• Zach

How to be financially smart without being Frugal


basically my daily view

As I sit looking out of my floor to ceiling windows at my beautiful view looking over the water and city, I know I could save more money. I just don't want to. Today, I'm not feeling frugal. Today, I feel like splashing out, buying organic, getting some new clothes. And you know what, that's ok, I can do that and still meet my financial goals. In fact, I've already saved so much money the last several months that I met my savings goal for the year half a year early.

I often write about how to increase your frugality. Saving money is kind of my jam. But it's not the only factor in reaching your financial goals. There are ways to be financially smart without frugality. Today I'm going to write about the two main ways to do this. The first way focuses more on the income side of the equation.

In the Personal Finance space, there's a concept called "growing the gap." The gap is the difference between what you earn, and and what you spend, it's how much you save. Growing income is often perceived as "playing offense" while cutting spending, frugality, is "playing defense." In the end though, there's only so much spending you can cut. You will still need a place to live, clothes to wear, food to eat. But potential income has no ceiling. This is why the most important way to reach your financial goals without being frugal is to increase your income.

There are three main ways to increase your income. The first is to get more training and certifications in your field so you can do more difficult tasks and get promotions and raises. To do this well though, you need to know your field and your own interests. Don't do training that's not going to make you professionally fulfilled or make you more valuable to the company and clients. This is the reason, as a teacher, I did IB training, so I could teach IB classes, but didn't do my National Board Certification from the US. The first has gotten me several jobs, while the second would have no tangible benefit and would drain a whole lot of time and energy.

The second way to increase income is to change companies. According to leading employment website monster.com, those who change jobs every few years come out way ahead of those who don't. I've seen this in my own life, with every new job growing my income, especially my last job switch, that led to a 33% raise.

The third way to increase income is to have a side hustle. This is where you monetize your hobbies and skills. For me, it was photography, music, and writing. I enjoy my time spent doing these things, and they've made me a lot of money over the years.

The more defensive ways to meet your financial goals without frugality are also important. The first is to not fall victim to lifestyle inflation. If you are fine living in a one bedroom apartment, just because you got a raise doesn't mean you now need a 3 bedroom apartment because you feel pressure to do so from family or culture. If your car works fine, don't get a shiny new depreciating asset just because you get suckered in by a great ad campaign. You don't need bottle service and VIP treatment every weekend at the club, I promise.

Another side of this is simply putting off spending until you are more financially secure. The new car now might put a huge dent in your finances, but if you simply wait a few years, the car will be a much smaller percentage of your net worth, and won't take as many income producing assets to afford. The same can be said for putting off having kids or buying a dog or cat. It's not that you can't have these things, it's that if you wait longer, you'll be able to more easily have them later.

You can reach your financial goals. You don't have to be frugal, you just have to be smart.


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