you more likely to buy granite countertops or fully fund a Roth IRA with this little windfall?” Those choosing the latter are more likely to end up rich, I propose.


    • retirebyforty March 8, 2012, 11:33 pm

      I prioritize investing first as well. It’s fun to spend money on things, but then that money is gone forever.

  • John @ Married (with Debt) March 7, 2012, 2:23 pm

    I would give the slight edge to saving money being more important. There are homeless people with higher net worths than people driving Benzes.

    • retirebyforty March 8, 2012, 11:34 pm

      I love your response. I suppose there must be many people out there with negative net worth. A homeless person with $5 in his/her pocket at least has a positive net worth.

  • krantcents March 7, 2012, 3:06 pm

    You can only do so much about reducing your spending! You have to increase your income to get to your goal. You are doing that through rental property.

    • retirebyforty March 7, 2012, 8:31 pm

      You’re right of course. 🙂

  • MyCanadianFinances March 7, 2012, 3:23 pm

    I do not see why someone cannot aim to spend less AND receive a higher income?

    • retirebyforty March 7, 2012, 8:31 pm

      That’s right! I just think spend less comes before earning more money.

  • Charlotte @ HIMMB March 7, 2012, 4:30 pm

    I have to agree with you. Being frugal is the way to go. Jobs come and go and if you’ve been frugal while you have a job then you can weather the drought much easier.

    • retirebyforty March 7, 2012, 8:32 pm

      I guess that’s the sign of the time – jobs come and go.

  • david March 7, 2012, 4:45 pm

    Making more is always good, but, I am like you, at a certain point, you just cant earn more from your regular job. Thats where being frugal comes in, spending less and investing the rest, allows you to make more…dividends, cap-gains, etc. I leave out interest at this point, we all know why. So, in theory, being frugal can actually help you make more. Being frugal doesnt mean you have to go without, you just look for the best value. I, like you have a plan to retire early too. I got a late start, so, my goal is 50. Ultimately, its about replacing job income with other income to gain your freedom!

    • retirebyforty March 7, 2012, 8:35 pm

      Great to hear from someone who also aim to retire early. Being frugal will get us to early retirement much quicker.
      It’s very difficult to make $200/month from dividend income. I think it’s much easier to cut spending.

  • Julie @ Freedom 48 March 7, 2012, 5:28 pm

    Making more money can be far better – but you have to be disciplined enough to save it (and live a frugal life). I wonder though, if you’re earning a crapload of money… you’re likely surrounded by people wearing fancy suits, driving expensive cars and living an expensive lifestyle. That might make it even harder to resist those expenses and stick with a frugal living.

    • retirebyforty March 7, 2012, 8:37 pm

      That’s why it is difficult to make more money and be frugal. Your standard of living increase along with your peers.

  • Well Heeled Blog March 7, 2012, 6:27 pm

    Making more money is important, but you can’t out-earn bad spending. You just can’t. The math is against you. It’s really easy to spend and not so easy to make more money, at least for most folks. Let’s say you get a $50K raise. AMAZING, right? But taxes take 25%. So now you’re down to $37.5K of after-tax income. Let’s say you lease a new car for $800/month, boom, that’s almost $10K gone. You upgrade your wardrobe with a trip to Nordstrom, boom, another $5K. You go on a big vacation to celebrate with your spouse, another $10K. Maybe you buy a bigger house. There goes the remaining dollars.

    If you don’t learn how to manage, say, $50K, you are not going to learn how to manage $150K. Now having said that, I’m not denying that it’s much easier to accomplish your goals if you earned $150K vs. $50K, or if you earned $1 million vs. $200K. But all those stories of multi-millionaire sportstars and entertainers going broke? That’s because they didn’t learn how to save and spend their millions.

    • retirebyforty March 7, 2012, 8:38 pm

      Great comment! Money can disappear very quickly if you don’t watch it.
      If you don’t get a handle on spending, you’ll never have enough saving left to invest.

  • Kanwal Sarai @ Simply Investing March 7, 2012, 6:44 pm

    It takes money to make money. Whether you are investing in stocks or real estate, the more you have to invest the more you will earn in dividends or rental income. Saving money is important, focus on that first, then figure out how to accumulate income generating assets. A typical 9-to-5 job will not make you rich.

