There are some interesting opinions about personal finance floating around the internet the past few days, some of them from more respected sources than others. Two, however, really stuck out more than the rest. The first was a Lifehacker post that a friend of mine posted on facebook. Melanie Pinola of Lifehacker wrote an interesting article titled “Why you should focus on earning more, rather than spending less” and it really was not something I anticipated from Lifehacker. But what REALLY surprised me was her source of inspiration: Get Rich Slowly. For those of you not familiar with it, Get Rich Slowly is probably one of the oldest finance websites out there. JD Roth, the founder, started it in 1999 or so and maintained it for his faithful audience for years. Unfortunately, he has since sold the website and left as editor. Which led to El Nerdo, one of the writers there, writing a post yesterday entitled “Throwing away an old rule.” The rule is one you see constantly in the personal finance sphere: “Spend less than you earn.”
Now, the big thing here is that Lifehacker and El Nerdo are both using the difference in phrasing between to the two in order to put the emphasis back on earnings. Why should we try to “squeeze blood from a stone” as El Nerdo writes, when we could focus instead on finding more work, more pay, more money! I won’t lie, I don’t disagree with it. Net income, how much you make each month after you subtract all your expenses and spending from your take home pay, is a two way street. Like a business, you have Revenue and Expenses. Like a business you want more revenue but you’re also mindful of your expenses, keeping them from getting too high and overwhelming your revenue.
Now, here is the big thing. Like a business, we can suffer if we cut too much from our lives. If you cut too much from the pay of employees or from Research and Development, a company will suffer in the long run. If we cut too much out of our lives, we too will suffer. Just because you can technically eat Ramen for every meal and save X amount of dollars doesn’t mean you should!
However, I’m not sure I 100% agree with the logic behind this. Granted, yes, we all want to earn more. However, by shifting the focus to earnings rather than spending I feel we hit two problem areas. One: we are no longer focused on our spending. Obviously. Because of this, your renewed focus on earnings will no longer keep you diligently focused on your budget, allowing little things to pile up and cost your more money than if you had just stayed focused on your budget. This is what gets people into trouble in the first place! Plenty of people make enough money to live a good, solid life. The problem is that they try to have a rich lifestyle before they are truly rich. Or, they are rich but they STILL spend more than they should. All because they focus on their earnings instead of their spending.
Second: we now are running into a lifestyle change. For some of us, a change in career could be a good thing. Maybe we’ve outlived engineering and want to be a teacher. For others, we’re underemployed and it’s time to find a better job for us. However, for many of us, making more money means a sizable tradeoff. For those of us with full time jobs, it means we either need to find a new job (not easy and fairly time consuming), work more hours (if we’re hourly), or get a second job.
We only have so much time in this world and if you ask me, working MORE is not how we should be spending it. I know for a fact I could work weekends and evenings at a running shoe store nearby (they asked me already) and could easily pull down an extra $1000 a month. However, I’d give up my weekends and evenings. I’d lose out on the time with my girlfriend, my friends, and myself. I won’t lie, an extra grand a month is huge. But at what cost?
Overall, I’m pretty disappointed with both GRS and Lifehacker. Of course everyone wants to earn more money rather than cutting their spending but that’s not the point of a frugal living. Living within your means is supposed to mean living within what you can do right now. If you make more money, great! Stash 50% of it away and use the rest to up your standard of living a little bit. But don’t go killing yourself to make an extra $500 or $1000 in life. You’re supposed to live a balanced and healthy life. We shouldn’t waste it all working our lives away.