Increase income or reduce spending?

There are two schools of thought when it comes to financial independence.

One advocates increasing income, and argues that saving is pointless without income, and extreme frugality is no way to live. They advocate attaining financial independence through drastically increasing your income.

The other side says that while increasing income is good, it is not always possible, especially in this economy, and that no matter what your income FI can be attained by spending significantly less than you make.

So which is correct? is one tactic better than the other? Well, if you have read my first post, The Money Monk Method, then you know I think you can do both. It is a false dilemma for anyone to assume you have to choose one or the other. In fact, I think you would be a total moron to NOT actively utilize BOTH techniques, because there are benefits and limitations to each.

Increasing income is a super powerful tool for financial independence. In fact, income is the cornerstone of the entire plan. You HAVE to have an income of some sort to be able to save anything, no matter how low your expenditures are. So income can't be ignored. And adding income allows you to increase your savings even without changing your spending habits. Additionally, frugality has a floor (You can't spend less than 0, you are always going to be spending something) while income has no upper limit. No matter what you are making there is always technically the possibility to make more.

The limitation in increasing income is that, while it is always technically possible, it is not always practically possible, at least not for everyone. You don't just 'decide' to start making more money. It usually takes a lot of work, and there is often risk involved. People who are already low income may not be able to afford to risk much of anything. Other people just simply won't have the physical ability or knowledge necessary to make income increases happen in any significant way. The "increase your income' cheerleaders try to sell this idea that if anybody gets fired up enough about making money you can be rich, but that just isn't always the case, so you can't rely completely on trying to increase income if you really want FI.

Frugality has one thing going for it. ANYBODY can use it to gain FI. Almost no matter what you make, you can spend less. It won't be fun, but it can be done. And the thing about spending less than you make is that you will eventually gain FI. Guaranteed. How much you save will drastically affect how long it takes you to get there, but spending less than you make WILL work. EVERY TIME.

The downsides are that it can be very hard if you don't make very much. For some income levels it would require things like living in a van.


This is why I recommend using BOTH methods to maximize your opportunity to reach FI. But don't let people talk you out of being frugal, it is totally necessary, at least until AFTER you manage to drastically increase your income. And you should be aggressively working to make that happen. but until it does, do what you know works - spend less than you make!



-The Money Monk

Follow the leaders

Such a small percentage of the population is actively pursuing financial independence that it is unlikely that very many of your friends, family and co-workers are pursuing the same goals as you. So most of the time you are going to be surrounded by people who's behaviors and attitudes about money completely destroy any chance of financial independence or retiring early (or at all!).

Because of this it can be hard to maintain the frugal lifestyle that is necessary when everybody around you is spending money hand over fist and seem to be enjoying life just fine. So it becomes important to find a way to interact with others who are on the same mission, otherwise it can feel like its always you against the world.

One of the best ways to do this is online. There are a lot of great blogs and websites about financial independence, and a couple even have forums. Seeing how much progress other people are making on their quest for FI can give you a good kind of competitive fire. It's almost like a 'keeping up with the Joneses' attitude, except that THESE Joneses are worth keeping up with.

Skipping a month of saving may not seem like a big deal, until you find out that during that same month Dividend Mantra added $3,000 to his 'freedom fund'. You may feel like you are suffering by driving an old ugly car, until you read on the MMM Forums about the guy who bikes 15 miles to work each way.

It can is especially motivating to be able to see the real time progress of these people as they attain their dreams.

I started following "Mortgagefreeby30" A couple years ago, and was along for the ride the entire time he paid off $86k mortgage in about 2 years. He is now truly mortgage free by 30! What freedom!

I have been following dividend mantra for about the same time, and have seen his 'Freedom Fund" grow about 30k in a single year! I have no doubts he will reach his goal of FI by 40 years of age.

Find somebody that deserves to be imitated. If you can't find them in everday life, find them online. They are out there. Get inspired.

If you're constantly having to go against the flow, maybe you need to find a different river to swim in!

http://earlyretirementextreme.com/
http://www.mrmoneymustache.com/
http://www.mortgagefreeby30.com/
http://www.dividendmantra.com/
http://freeintenyears.com/


- The Money Monk

Stay Warm for less!

We are headed into full-on winter weather for most parts of the country, so it is worth mentioning ways to save money on one of the biggest energy expenses in the modern home: Climate Control. In this case, heating.

I am not super strict when it comes to electricity use, but most of these are fairly easily implemented tips, and can still add up to some serious savings.

It takes a lot of energy to do this, which also means it takes a lot of money. But there are plenty of ways you can save money on your heating this winter. Some are drastic, some not so much.