  • Squirrelers March 7, 2012, 7:01 pm

    They’re both important, and anyone who has read my blog knows that I relish saving money! However, if I absolutely had to choose one or the other, I’d go with making more money as being more important. You can only save so much, but earning are theoretically limitless.

  • Aloysa @My Broken Coin March 7, 2012, 7:34 pm

    I have a friend who is a complete opposite of me. If I am a spender, she is a saver. And a very frugal one! I make more than her but she can afford more than I do. If she wanted she could retire and love comfortably off her savings. So, yes, being frugal and cutting down on your expenses will take you really far.

  • Squeezer March 7, 2012, 7:43 pm

    I think few people have gotten rich from being frugal alone. You have to increase your income and invest wisely as well.

  • Shaun @ Money Cactus March 8, 2012, 5:10 am

    Hey Joe,

    Just wondering how much you think you save by being frugal each year? Is it a comparable amount to what you might be able to make as a side income? I don’t think either just being frugal or just making more on their own will make you really wealthy, but both can make you unhappy if you take them too far. I think it is important to find a balance so that you can do some of the things you want without regret, or the need to wait forever.

    • retirebyforty March 8, 2012, 6:53 am

      I probably saved $30k/year by being frugal. It would be so easy to spend $30k if I put a little effort into it.
      A new Mercedes, a bigger mortgage, eat out more often, travel more, new clothes, toys, and just more stuff in general.
      I think it’s important to find balance too. We live a pretty comfortable lifestyle and don’t feel deprived of anything.
      The only thing I would like is to travel a bit more, but that’s difficult with a baby anyway.
      We spend about $4k/month and I think that’s plenty of spending.

  • Little House March 8, 2012, 7:05 am

    It’s definitely about spending less, not necessarily earning more. However, the key is to invest the difference so that your money can make more money. I’m still figuring all of this out, but I do know that the more money we make, the more stuff we end up with (which means we’re spending more!)

    • retirebyforty March 8, 2012, 12:15 pm

      Lifestyle inflation is so difficult to avoid. That’s why so many of us are in debt…

  • [email protected] Budget Big Dreams March 8, 2012, 7:14 am

    I think that they’re both important, but for someone who’s in a field with lower salaries there’s not as much room to “make more” without changing careers. Ultimately, If you’re happy with you job and the pay is low, I think you can live frugally and still be happy. If you make a lot of money and your job makes you miserable you might not have to live frugally, but then your whole life is a spiral of, “Oh god it’s Monday, Thank god it’s Friday”. It’s all about tradeoffs.

    • retirebyforty March 8, 2012, 12:16 pm

      Thanks for your input. You can invest your saving. That’s a good way to increase your income a bit every year.
      If you’re happy with your job, then I think you are doing great already. 🙂

  • Roshawn @ Watson Inc March 8, 2012, 12:24 pm

    I’m with you. There’s no problem with earning more. I’m for that. I just think people are blatantly dismissive of frugality, and that is downright discouraging.

  • Bichon Frise March 8, 2012, 2:41 pm

    2 points: 1) a penny saved is worth more than a penny earned and 2) the lower your spending:income ratio, the sooner you’ll reach financial independence (which we consider to be rich).

    Our take…http://wp.me/p2h40p-z

    • retirebyforty March 8, 2012, 11:35 pm

      You’re right about that. Tax and other deductions take a huge chunk out of earnings.

  • Broke Professionals March 8, 2012, 4:36 pm

    Hmmm… earn more, spend less… sounds like a way out of a federal debt crisis!

  • Everyday Tips March 9, 2012, 7:12 am

    I am a combination of both I think. I grew up in a poorer area, and there were many people that really couldn’t earn more money, but they saved all they could and they did not struggle.

    People that downplay frugalism probably just don’t want to be frugal! Frugal is not always fun.

    • retirebyforty March 9, 2012, 11:47 pm

      I’m also the same way and think everyone should be like that. I think you’re right about people who downplay saving money, but they can’t keep making more and more money forever. If they keep inflating their lifestyle and one day lost a job, then it’s not going to be pretty.

  • Bryan March 9, 2012, 3:24 pm

    Thank you for the realistic manner in the way you wrote this post. Sure we can all try to increase our income and to some degree we can add to it. If we learn to be frugal and content with that lifestyle it make all the difference in the world.

