This is a post from Kayla of FrugalRules.com. Kayla is a personal finance blogger in her mid-20s who loves to write about money topics of all kinds. Please let me know if you would like to guest post on RFI.
Personal experience has taught me that tightening your financial belt alone isn’t going to gain you financial independence. Believe me, I’ve tried it.
After I graduated from college a few years ago and got a job, I bought a house, furniture, and a work wardrobe and gained a whole lot of debt.
When reality hit home and I realized just how much money I owed I cut my expenses and began living on less so I could pay down my debt faster. I soon realized, however, that I wasn’t going to reach my goals simply by living on less. Even by cutting back to the bare minimum level I need to live off of, I was barely making enough money to cover those expenses. So I made some changes to help me meet my personal financial goals even faster and I’m going to pass on to you why frugality isn’t really the key to financial independence.
It’s Hard
Living on a tight budget consistently isn’t easy. Cutting down your daily Starbucks habit to once a week and shutting off the cable you rarely watch might not be too hard, but continuing to deny yourself life’s little pleasures over and over is tough. Sometimes the financial difference you make in your budget by doing so is such a small amount it feels like you aren’t making that much of an impact on your situation. But don’t despair. There is a way out. Read on.
It Isn’t Enough
I’m not saying you shouldn’t try to cut expenses and live a more frugal lifestyle. What I am saying is that spending less isn’t enough to get you to your dream of financial independence. The reason for this is because there is a limit to how much you can cut your budget. You can’t eliminate your rent or mortgage entirely. In addition, you need to pay your electricity so you have heat for the winter. Also, let’s not forget that you need to eat occasionally.
You Need to Make More
So then, if frugality alone isn’t the key to financial independence, what is? My answer was to start earning more money. I did this by taking on a part time job, and eventually by staring my own business.
These days I’m earning quite a bit more than I used to and I am finally able to get ahead financially. I am paying off debt, saving money, and building wealth through investing. This is the true key to financial wealth and independence. Frugality is simply a tool to help you get there faster. In addition, making more through investing is not limited. Through wise investment choices you can make more money and build wealth for the future.
In conclusion, go ahead and cut your expenses, live frugally, and save. Then take what you have saved and invest it so you can achieve true financial independence.
Can you think of other reasons why frugality isn’t really the key to financial independence?
I feel you there that no matter what we do, it feels like we are doing not much for financial independence. I have tried bringing food to work and commute, and these sacrifices might be small, but in the long run, it really helps me reach my financial goal. It’s really about time and determination.
I tend to disagree when you say frugality is just one of the tools. It is *the* main tool. Think of your wealth as a sink in your bathroom. If you wanted to fill that sink, what would be the *first* thing you do? You’d put a plug to cover the hole at the bottom. That’s frugality: reducing the amount that gets out. The *next* step is increasing the volume of water you put in there. That’s when you increase your income.
They’re both important, but reducing the output is the easiest and more natural way to start. As such, it is the key. Everything else is tools that make it happen faster.
In my opinion you really need to do both, I dont think skipping the Latte a day is really going to matter much over the long term but buying a new car every few years will. You must also learn to make more money whether its a side gig or a better job.
I think both are important (saving and earning more). However, I believe ultimately focusing on earning more will get you there. I am not about wasting money, but I also want to enjoy things in life. That means I can’t be too frugal.
Frugality is definitely important as long as it does not compromise your happiness, your basic needs and your relationships with others.
I do agree that the focus should be on earning more and that frugality is one of the tools of reaching financial independence, but not the most important one.
You are your biggest asset (at least when you do not have any other assets), so try to make the most out of you!
https://piggy-banking.com/2016/12/07/you-are-your-biggest-asset/
I think you have the right idea, now. Unfortunately, you learned the hard way. It’s exciting to be finally on your own, making real money. When reality hits, and the bills come in…it’s a wake up call.
It seems even though it was a rough start, you came out with flying colors. Good job.
We always recommend paying off debt before starting an investment plan. But, do keep an emergency fund handy in case you run into problems in the future. Good luck In 2017.