1. Wear more clothes!
Living it Florida we normally have the opposite problem (its too hot) and in college before starting on a mission of frugality I liked to keep the AC cranked ridiculously low. Lower than would even be comfortable for me now that I have allowed myself to actually acclimate to the weather. One of my roommates preferred it cool as well. But we had another roommate who was always complaining about it being too cold, but he was always walking around with no shirt on. Seems like a simple solution, right?

Well that can work for you too. No reason to be walking around your house in shorts and a tshirt and then paying to heat your house. Put on pants, socks or slippers, and at least a long sleeve shirt or sweater. Then even if you do still have to heat your house, you don't have to heat it as much to be comfortable.

2. Use waste heat in your favor.
There are a lot of things that you do normally that can generate some heat, like using your oven or clothes dryer(assuming you don't hang dry). Use them whenever it is coldest and they will be serving double duty.

3.  Use small one-room heaters.
If it is just a little bit colder than you can stand, try using a space heater to heat just the room you are using. It will use a LOT less power than central heating, and most of them are surprisingly effective.

4. Don't heat rooms you aren't using!
If you have to use your central heating, don't waste it on heating rooms you aren't using. Close the vents in rooms you aren't using to have all the hot air directed into the few you are actually in most of the time. Keep the doors closed, too.

5. Don't heat when you are gone!
If you have a programmable thermostat, make use of it, or at least be diligent about turning off your heater when you leave for work or anywhere else. There is no reason to waste money heating your house when you aren't even there.


These tips may not cut your power bill down to nothing, but they will at least keep you from drastically over-paying. Post any tips you have in the comments.


-The Money Monk

The Money Monk's Goals for 2013

As I mentioned a couple posts ago, I was inconsistent with accomplishing my goals for last year. I was able to increase my semi-passive income from online ventures WAY more than I thought possible, but I fell drastically short of my long term savings rate. The savings rate issue was a result of leaving full-time employment to start my business, so hopefully that will pay off financially. It has already paid off in a lot of other ways, and I get a lot of satisfaction from being my own boss.

So my goals for 2013 will mostly be in regards to these same issues:

1. Continue to build my business so that I have the option of hiring somebody else. This doesn't mean that I necessarily would, but want to get the business to the point that I could hire somebody to run the counter on a daily basis and still have enough profits left over to live on. This is currently not the case, but the business isn't even 6 months old yet, so I don't think that's really a bad sign.

My plans for doing this are more marketing, opening several more channels for moving my merchandise other than just my store, and some of that is already in the works.

2. Increase my online income to $2000 a month.
This may seem like a lot, and it is. It is ambitious, but I think it is definitely possible. I got it from roughly $100 a month to $800 in about 8 months, so it is entirely possible to increase it another 100%. I plan on doing this by increasing the effort on my existing online sources of income, and I am about to start a couple more that I am optimistic about. I am also considering writing an ebook or something along those lines.


Those are really my only specific goals for the year, and If I can accomplish even one of those, I will truly be living the dream. If I manage to accomplish BOTH, then I am basically FI!

Exciting times!



-The Money Monk

How to make money from a side-hustle with no initial investment

 If you are interested in financial independence you have certainly considered different ways to supplement your income to achieve your goals as soon as possible. You've probably come across various articles about 'picking', storage unit auctions, estate sales, garage sales, and other sources where you can buy stuff to resell.

However, if you have very little extra money, it can be difficult or impossible to spend it speculating by buying stuff to resell. If you have no experience reselling it can be especially problematic, as you don't necessarily know what is a good buy, so it is a lot more risky to spend money hoping to resell.

The first thing you need to do is start doing some research so you have an idea of what things are worth, what they sell for, etc. I will be doing a post on this in the future, but suffice to say one of the best ways is to watch youtube videos of resellers.

The next step is to get some stuff to sell! And I have several ways you can do that without spending any money!

1. Constantly check the free section on Craigslist. In the past I have managed to make about 100 to 300 bucks a month exclusively from the craigslist free section. Mostly on small pieces of furniture, etc. I would pickup the free stuff and then list it right back on craigslist! It doesn't get much easier than that.

2. Garage Sale leftovers

I recently did a video on this tactic, so check it out:

<iframe width="560" height="315" src="http://www.youtube.com/embed/tkg6gqCbofU" frameborder="0" allowfullscreen></iframe>


3. Put the word out!

You will be amazed at how much free stuff you will get from people you know once they hear you are a re-seller. Most of it they just give you instead of throwing away or paying to get hauled off. Just make it known that you are willing to pick stuff up.


These techniques allow you to get stuff to sell with NO RISK! if it doesn't work out all you are out is a little time. Worst case scenario you donate it to goodwill and get a tax deduction!