  • First Gen American March 10, 2012, 3:09 am

    It’s hard to get ahead if you are making a low salary, but not impossible. I think it’s also important to know the things you should not be “frugal” about, like spending money on work skills and degrees that have a good ROI. The money I spent on my college education is the best money I’ve ever spent. Actually, so was the airfare I spent out of pocket so that I could work overseas for a year. It was a great life experience and resume builder too.

    But like you said, you must be disciplined with spending first and foremost because even millionaires get into money troubles.

  • Cherleen @ My Personal Finance Journey March 10, 2012, 8:57 pm

    Definitely agree. Spending less does not mean being frugal. Furthermore, I believe that having other sources of income as well as saving more and putting money on investment help build your wealth faster.

  • Matt @ RamblingFever Money March 11, 2012, 4:58 am

    I love a post like this that gets you to think outside the box a little bit. I think frugality is a little bit loosely defined here. You don’t necessarily have to be frugal in order to spend less than you earn. Heck, high income-earners can be frugal and still not become rich (if they save or invest poorly). Becoming rich, like you say, is a combination of spending less, earning more and saving. Not entirely sure that one is more important than the other.

  • I used to think getting ahead financially depended on frugality. I still think that, but now I think frugality must be combined with increasing income. We have reduced our monthly expenses quite a bit, so now we are working on making more money. Both are necessary.

  • Jerry March 11, 2012, 2:49 pm

    You have to do both. There’s no insurance anyone will be a millionaire so you have to live well below your means so it leads to getting ahead. You will not make progress otherwise.

  • Frugal Fries March 11, 2012, 8:57 pm

    I really hate the bad rap frugalism seems to be getting these days! I think being frugal is one of the best ways you can help yourself get ahead.

    Of course you need to enjoy life–I’m not trying to advocate a monk-like approach to spending–but I do believe people need to think critically when spending their money.

    It often starts with realizing the impact a few dollars saved a day can have. Once you have a tangible perception of your money’s value, it becomes a lot easier to make smart choices (such as investing and saving).

    I think it’s best to look at the frugal approach as complimentary to extra earning–instead of just as as a mutually exclusive club for penny-pinching misers.

    • retirebyforty March 12, 2012, 9:18 pm

      I think you’re right. For the masses, it’s probably best to look at frugality as complimentary.
      Most people in north America are too consumption oriented to be able to deal with penny pinching effectively.

  • youngandthrifty March 13, 2012, 1:01 pm

    Spending less all the way. My BF would beg to differ- he thinks its about making more money.

    I guess its 50/50 thing. 🙂

    • retirebyforty March 13, 2012, 10:48 pm

      Now that I have more time to think on it, I still think spending less is the way to go. I’ll write more about this in the next post. 🙂

  • YFS March 13, 2012, 7:16 pm

    I think there has to be a balance. One must always seek to earn more money especially passively. I recommend living on 50% of your income. That should the goals for controlling spending. All the rest of your effort should go to earning more money.

  • Gerard March 25, 2012, 5:25 am

    I think we can do more to pull apart the original statement (“No one ever gets rich by being frugal”). Why would you need to be rich? Comfortable, yes; free of fear and debt, yes. But the only reasons I can think of for being rich are to increase foolish spending or to impress others, neither of which interest me. Criticizing frugality because it doesn’t make you rich is like criticizing exercise because it doesn’t make you fat.

  • cs March 31, 2012, 12:28 pm

    Late to the party here but I will say that as your income rises, so does the ease with which money slips away (less time to keep track of it, too many different things going on, easier to say oh, what is $20 anyway). When I was making $30K, a $20 bill was a big deal. Now that I make 10x that, I find little things slipping through (like where somehow not filling out an annual online form automatically triggers a $20 a month added fee to accept credit cards thru my merchant services account). I used to be like a hawk about these unnecessary expenses but it is harder to be that hawk with less time and more accounts. And unless you have passive income or good leveraging, there is a limit to how much you can make per hour and how many hours you can work before compromising you lifestyle, health and happiness.
    Its like whether strength or skill is more important in certain athletic endeavors. Both are good, one without the other makes it a lot harder, if not impossible. Balance and moderation. Improve the tires if the engine is strong but don’t get better tires if the engine is blown.

