Sarah (no, not my wife) wrote in with a really good question:
Let’s say I have a free weekend. Am I better off spending that time earning money or being frugal? I know it probably depends on the options available to me, but which one is more important to look at seriously?
As you mentioned, Sarah, it really has a lot to do with your personal situation. Are you on solid financial footing right now or is debt ready to drag you under? What is your career like? What is your skill set like? How much “low hanging fruit” do you have when it comes to frugality? Is this an unusual weekend, or do you have a lot of free Saturdays?
So, let’s walk through some of these questions.
The State of Your Finances
One simple rule really sums up the connection between the state of your finances and the choice between frugality and income.
The more precarious your financial state, the higher priority you should put on frugality.
The reason for this is very simple. Frugality’s big advantage is its speed. You can spend a weekend doing frugal things and see the financial benefit very, very quickly. Sometimes you even see it immediately; at other times, it’s obvious within just a few days. It’s virtually always obvious within a few weeks.
The problem with earning more money with your time is that the turnaround often isn’t that quick. If you spend a weekend on tasks designed to earn you more money, the vast majority of the things you might do won’t immediately put more money in your pocket. Instead, they put you in a better position to earn money over the long haul. Even if you do some things that earn a little money in a very direct way, you often won’t see the pay for that immediately.
So, if your finances are pretty precarious, you need to choose the avenue that sees more immediate results, and that’s frugality. Spend your weekend finding ways to minimize your spending over the next few weeks by making meals in advance, carefully planning out your meals, making your living space more energy efficient, and so on.
The less desperate your financial state is, the more you’re able to dedicate that spare time to activities that might earn more money. Things like getting a part time job or doing tasks on or Mechanical Turk will translate your time into cash in a more direct way, while things like taking a class or building a skill or starting a microbusiness are very long-term approaches that can potentially see big rewards.
Another thing to consider is the state of your current career path.
The more options you have to move up in your current career path, the more worthwhile it is to spend your free weekend preparing to earn more money.
Similarly, the more you want to switch career paths, the more worthwhile it is to spend your free weekend finding new paths to earn money.
On the other hand, if you’re pretty happy with your job but it doesn’t have a whole lot of upward potential, your time is probably better spent on frugal preparations.
In 2006, I was definitely on board with finding new sources of income. Although I liked some aspects of my job, it was pretty clear that there was no upward path for me to follow. So, I devoted a lot of my spare time to building Money360.
Today, I actually enjoy my job quite a bit. I like the regularity of the work and the relative freedom I have. I could probably “move up” by writing more, but I’m in a happy place with things for now. Thus, I’m more likely to devote spare time to frugal projects.
Skills to Pay the Bills
Another thing worth considering is whether your skill set gives you a lot of opportunity to earn money elsewhere. This depends a lot on your current job and the skills you have at your disposal.
Are you in a situation where your skill set doesn’t open a lot of doors for you? Or do you have skills that will make it easy to find a new job?
Here’s another way to look at it. Let’s say you were fired tomorrow. Could your current resume and skill set find you a new job that pays reasonably well within a month or two? Or would you be in a serious pickle and likely have to find an entry level job quickly?
The stronger your skill set is, the better options you naturally have in front of you when it comes to earning income. You have better job opportunities and better freelancing opportunities. On the other hand, the weaker your skills are, the more precarious your entire situation is.
To translate that, if a job loss would put you in a situation where you could not easily find comparable work quickly, you need to spend your free time building up a skill set that would make that liability disappear. On the other hand, if you have a skill set that would make finding a new job quite easy, then there is much less pressure to spend your spare time building skills.
A lot of this has to do with what you’re already doing at work. Do you have a job that builds skills that others might find valuable? If the answer is yes, then you have a bit less incentive to spend your spare time building skills. If the answer is no, you need to be building the skills that pay the bills.
Low Hanging Frugal Fruit
Another factor comes in when you examine your previous frugal efforts.
Have you taken care of some of the more obvious frugal tasks that can save a ton of money?
Have you done things like air seal your home, install LED light bulbs everywhere, move your credit card debt to lower interest rate offers, shop around for better insurance and cell phone rates, make a bunch of meals in advance, and so on? These are things that pop up over and over again on lists of things to do to save money because they’re easy one-time tasks that really make a big difference.
On the other hand, if you’ve taken care of a lot of that low-hanging fruit, then frugal projects gradually become less and less productive for the time and energy involved. If you already have a bunch of meals in the freezer, your home is air sealed and insulated well, you have a great cell phone rate, you have LED bulbs everywhere, and you don’t have credit card debt, then finding frugal projects to do might be trickier than it would be for others.
In other words, if you’re really stretching to find a frugal project to take on, then you might want to focus your spare time on earning more money. On the other hand, if there are lots of obvious projects, getting those things taken care of will see a healthy return for your time and energy.
The State of Your Free Time
Want even more to think about? Another really important factor is the nature of this free weekend that you have.
If you normally have a block of free time on weekends, then getting involved in a side business or a degree program or another long term plan to really raise your income is probably a smart move; on the other hand, if the block of time is unusual, frugal tasks are probably a better choice.
The reason for this is consistency. Many avenues for boosting your income require some continuous effort over time. Launching a small business? Continuous effort. Working toward a degree program? Continuous effort. Building new skills? Continuous effort. You can’t make those things happen with one afternoon once in a while.
On the other hand, many frugal tasks are one-off things. You can do them once and the savings lasts for a long time. You don’t have to put continuous effort into things like air-sealing your home or negotiating better credit card rates. You can do them once and enjoy the benefits for a while without having to contribute continuous effort.
So, the more consistent your free time, the more sense it makes to work toward a higher level of income. The less consistent, the more you might want to consider taking on one-off frugal tasks like making extra meals in advance and freezing them.
It shouldn’t be surprising to you to hear that I think there is more than enough room for both frugality and income improvement in a person’s life. I’m not the type that thinks frugality is useless, nor do I think that earning more money is a pipe dream. Both are useful because both contribute to the big goal of personal finance – spending less than you earn.
If you’re like most people, some of these questions likely hinted toward frugality, while others nudged you toward earning more money. That’s completely normal, but it doesn’t really help answer which path you should be on.
In my eyes, it comes down really to three questions being key. First, are you in a very precarious financial situation? Second, is your free time pretty inconsistent? Third, do you have a lot of low-hanging frugal tasks that you could easily take care of with some free time? If you answer yes to two out of three of those, then I’d probably put a priority on frugality. If you answered yes to only one of them, then I’d strongly consider devoting your spare time to building up a bigger income.
Whatever route you choose, good luck. Taking a serious approach to improving your financial state is always a good thing, whether it takes the form of cutting your spending or improving your income.