All the free stuff you get can be sold on ebay, craigslist, or at a garage sale. See my post on how to have a kick-ass garage sale!



-The Money Monk

Don't ignore fixed costs!

Most personal expenses can be categorized as either a fixed cost, or a variable cost. Fixed being something that is the same every month, like rent, and variable being something that changes like gas, food, electricity.

Those of us who are trying to attain financial independence are always tracking costs and expenses and attempting to lower them as much as possible.

Most of the frugality is usually focused on the variable costs because your behavior and spending habits can vary those costs greatly, so they are usually the easiest to dramatically lower.

The fixed costs however, are usually what make up the majority of your monthly expenses, so it is super helpful if you can lower these at all. But many savers almost completely ignore these, assuming that fixed costs are stuck at that level. But this isn't always true, and a lot of times there are things you can do to lower your fixed costs, so never assume they are off the table. Even bills with contracts can be adjusted many times  with very little effort.

I'll cover a few of these fixed costs and some things you can do to change them.

 - Mortgages and rents.

Many people bought their houses or signed their leases before getting serious about their financial independence, and so they have loans or leases that they wouldn't get if they had to do it all over again.

For rent, ask your landlord about their policy for breaking the lease. Most of the time there is at least some option for getting out, even if it involves paying some fees. But if you can move to a place that is a lot cheaper, you may be able to make up the difference in only a couple months. Especially if the new place will help you save money in areas other than rent as well, such as less gas by being closer to your work, less electricity, whatever.

If you can't break the lease, see if subletting is an option. You get a new place and rent your current place to somebody else. Maybe even for more than you are paying!


With mortgages, refinancing is always something to look into, especially with today's historically low interest rates. Also consider selling if the place you are in is really too much. Or even renting out your house and then renting a much cheaper location for yourself.

The fixed cost of a mortgage also includes the interest you end up paying, so one counter-intuitive way to lower your spending is to pay more. Just an extra $100 extra a month toward my mortgage is going to take 8 years and over $30,000 of my total payments. Just remember to budget properly for the extra payment.


 - Debts and loans

You should be trying to aggressively pay off any debts anyway, but take the time to see if consolidation is an option. Only do it if you can lower your total amount paid though. Don't fall for tricks that lower your monthly payment but increase your total obligation by spreading the term out.

It is also possible to save some interest by transferring balances to a card that has a year of 0% interest so it is not getting any bigger. You must be careful with this method though and make sure you can pay it off completely before the year is up, or else you get slammed with the interest for the whole year. Be sure to do the math and read the fine print before messing with this type of thing, but it can be done.

- Insurance

You should occasionally be getting quotes from other companies and comparing. Never assume you are getting the best possible deal. Even if you don't want to switch companies, you can use the fact that a better deal is out there as leverage, and try to negotiate a better deal with your company. It can't hurt to try.

For car insurance ask about good driver discounts or loyalty programs, or reduce your annual predicted mileage. For any type of insurance you should raise deductibles to the highest amounts feasible for your situation.

- Cable

 You better be joking




If you have any tips for reducing so-called fixed costs, post them in the comments.


-The Money Monk

Where the hell has The Money Monk been?!

It's been several months since I posted here, and I aim to get back on track. There are a couple reasons for my absence, the main one being that I started my own business, a thrift store. I had been a re-seller for a long time on the side, and decided to make it a full-time venture.

The bad part is that I haven't been able to increase my savings at all, as I had to spend the money to start the business. So now the goal is just to get the business to the point where I am actually making enough money to be able to save 50% or more once again.

The benefits of working for myself are almost endless. I always knew I would never truly be happy as long as I was working for somebody else, so I am super happy to be able to make the move to self-employment while I am still relatively young. The freedom of not having a boss is something that you have to experience to believe. There is definite stress worrying about whether I will be able to make this work long term, but I am hopefully optimistic.

My last post on my goals for 2012 outlined 2 goals:

1. Maintain 50% savings rate
2. Increase internet income to $250 a month

I haven't been able to maintain the first goal at all, because of leaving employment to start my business. So there were a few months where I didn't have any income at all, AND I was having to pay to start the business. But hopefully long term this investment will pay off.

The good news is that as much as I under-performed on the first goal, I Over-performed on the second. My income from my various online ventures has exploded this year, and I am currently averaging about $800 a month in online revenue from my various ventures, with my highest month just clearing $1000. This is a monumental development, because it brings the possibility for pseudo-retirement / financial independence that much closer. It is a relatively passive source of income, so if I can get it to more than I am spending, I would consider myself financially independent! FI has never felt so close!


- The Money Monk