No One Ever Gets Rich by Being Frugal

No One Ever Gets Rich by Being FrugalI really dislike this statement – No one ever gets rich by being frugal. Some people like to say this whenever you try to save money. To me, this means you shouldn’t bother trying to be frugal. Their argument is it’s better to focus on making more money because “income has no ceiling.” I have a couple of problems with this viewpoint.  First off, no one is too broad. Somebody somewhere got rich by being frugal. I am frugal, but I’m not rich yet. However, we will be wealthy someday. It can be done. Second, it will be a lot harder to reach FI if you ignore the spending side of the equation. I think they forget that there is no ceiling on spending either. It is so easy to spend all you make and more. Anyone can do that with no effort at all. This is why so many people have debt. It’s like sports; you need to be good at defense and offense to win the championship.

Saving rate

If you want to get rich, you need to excel on both sides of the equation. It all comes down to your saving rate*. The more you save, the more you can invest. The average US personal saving rate was about 8% in 2019. That is way too low. Even if you make a million dollars, you are not saving that much at 8%. It also means you spent $920,000. Once you live like that kind of lifestyle, it is very difficult to cut back. What if you don’t make as much in 2020?

*Saving rate = how much you save/how much you make.

If you want to be rich, you should aim to save 50% of your gross income. It will be seem impossible at first, but it will become easier if you keep at it.

Frugal first

Being frugal matters. In fact, it should be the first thing you do if you aren’t rich yet. I learned to be frugal when I was young and penniless. Subsequently, I was able to start investing right when I became an engineer. That’s the best time to invest.

Back then, I didn’t make much. I could have easily spent all my income like most of my coworkers. That’s the great thing about frugality. Anyone can learn to be frugal and save. Once you know how to live frugally, you just need to keep lifestyle inflation to the minimum. That’s way easier than living it up and having to cut back later.

Increase your income

Increasing your income is very important too. In fact, this is a lot more important once you already know how to control your spending. That’s the only way to increase your saving rate.

In my chart, I said having low income and being frugal means you’ll have a long struggle ahead. It is very difficult to save 50% of your income if you make minimum wage. The cost of living in the US is too high for minimum wage workers. Even if you’re super frugal, you can’t save much.

At this point, you need to focus on increasing your income. There are many ways to do this. Here are just a few.

  • Change to a more lucrative career.
  • Go back to school and earn a degree that’s in demand.
  • Get a promotion.
  • Negotiate a raise.
  • Learn new skills so you are more valuable to your employer.
  • Take on a side hustle or two. Blogging* is a great way to test the water. It’s cheap to start and it’s a lot of fun.
  • Invest.

*If you’re curious about blogging check out my tutorial – How to Start a Blog and Why You Should.

Passive income

Fortunately, increasing your income is doable for most people. In 2019, we saved 50.2% of our income. Most of that is reinvestment from our passive income. Those early investments are paying off for us. Compounding (compound interest) is such a powerful tool if you make it works for you. Unfortunately, so many people are in debt and compound interest is working against them. That’s the problem if you ignore the frugality side of personal finance. Even high-income earners can get in debt if they’re not careful.

You can see how I generate passive income here.

An average Joe’s journey

Here is a picture of my journey. I’m just an average guy and I think anyone can make this type of progress. First, learn to be frugal then focus on increasing your income. Eventually, you’ll be rich.

Get rich being frugal

Don’t spend too much

If you just focus on increasing your income without worrying about being frugal, you never know where you’ll end up. You might get lucky and become rich, or you might end up with nothing at all. Don’t follow this model below. It’s not a good path.

spend too much

What do you think? Do we need to focus on both sides of the equation? Or is being good with one enough? 


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Joe started Retire by 40 in 2010 to figure out how to retire early. He spent 16 years working in computer design and enjoyed the technical work immensely. However, the job became too stressful and Joe retired from his engineering career to become a stay-at-home dad/blogger at 38. Today, he blogs about financial independence, early retirement, investing, and living a frugal lifestyle.

Passive income is the key to early retirement. This year, Joe is increasing his investment in real estate with CrowdStreet. He can invest in projects across the U.S. and diversify his real estate portfolio. There are many interesting projects available so sign up and check them out.

Joe also highly recommends Personal Capital for DIY investors. He logs on to Personal Capital almost daily to check his cash flow and net worth. They have many useful tools that will help DIY investors analyze their portfolio and plan for retirement.

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