  • Damien April 3, 2012, 1:41 pm

    Yes, spend less, deny things that make you happy. Live a limiting lifestyle, that will get you rich, not. Why is there nothing in here about investing, creating value, and expanding your means? That is the true path to wealth, not penny pinching and ringing up mortgage brokers for better interest rate deals.

    People live so small because they operate on these principles. Also – saving money is useless especially given inflation is sky high and interest rates are at their lowest level in 40 years! You will have a large sum of money but it won’t buy you much, you need to:

    1. Create cash flow positive businesses
    2. Re-invest these cash flows into more business
    3. US assets from your business to acquire more assets, i.e real estate, more business etc

    And keep repeating that.

    Don’t stick it all in a bank account, that is moronic. Scared to lose? Then you don’t deserve to be rich!

  • SavvyFinancialLatina May 2, 2012, 5:03 pm

    I am trying to make us live a frugal lifestyle, and not succumb to lifestyle inflation.

    • retirebyforty May 2, 2012, 5:23 pm

      Lifestyle inflation is almost inevitable. My goal is to keep it stable and not inflate anymore. Lifestyle is very difficult to deflate. 🙂

  • vincelombardi May 12, 2012, 9:24 pm

    earning more = offense
    spending less = defense

    offense wins games, defense wins championships..but you need that goddamn offense to reach the championship round

    • retirebyforty May 14, 2012, 1:59 pm

      I haven’t heard that “offense to reach the championship” before. Good one.

  • Ritz November 3, 2012, 12:59 pm

    I think both are important. Be frugal and earn more, then you will have more money to invest .

  • Dave January 17, 2013, 8:44 pm

    Being frugal is number one for me. If I can spend $1,000 less, that means two things. That’s $1,000 less I need to account for in retirement, and $1,000 I have to invest!

  • JT January 25, 2013, 6:06 am

    Just read this one. A VP at one of my prior places of employment had a favorite line that I ingrained into my personal life: “If you want to be rich, act poor”.

  • Christopher February 8, 2013, 11:50 am

    This is a question I think is crucial to consider, especially at life-changing times, e.g new job, partnership/marriage. I, for the first time, asked our payroll dept to calculate my raise on a monthly basis and have that amount deposited directly into my ING (now Capitol One 360) account, so I didn’t see the additional money in my regular payroll deposit. It has been a really effective way for me to avoid “lifestyle inflation” because it would mean I have to take deliberate action to transfer that money to a spendable account. I also take full advantage of my (very lucky to have, I admit) deferred comp plan which allows me to insure that my small rental property payment obligations are always funded a year in advance so even without a tentant, I could pay all the necessary expenses. However, I would caution others to be careful to make blanket statements about the “rich” based on salary. I live in the NY metro area because I’m in publishing. I’d love to live in a lower cost area, but there isn’t much publishing in the midwest so not an option. My seemingly relatively high income goes to $15K+ in property taxes, for example, for a modest house that needs work. Bottom line: It’s a combination of both.

  • Jimmie Davis March 26, 2013, 4:36 pm

    Unfortunately like most things in life you need to do both and you can’t ignore both sides of the equation.
    On the income generation side:
    As employees we should strive to make more but as employees there is a glass ceiling for most of us. That doesn’t mean to lose hope. It means that we should strive to increase income outside of work. Online marketing and sales, stocks, real estate rentals, etc. Create multiple streams of income.
    On the savings side:
    First and foremost – eliminate all debt. Learn things like a house (home) is a liability, not an asset because your house doesn’t generate money for you when you are not working. As a family man you have to have a home and that is a given. But I am single and it doesn’t make sense unless I am renting out the rooms to cover the expenses. Then I eliminated every recurring monthly bill that I could.
    Even more important than generating more money and saving expenses -> PLANNING. What really propelled me forward was financial planning. This consists of creating a monthly budget along with targets for stock returns and cash savings. With debt eliminated, expenses under control and targeted portfolio goals, it is amazing how fast things move
    As you are probably saying. There is no magic here.
    In reality, all of this is like losing weight. Deep down, we all know how to do it. It is just a matter of if it is important enough to us to act on what we know.

