Tuesday, May 3, 2011

I Feel Validated

In yesterdays "NY Times" author Ramit Sethi argued something I have been advocating for a long time: The best way to increase your saving is to increase your earnings. Frugality can only take you so far and you can never save more than you earn. It's just common sense.

So why are we peppered with articles about saving money on toilet paper and skipping lattes (like I ever had the luxury of lattes!?)? Because it is much easier to write about frugality than earning money. Everyone can tell you to cut this and that. Not that many can tell you how to market your skills and find a job. Earning money is very difficult for those who do not know how to work the job market and very few people know how to point you in the right direction.

Sethi's approach is termed "conscoius spending", basically spending lavishly on things you love while cutting everything else. I support many of his claims, but I wouldn't just throw frugality out the window either. I don't necessarily "love" my Roth IRA, but I would like to retire someday. So I am not going to buy that iPad I have been hankering for because that money is supposed to go the Roth IRA.

A combined approach - where you live frugally but realize that sometimes you have to spend a little to earn a great deal more - is probably the most effective. Save on gas by not showing up to work any more? probably not a good idea. Using the office coffee machine? good idea. The quality of your offee should not affect the quality of your work. A vacation every now and then? Sure as long as you have first met your savings goals, and have an emergency fund. Go ahead and reward yourself for meeting those goals - but be sure to get the best deal on that vacation through planning and research.

The main point which I wholeheartedly agree with is that once the obvious luxuries are cut, it is much more effective to focus on earning more. Denying yourself is extremely difficult and making your own laundry detergent isn't gong to save you all that much anyway. Many of these frugal measures are time consuming and exhausting.  Finding a side job that you like and that pays will bring in far more. Plus there's no limit on how much you can earn. There is a limit on how much you can save - never more than you're earning, usually a heck of a lot less. This is why I try to mix in posts about earning more and increasing your earning potential.

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