I know, I know. You have heard it a million times.
Layoff the Starbucks, sell your expensive car and avoid eating out 6x a week.
And on some fronts, I agree with everything I just typed 4.5 seconds ago. But there is a caveat to the frugal lifestyle…
You will need to focus on cash flow.
You will need to figure out how to make more money.
You will need to make quite a bit of extra money if you are looking to really live a free life.
The frugal lifestyle will only get you so far. You can’t save or coupon your way to a life of choices.
The Debate Continues – Frugal or Make More Money?
Learning to place priorities on spending is a must. No matter how you slice it. Don’t read this and justify your $200 Starbucks habit. Being frugal is still super important.
However, like I wrote recently about having a positive monthly income, if you are only plus $100 each month after you pay all your bills, it doesn’t matter how many frappes you cut out, you might need to make more money.
I have this debate quite frequently and typically the go-to for me is you can save $50 a month or you can go make an extra $6,000.
And YES making an extra $500 a month might seem like a lot, it really isn’t that complicated. You can job hop, ask for raises, focus on side hustles, or cash in on a passion. But that is not the point of this article.
Being super frugal will only get you so far towards your goals. While there is merit in slashing spending to help pay off debt – AND YES IT TEACHES DELAYED GRATIFICATION – focusing on creating a huge amount of discretionary income is a must.
But it doesn’t happen overnight.
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$300 and 3 Years Ago.
Three years ago I was broke. Depending on your definition of broke, but my definition is the ability to at any time have money to do what you please without stressing out.
So when my car engine went out and my washing machine decided to break all in the same month – scooping up a new car and stopping by Home Depot wasn’t a big deal.
And we did with CASH not credit.
But prior to that, in 2014 into 2015 that was just not the case. Because I bought a $40,000 GMC Sierra, already had student loan debt and a mortgage, then decided to keep the same lifestyle I was basically scraping by each month.
And sadly that is 80% of the population – living paycheck to paycheck.
I say it all the time, but you have to be really really REALLY honest with your finances. When we overcompensate or act like things are better than they are… you are only fooling yourself.
If the doctor told you that your life depended on your diet and exercise and that the two better change, I don’t think you would hesitate.
So when I looked at my positive income each month and it was $300… I knew I had to change some things.
But I think we live in a world where there is a lot said, but not a lot did. It is easy to complain about money. It is easy to justify your current position. But it is the action that separates.
Be honest with your finances.
When I realized my finances were a liability – I knew I personally had to make changes. Subconsciously, I had to to tell myself to change.
So I sold my truck. I talked to my eventual wife about getting on a budget, and we started really asking ourselves if all of our spending was going to get us where we wanted to be in 5, 10, and even 15 years.
And we stopped comparing ourselves. I had to learn that comparison doesn’t do anything but create a lifestyle that is filtered.
But what does all this have to do with frugality?
I almost feel like frugality has become a “cool” thing and not a purposeful thing.
Much like the term entrepreneur that is thrown around loosely, I see people talk about FIRE – Financially Independent, Retire Early – but they aren’t “FIRE.” And when I see the steps that it takes to F.I.R.E. the one missing ingredient is cash flow.
Yes, cut out wasted spending.
Find joy in what you really love doing.
Be self-confident enough to go against the grain.
Lay off the consumerism.
But you will need to create some sort of asset that allows you to actually “FIRE.”
Listen, it is awesome if you are saving. And you should!
My wife and I are extremely frugal with lots of things in order to create the cash flow that allows us to have different options. It is how we had the choice to have a cleaning service monthly to create more time for ourselves.
We don’t drive sexy cars, have a huge house or go on a million trips. But our financial security and peace of mind grows daily. But as much as we saved, we also got serious about cash flow and making sure we had more coming in then we did going out each month.
The way I figure, you need at least 1 million in some sort of money account with at least a 5% return to really retire early. I also think that you should probably be debt-free at the point – including a mortgage that is paid off.
Living off $50,000 with debt… well that seems very challenging to me. Even $50,000 net, would be about $4,000 a month.
With a mortgage payment and utilities eating up somewhere around 40% of that $4,000… you would be living an extremely frugal lifestyle forever.
So if that is the path you want to go down how do you get to that point? How do you make more money?
A few steps we are taking to get to the point of having endless financial options.
As I close I aim to share a few steps we are taking in order to accomplish our personal goals which is a stay at home wife and options to travel and live life on our own terms. I don't consider ourselves part of the “FIRE” movement. More about the lifestyle of choices movement…
I also like to add that we would rather say yes more then we say no to others. But in order to do that we:
1. We make sacrifices, but it is easy with a long term plan in place.
2. Rapidly decrease all debt including our mortgage.
3. Save 6 figures.
4. Invest in real-estate properties once in a financial position to do so.
5. Continue to grow assets and online companies, focusing on cash flow.
6. Make sure all spending decisions fall in line with 5-10-15 year plans
Q: What do you think, frugality or cash flow?
Josh writes about ways to make money, pay off debt, and improve yourself. After paying off $300,000 in student loans with his wife in less than five years, Josh started Money Life Wax and has been featured on Forbes, Business Insider, Huffington Post, and many more! In addition to being a life-long entrepreneur, Josh and his wife enjoy spending time with their newborn son, their chocolate lab named Morgan, working out, being outside, traveling, and helping others with their finances! In case you were wondering, Josh uses Personal Capital to track his net worth and his first investment account ever was an Acorns account 😎