  • Frugal Frannie August 6, 2013, 10:52 am

    Sales in the way to go to save money. I lived on my draw or low salary and socked away my commission checks. I don’t believe in starving but I lived a modest life with a cheaper apartment but still spend on things that were important like travel. I also invested in Real Estate which is great, I get a rent check for cash flow and appreciation for investment. You can retire by cutting costs. As a sales person my income varied I lived at the same level during feast and famine and was able to save enough to have passive income from investments in my fifties and scale back to part time work.

  • gravypro August 19, 2013, 5:18 am

    Yes, making more income is desirable, but sometimes work costs us more than we think. Years ago, I lived in San Francisco, working 70-100 hours per week and making (at the time) a nice sum of $65K/year in advertising. I didn’t have a television, cell phone or car, or buy expensive clothes. But those long hours meant excessive cab fares, laundry service, prepared food, and plenty of coffee. High stress resulted in unrelenting chronic pain. Visits to the acupuncturist and massage therapist to prop my body up cost a small fortune. I saved virtually nothing in nearly a decade.

    A stroke of luck landed me a 6 month, 35 hour/week, $11K gig working for a non profit in Micronesia. The island provided everything one needed to survive, but not much else. I did yoga every morning, took a nap for lunch, read every night, and spent weekends scuba diving or kayaking. At the end of six months, I saved $5K, more than I had in 5 years. Better yet, I was pain free for the first time in a decade. One visit to the doctor for bronchitis cost just $12.

    I wish I could say I’ve been able to translate all of those gains in health and savings at the same level in the US. Stress and consumerism are contagious and it is an act of rebellious discipline not to fall prey to. I now own/run a small business, own two rental properties and sacrifice some quality of life & relaxation as I work toward financial freedom.

    Thank you for this site. Your perspective and comments from your readers are helpful for me to take another hard look at my expenditures so that I can get back to an island paradise sooner.

    • retirebyforty August 19, 2013, 9:10 am

      I had a lot of health trouble when I was working a stressful job too. I finally figured that it’s not worth it. Your health is much more important than more money. Micronesia sounds great. I’d love to visit for 6 months! Good luck on your journey.

  • Eliza @ Happy Simple Living September 30, 2013, 11:11 am

    I enjoyed your post, and I also really enjoyed everyone’s comments on both sides. This whole debate has inspired me to explore some ways to earn more income in addition to living frugally. Thanks for a thought-provoking topic.

  • eddie December 16, 2013, 3:57 pm

    not sure where i saw it the other day, think yahoo finance… sweet little study saying that 1 in 5 americans will become rich at least for one or more years in their life…
    now they had a totally different idea of being rich in usa is than i do.
    to be considered “rich” was making 250k or more in a given year before the age of 65 for single or married couples.
    i like using “wealthy” as a better term, if defined as only working because u want to and not have too. i wonder if that is 20% of the population?
    being “rich” should not be based on what u earn but rather what u spend (which is y a flat tax makes so much sense)
    u can increase your offense(how much u can earn) or a good defense( how much r u spending) or do both and become “wealthy” quicker

  • draiss March 15, 2014, 1:43 pm

    It always amazes me to see those who refuse to change their expendatures even when they are out of control. They refuse to change what they perceive as their god given right to be an ultimate consumer. They do not even realize that their is a carrying charge for everything they purchase. I became financially free by cutting expenses and becoming debt free. Once I had that side of the equation under control, I then focused on the revenue side o fthe equation. From there it was a snowball effect. If you manage your resources by constantly working on the revenue side of the equation, you are nothing but a hamster.

  • Andrew April 21, 2014, 9:08 pm

    The way gas and groceries have shot up w/ our POTUS who claims to be such a friend of “main st.” I feel like I’m falling further and further behind.

  • Peter May 16, 2014, 10:48 pm

    Found your site, some interesting articles. I’m really interested in visiting Thailand, maybe a short stay for testing out retirement there.
    As to being Frugal, its very important as that allows a person to build up savings, and not blow through savings during a tough period (like unemployment).
    I know a guy that was a great programmer, would get great paying jobs and blow money left and right. Then after years he hit a spell of less demand, and was living in his parents basement because he had zero savings.

    • retirebyforty May 19, 2014, 9:48 am

      Ouch. Sorry to hear about your friend. Hopefully he learned a lesson and turn it around.

