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When money feels tight, the first thought is to cut back on expenses. In fact, a lot of money saving articles and advice would mirror the sentiment. Do you need to save some money? Go look through your spending and see where you can cut back.
It’s good advice. A lot of people still don’t track their spending or have a set budget in place. There is usually always some department to cut back in. Food, eating out, shopping, and excessive subscriptions are the popular categories to look at.
I’m sure I could cut out my Netflix and Spotify subscriptions, but I’ve kinda got some killer playlists going on and need to finish watching that British show Lovesick. Yeah, I use the $18 a month I would save by cutting them, but it gives me some entertainment.
With this said, you’re primary focus shouldn’t be on spending less.
Despite what negative comments on money articles would lead you to believe, your $11 a month Netflix subscription isn’t the reason you can’t get ahead with your finances.
Your focus should be on earning more.
Yes, I know, you’ve probably heard the words “side hustle” uttered several times. It’s become a buzzword nowadays. However, despite the trendiness it holds, at the end of the day, it is a very helpful thing to have.
This isn’t to say spending less and frugality aren’t helpful. They are. Frugality is a muscle you can develop over time in order to limit the amount of monetary baggage you carry. It helps you learn to value what’s important and what you can really afford.
It’s a necessary habit to have throughout life. But…it shouldn’t be your main focus.
Why? Well, because the world is an expensive place. Rents are going up constantly, house prices are bananas (and not the fun Gwen Stefani kind), and wage stagnation is alive and well. It’s a lot to take in and realize, but when you’re earning a tiny paycheck and putting half of it towards your closet size apartment, cutting back won’t give you the substantial gains you probably need.
A focus on earning more isn’t just for those earning a low income, it’s for everyone. The best thing you can do to hit your financial goals is to earn more.
Frugality Has a Limit
There are two ways to cut back. The first involves cutting out the nice-to-haves. The second way involves cutting out every non-essential thing and only focusing on the bare necessities (a.k.a. the joyless budget). Frugality articles tend to focus on the first way. Internet commenters and keyboard warriors seem to focus on the second.
Either way, there comes a point when you can’t cut back anymore.
Freeing up $100 a month extra in your monthly spending can be great, but what if you have a gigantic student loan payment to make every month. How would you be able to meet that and save for your other goals like travel, retirement, wedding, or a home down payment?
Being frugal is helpful in making you mindful of your spending, but it won’t help a lot if you’re looking to work towards several savings goals and grow your wealth.
Earning More Gives You Options
If you’ve ever played any sort of video game, you would know that you get several lives for your character. So if some disastrous event happens and you get depleted, you can use another one of your lives.
Too bad life isn’t like that. Although having a side hustle can get you semi close to that feeling.
Earning more money could provide a sense of financial relief that cutting back probably would never be able to provide.
According to a 2017 study by Bankrate, 57% of Americans have less than $1,000 in savings. For young millennials ages 18-24, 67% have less than $1,000 in savings.
The statistics are bad but not surprising. Saving money is hard. It can be done, but what happens if you have several financial goals to hit and don’t make enough to contribute to all of them?
If you were to lose your job, have your car break down, or have an unexpected expense pop up, a few different things could play out. You could use your big emergency fund to help tide you over or you have a panic attack., scrambling to figure out how to cover your expenses.
Ideally, a big emergency fund would be great. You would have the recommended three to six months of expenses in it. Handling unexpected expenses would be okay.
The problem is fully funded emergency funds take awhile to build. I’m talking months or years to get them to full capacity.
A side hustle can give you an additional income stream to use for when you don’t have a fully funded emergency fund or enough income from your main job to reach your goals.
It Teaches You Valuable Skills
Probably the best thing that comes from having a side hustle is the skills you learn from doing it. I’ve learned more about selling, pitching myself, and being confident in my skill set with freelancing that I have ever gotten from any traditional job I’ve worked.
The two things I’m doing right now, blogging and freelance writing, have allowed me to learn a lot. Content marketing, and how to approach it at different angles, has been a skill I’ve grown from doing freelance writing. Putting together graphics for posts and Pinterest has taught me more about graphic design (although I’m still very bad at it, haha).
Changing things around on my site and WordPress theme has made me better at understanding WordPress as a content management system.
Simply put, you can learn a lot from having a side hustle. A focus on earning more, rather than cutting out everything from your spending, can have a greater benefit than the obvious one of earning more.
Earning that first bit of money, outside of a traditional job, gives you an awesome feeling.
Frugality has its place but overall, the earning more side of the equation can yield some pretty good benefits.
You’re able to test out entrepreneurship in a low-risk setting, diversify your income, and learn more about how to position yourself as someone with value to bring.
What do you focus on more? Cutting back or earning more? What benefits do you think a side hustle provides?