There are three basic techniques for improving one’s net worth: spending less, earning more, and controlling what one already has. Of these techniques, the one most readily accessible to most Americans is spending less. Although “the American dream” tends to idealize the concept of being financially secure through a high-paying job, for many people, rapidly increasing their income is simply not feasible. Spending less, on the other hand, has many concrete advantagss over earning more money:
- Anyone can do it. You may not be in a position to change careers, find a better job, or negotiate for a higher salary, but you can almost certainly find ways to reduce your spending. Most people are stunned to discover how much room for improvement there is in their spending.
- The results are immediate. Efforts at getting more through investing time, money, effort, and education, generally take time to come to fruition. This does not mean that these efforts are futile, but often our financial situations need immediate relief. The benefits of reducing our spending are immediate. At the very moment that you decide to eat in instead of ordering pizza, you’ve just increased your net worth by ten dollars. No waiting.
- The results are guaranteed. Unlike investments or looking for better jobs, which don’t always yield the results we hope for, reducing one’s spending always puts us in a better financial situation. There is no risk that the value of frugal living is going to drop and that you will lose your investment. If you reduce your spending, you will be in a better financial position.
- It’s tax free. If you were to find a way to earn an extra thousand dollars this year, chances are that by the time you paid taxes, your net worth would only have improved by 750.00. If you find a way to save an extra thousand dollars this year, the whole thousand dollars is yours to keep, use toward debts, or invest.
Reducing one’s spending is a guaranteed, immediate, accessible and tax-free way to improve one’s financial position. Although this technique is often taken for granted and overlooked because it’s not as glamorous as beating the stock market or finding the perfect entrepreneurial idea, it’s much more secure and it’s available to everyone.