Tess Vigeland: Warren Buffett is also known for living a fairly ordinary lifestyle. He’s been in the same modest home in Nebraska for decades. Though, admittedly, he does also have his own private jet.
But he’s not a spendthrift. You might even call him frugal. That’s a word that’s enjoyed something of a renaissance the last couple of years. But commentator Ramit Sethi wants you to forget what you’ve been told about the best way to save money.
Ramit Sethi: Have you ever noticed that personal finance experts love lecturing Americans about what they can’t do with their money? They say things like: “Stop spending money on lattes!” “You can’t afford those jeans.” “Eating out? You should cook at home every night — duh.”
The only problem is, these tips haven’t worked for the last 50 years. Look at any indicator of debt or financial literacy and you’ll find that Americans are worse off year after year.
Perhaps it’s time for another approach. Instead of telling Americans worrying about cutting back on everything, what about earning more?
It turns out that, when it comes to the two ways to grow your money, most Americans focus entirely on cutting back, but neglect the idea of earning more money.
In my research, I discovered two main reasons we don’t focus on earning more: First, we don’t have an idea how we could earn more. Second, we believe we don’t have enough time.
And so we focus on micro-savings like cutting back on our morning latte, when eliminating it will only save us a few hundred dollars per year. But the truth is, with five to 10 hours per week, most Americans have an existing skill that could earn them $1,000 a month on the side.
For example, if you play a musical instrument, you could be a music instructor, often charging $25 an hour or more. If your house is meticulously organized, you could be a personal organizer, billing out at $75 an hour. Many of my readers charge very high rates — sometimes over $100 an hour — doing web design, Powerpoint creation or IT consulting.
In this economy, multiple revenue streams mean more security from a layoff. And since it’s on the side, as you start to earn more, you can save it, pay off debt, spend it — or even decide to quit your job and start this full-time.
So when it comes to living a rich life, what will be more effective? Trying desperately to save a few bucks on our morning latte — then rebounding back out of habit — or earning thousands more doing something we already love?
There’s a lot happening in the world. Through it all, Marketplace is here for you.
You rely on Marketplace to break down the world’s events and tell you how it affects you in a fact-based, approachable way. We rely on your financial support to keep making that possible.
Your donation today powers the independent journalism that you rely on. For just $5/month, you can help sustain Marketplace so we can keep reporting on the things that matter to you.