One of the fundamental rules of personal finance and money management is to spend less than you earn. Living within your means is good financial management, and it is the cornerstone of a frugal lifestyle. Whether you want to retire rich, or whether you are content with your own version of wealth, it is still important to make sure that you live within your income. You can do this by following one of two paths:
- Spending Less
- Earning More
Of course, you can also do a combination of the two in order to achieve even more impressive results. However, as you decide how to best live within your means, you need to determine what is most likely to suit your notions of financial freedom.
Spending Less
Many people look for ways to pinch pennies and live more frugally. This makes sense when you feel as though you are restricted as to income. Many people decide to do things themselves, or they look for good deals. Many people choose to use coupons — or even get involved in extreme couponing. The main downside to spending less is that it can sometimes lead to feelings of deprivation. After a while, frugal fatigue can set in. Even though there are plenty of ways to have frugal fun, always thinking about how you can pinch pennies can stress some people out. (Although for others it is an exciting challenge.)
Earning More
The other option is to earn more money. In some cases, rather than try to chip away at the spending — especially if you feel as though you can’t reduce your spending any more — it might make sense to look for ways to make a little more money. In some cases, it might make sense to go the more traditional route, getting a part-time job, or, if you have a skill, hiring out for odd jobs. My neighbors provide yard care services on the weekends to earn a little extra money, and I know others who clean homes.
On top of that, if you have the time and patience to build up your online reputation, or provide interesting content, you can start a web site. My husband just finished working his first job as a consultant, providing his stats expertise to a local health care system. He is also working as a adjunct at two different universities — sort of like a freelance professor. If you know what your skill set is, and you are willing to put in some initial work, you can find ways to get paid for what you can do by starting a home business.
Combining the Two
You can, of course, achieve your desired financial results with a combination of spending less and earning more. You can look through your spending to see where it makes sense to cut back, and make efforts to get a good deal on your purchases. That way, you get more for your money. While you are doing this, you can think of ways that make sense for you when it comes to earning more. That way, you will be able to more quickly build up your emergency fund, pay down debt, and save for retirement.
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I’d vote for the “earn more” category. Cutting back from your current level of expenditure tends to be painful. There are some big things you can do to free up cash over time (move to a different, cheaper house, get rid of a car, move to a cheaper state, etc.) but the key phrase here is “over time.” In the interim, if you find work you enjoy, earning more can be less painful than cutting out all little pleasures.