Tag Archives: earning

People are Attracted to Frugality Because of Laziness

I haven’t always been the biggest fan of frugality, but I know exactly why people are attracted to it.

My opinion is that there often bigger fish to fry and better way to make the gap between earnings and spending as large as possible (including earning more money!). But to each his own, and there’s a clear explanation for why the first step of personal finance for many is resorting to cutting costs.

What it comes down is that people are lazy. Increasing income doesn’t come easily. If we could wake up in the morning and say ‘I think I’m gonna earn something extra today’ we’d all be pretty happy. But in reality making money takes hard work. We either have to learn another skill or put in a lot of time and effort into a business plan. For most people who want to have an extra $1,000 in disposable income each month, why go that route when we have some low hanging fruit we can pick?

To me, the problem with frugality doesn’t have to do with picking the low hanging fruit. I think it’s admirable to cut out the first layer, which is often just waste. Once we get rid of the wasteful spending and become conscious of our spending habits, we get two positive outcomes: more savings and less clutter, both mentally and physically.

My issue is when the first layer leads into a second and third layer. Cutting out waste is great, but eventually we start cutting into the things we like and cut back on the things that make us happy. Right there is where it crosses the line for me. Once we save money for the sake of saving money (and get no additional benefits and in fact get some drawbacks), we’ve taken it too far.

It’s easy to save on our existing expenses, and we should all aim for this goal. However, just because it’s easier to cut back on expenses doesn’t mean that there’ s no limit to how far we can go. In fact, there’s a very clear limit. We only have so much we can save. There’s no limit to how much we can earn. If we spend $2,000 a month, we likely will be able to cut that a little bit but we’re not going to get an extra $1,500 in earning power per month.

But who’s to say we won’t be able to do that with a small business? Just $1,500 is definitely attainable! There really is no limit to how much more we can make by working hard and building a businesses using our existing skills, we can do anything.

Readers, are you over frugality yet? It has its place, but have you moved on to greener pastures yet?

Is Living Within Your Means The Right Way to Live?

My favorite Yahoo! Finance writer Laura Rowley recently wrote about whether it’s always necessary to live within your means.

A basic tenet of personal finance is to live within your means – spend less than you earn. By following this one simple rule, you’re saving for the future and putting yourself in good position.

The question Laura tries to answer is why we have to live like college students now only to splurge when we’re older. Can’t we achieve the balance we’re looking for?

The conclusion Laura comes to is that we should live within our means except when it’s smart to borrow. The economist in the story says that we should have a spend now mentality because living without our means has no economic foundation.

While this can definitely work for some people and balance is important in all our lives, this is a hard plan to put into action for most people. Hindsight is 20/20, but the future is hard to predict. Can we really be sure that we’ll be making that much more later in life? If we don’t have the surplus we expect, will we look back and be disappointed in our past decisions?

Another question I have is about the effects of compounding interest. Maybe one of the reasons people have a surplus of money when they’re older isn’t just related to their income but also to their savings. If we spend more money when we are young, then we will be putting less into savings (and in some cases borrowing more).

By losing years and years of compounding interest, won’t we have to save more later in life to make up for it? Suddenly we’ll have to be making larger 401(k) contributions and paying off a larger mortgage because we didn’t put down as large of a down payment.

This is a slippery slope in my mind. When you are in medical school and know that you will be making a lot a few years down the line, I think it’s ok to spend and enjoy life a little more. But if you’re a teacher, it’s much harder to see how the riches of tomorrow will be able to cover today’s expenses.

Readers, do you think we should spend more now because we’ll have more later? Or is it just setting ourselves up for trouble?

What Skills Do You Waste Than Could Earn You Money?

How many of you see someone making money and think to yourselves, ‘He’s so lucky! If I had those skills, I’d be doing that too!’ We sit and think how lucky other people are, when really they are just employing their skills and we could all be just like them, albeit with other talents.

I do it, but the truth is that we all have the skills we need to make money with a side gig. There are a million ideas out there, we just need to tap into our brains a little more and figure out exactly what we’re good at and turn it into something that others will pay for.

I recently read about a college student who put up ads on craigslist offering to jailbreak iPhones for money (jailbreaking involves opening the software to new features and apps that Apple doesn’t allow into their store for silly reasons). Now he makes $50,000 a year doing it!

When I read this, I slapped my forehead thinking, ‘I jailbroke my phone and it was super easy. This could have been me! Why am I so dumb!’

By now, the market is more saturated, jailbreaking ads are common and you can get someone to do it for $5, but there was a big opportunity. Unfortunately, I missed the boat on this one.

But I won’t hang my head and get all upset. I’m sure there are tons of opportunities out there for people to put their skills into practice and make some money.

Side gigs come in two main forms. Either we can provide a service that either yields a product people will pay more than it costs to produce or our we have skills that others are willing to employ, usually at a price that makes it worth it.

Readers, what skills do you have that could transform into a side gig? What’s your expertise in and what would people be willing to pay you to do?