“Thrift Is Necessary, but Not Enough”

Being lean is an important part of a balanced budget (notice the cereal box logo). However, it takes enough effort to easily believe that frugality is all it takes. But this is only part of the financial health.

As personal finance site Afford Anything explains, the most important figure in your finances is the gap between how much you earn and how much you spend . The larger this gap, the better for you. However, frugality can only affect one side of the equation: how much you spend. If the amount you earn never changes, your gap needs to be bridged. In other words, frugality alone is not enough to ensure your financial independence:

There are two ways to widen this gap:

  • Earn more
  • Spend less

Both are critical. But the more you earn, the easier it is to save — and the greater the savings become. Thrift is necessary but not sufficient. On the other hand, earning more money will speed up your path to freedom.

If you spend most of your time trying to reduce your expenses, but rarely think about how to increase your income, you are missing out on half of the equation. The gap can be affected by both parties, but your income (at least hypothetically) has no cap. You can never achieve financial independence without frugality, but it alone will not lead you to it.

In Three Words: The Ultimate Lesson About Money | Allow yourself everything


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