  • Johnnie Lee May 19, 2014, 7:02 am

    This topic is really interesting!
    Different folks, different stroke.
    Let’s say if I can’t make a lot of money, then budgeting your expenses and spending as little as possible helps in accumulating wealth. But how much wealth is consider rich?
    To a person who is living on a frugal lifestyle, I can imagine he/she will feel wealthy.
    So now let’s say if I am a high income earner but I hardly save much as I reward my hardwork and turbo spend plus debt to enjoy the rich lifestyle. So eventually I need to keep working hard for more money to feed my endless wants.
    Will he/she become rich?
    Do not confuse high income with Wealth.
    How about low income and still spend to live well?
    Or high income and being frugal?
    In summary, being frugal is an important strategy to rich.
    Frugal is really about mindset and who you are.
    Would you rather be in debt to drive an expensive BMW or debt free and drive a boring Japan entry car? What’s more important in your life?
    For myself, I budget X% of my income to wealth accumulation and Y% to spending every month. I don’t need many expensive luxury item (I am ok to splurge once awhile) to feel rich or happy nor do I care what others think of me. I think many of a time, people feel the need to spend to impress people whom we don’t know or even really care. Deep down, it is just our own ego or maybe lack of self esteem to justify the need to buy this and that. Maybe it is so boring to keep money and not spend on that latest new gadget.
    Once spending reach a stable phase, it will remains at that quantum and focusing on income growth will definitely be on track to richer and financial freedom!

  • kimm July 10, 2014, 6:57 pm

    def. being frugal. my whole life i was a work-a-holic/spender. now i make very little money and i have the most money i have ever saved. “its not how much u make but how much u keep”.

    • Seth Sanders July 25, 2014, 9:55 am


      You are SO right!

  • Seth Sanders July 25, 2014, 9:54 am

    Not to be rude, but some of the comments here seem to miss the point of this blog.
    The idea here is too live a good life without working, not how to get rich by working more.
    That’s what the wage slave masses out there are already doing.

  • MrNewJersey November 25, 2014, 2:27 pm

    Whilst I think being frugal is a great insurance policy for lack of income or early retirement, and I wholeheartedly agree that its easier and a more attainable goal, generating additional income is the only way to retire early and have a better lifestyle. By not striving to generate more income you look at the rich and say “im not going to even try and retire wealthy”.

    I also don’t think you need to work more to generate more money. Am I going to get a second job cleaning apartments? No, but I’m going to find the right apartment that let’s me run it as a holiday home. I try and generate more income streams from what I already have to maximize my returns – all while being frugal. In the last 3 years I’ve added 3000 a month to my salary of around 9000 a month while taking my monthly expenditure down to around 3000 a month. All I’ve done is simple things. Rented my apt on airbnb, used my land to look after other peoples dogs and rented out a room in my house. Nothing clever but I’m still looking.

  • Lenny Brewster June 19, 2015, 5:07 am

    It’s true, but evil Capitalism would prefer that people don’t know the secret, of course…

    I’m 50, financially independent, and have a million in the bank. I got this way being a cheap bastard all my life (thanks to my parents, particularly my father: “Do you Really Need to buy this book?”). It’s really very simple when you think about it: simply don’t play the evil Capitalist Game! You know: You “need” to buy this that and that other thing because the TV shows and movies Say you do–and your friends say so, and it’s all about Status and any other word you care to throw in here to Get You To Buy It. Also ignore all that one-upmanship Keeping Up With The Joneses BS. Every check you get you deposit in your bank account (or CD or Someplace where your money will make More money for you). You get a bonus or something–Deposit it! Keep this up and in no time at all you’ll find that you’ll have more coming in than going out! You pay off All of your debts, first and foremost, never “minimal” payments–you get your credit card bill and you pay it In Full each month.

    Capitalism is all about getting you losers to fork over money for garbage you don’t need and can probably get along without. Factor in planned obsolecence and you’ll learn to hang on to your Old commodities rather than buy new ones because they last longer. I’m a minimalist, a downshifter (though I’ve never shifted down–I’ve always been this way!), and retro as can be. My only game console I got back circa 1980 and it was an Atari 2600. I played the crap out of it too. I don’t buy XBoxes or anything of the sort–I play free and emulated games downloaded from the Internet (via my super cheap dial-up service). I never pay full price for anything, use coupons, don’t give a rat’s ass about brand names. I buy things new and keep them till their worn out and unusable–and then repurpose them or recycle them. My video collection consists of movies and TV shows taped live off the air or copied from the library’s selection burned to disc. Cable TV is the biggest waste of money for all those who don’t have clue. All this and I have a TV (or screen) in just about every room of my house–the last one I actually bought and paid for was well over 20 years ago–I’m a parasite on Capitalism’s ass! The elitist snob neighbors are always dumping their old TVs and computer junk out on the curb (because they get bigger ones or the old one is a little dirty)–I drag them home and add them to my collection!
    I don’t own a cell phone/smart phone, GPS, or any of that vanity crap–I have something better called a Brain and it’s microwave-free, thank you very much! No cancer here.
    I also grew up turning off lights in rooms when they weren’t being used, Never bought bottled water (unlike, well, 99% of all the a-holes around here!), never blew my money in Starbucks, and always drove fuel-efficient and reliable cars. I’d research them, target a particular model and play dealer against dealer, buying it never leasing it, paying in full on the spot–and driving it for 15-20+ years until it falls apart.

    The downside of all this is that throughout life I was made fun of as being a cheap bastard. No one would date me even. But while they’re still living paycheck to paycheck as wage slaves I’m relaxing now and never will have to work again! I have no monetary fears either.

    • retirebyforty June 19, 2015, 10:15 am

      Thanks for sharing! It’s awesome that you went your own way and don’t care what other people say. I bet there are many people like you out there and I’m sure you can find a community online.

    • Mysticaltyger February 27, 2016, 2:29 pm

      I think you’re confusing Capitalism and Consumerism. Because you weren’t much of a Consumer, you had the Capital to retire early.

  • Lenny Brewster June 20, 2015, 12:56 pm

    It’s not “awesome”–I hate that word, for it’s not used properly anymore. Does anyone know what it means to be “awed” hmm? Maybe the first time I saw “Star Wars” on the big screen back in ’77…

    I view life from a survivalist’s perspective and prioritize everything. Under Capitalism, having sufficient reserve money is everything, and to hell with so called luxury items. This country is built upon people programmed to waste their good money on trivial status goods. People think that Image is Everything. Basic food, shelter, and clothing is everything; including sufficient emergency funds to cover accidents which can range from anything from physical medical problems to replacing a dead furnace during the coldest winter period. A luxury car, jewelry, brand-names…are petty garbage in comparison to Survival needs.

    Or to look at it another way: How did my ancestors survive and on what? Compared to them, some of the poorest people in America today look rich in comparison. My grandparents were lucky to have one car much less half a dozen or some luxury model loaded with electronic shit. All they needed it for was for transportation, anyway, to and from work and the stores. My parents didn’t need a GPS to find their way around, they had eyes, ears, and could use things called Maps if not just plain common sense. And none of them needed to carry a frigging phone around with them 24/7. If they wanted to talk they’d talk in person or pick up the wired phone and make a call. They got more out of life by enjoying the simple things in life, like each other. That’s how I live (or, rather, want to).
    Really, when you factor in all this present-day electronic crap, your life gets More annoying, complex, and wasteful. You worry about “apps” and your batteries dying. You spend hours shopping around for the latest new models and upgrades; repairing and replacing the old ones. Having your gadgets lost, stolen, and hopefully not having your accounts fall into the hands of hackers or crooks and destroying your bank accounts. All for what? So you can do the same shit again and again, and showing it all off in front of your friends and neighbors. What are you trying to prove? Or what are you trying to prove To Yourself? You call that living? People who carry this crap around Are fools, in my opinion, and are just Asking to get ripped off.
    Anyway, compared to the people of the past, we’re all “rich” today–but thanks to the different strata within Capitalism which divides us up, we’re all Spoiled. And to the average American there’s no such thing as Rich Enough, Fast Enough, Flashy Enough, Big Enough… That’s what money does to people in the end. Suppose you do get that dream McMansion or diamond ring–then what? You’ll be happy for a brief period of time until the high wears off. Then what? Get a Bigger McMansion (a McCastle?), a Bigger diamond ring?
    People have to get their priorities straight.

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