Big wins: The quickest way to wealth

There's a divide in the world of personal finance. On one side are the folks who offer advice for scrimping and saving your way to financial success. On the other are the experts who scoff at frugality and champion big wins. I think there's a place for both.

From my perspective, it's important to do the small stuff — clipping coupons, conserving electricity — because doing so builds good habits. And, of course, many small actions combine to yield big rewards in the long term. (Plus there's the fact that a frugal lifestyle costs less to support, which means you can reach financial independence all the sooner!)

On the other hand, the “big wins” camp has a valid point. Too many people focus exclusively on the small stuff because it's easy to do and doesn't require any real sacrifice. Yet you improve your monthly cash flow by hundreds of dollars by achieving a single big win, which is likely to be more than you save on all of the thrifty things you do combined.

Big Wins vs. Pyrrhic Victories

The way I see it, there are four types of things you can do to reduce your expenses or boost your income.

  • Difficult (or time-consuming) things that provide small pay-offs. These pyrrhic victories include things like going door-to-door to collect old newspapers in order to earn money or making your own laundry detergent.
  • Easy (or quick) things that provide small pay-offs. Because there are so many of these opportunities, they're the bread and butter of personal finance. They're the daily victories with which we're all familiar. On the income side, they include working overtime and participating in research studies. Small, quick ways to reduce spending include clipping coupons, buying clothes at thrift stores, and making use of the public library.
  • Difficult (or time-consuming) things that provide big pay-offs. Some tasks, such as moving to a cheaper home in a cheaper city, can provide huge rewards, but they take a lot of time and effort to accomplish. These are ongoing projects, and might include selling all of the stuff you've collected in your attic or garage. (An example of this is me selling my comic books last year.)
  • Easy (or quick) things that provide big pay-offs. Here's where you should spend most of your time: Working toward big wins. These include negotiating your salary (which takes minutes, but pays off for decades to come) and reducing your transportation costs (which you can do in a matter of days).

Here's a diagram to provide a visual representation of what I'm describing:

The reward quadrant
Some actions provide bigger payoffs than others. And some are easier than others.
Note: For convenience, I'm saying that the things we do fall into one of these four quadrants. In reality, all of this exists on a continuum. Some of the easy actions are easier than others. And each of us will obtain slightly different results.

As you can see, big wins are the best way to improve your financial situation. They're easy (or quick) to achieve, but provide big rewards. If you want to improve your financial situation, start with these.

How to Achieve Big Wins

Here are some examples of common ways to achieve big wins that will dramatically improve your cash flow:

Housing

Housing is the biggest expense for most Americans — and by a wide margin. According to the U.S. Bureau of Labor Statistics' 2012 Consumer Expenditure Survey (CES), the typical American household spends 32.8 percent of its income on housing, which includes mortgage (or rent), maintenance, insurance, interest, and utilities.

In an ideal world, you'd slash your housing expense by buying an affordable home in a city with a low cost of living. But while that would provide a huge financial reward, it's not exactly easy, which means it doesn't qualify as a “big win” in my world. But there are easier ways to reduce your living expenses.

The biggest (and, admittedly, most difficult) is to move within your current city. Sell your home (or move out of your rental) and choose something more affordable. Think about it: If you're an average American who spends slightly more than $50,000 per year, $1,408 is going to housing every month. Drop that by 10 percent, and you'll save almost $150 per month. Drop it by 30 percent, and you'll save more than $5,000 per year!

Transportation

Transportation is our second-largest expense. We spend an average of $750 per month (17.5 percent of the typical budget) to get around, including vehicle payments, gasoline, insurance, and repairs. I know Americans love their automobiles. They're loath to let go of them, even in the face of logic. But imagine how much you could save if you could cut your car costs in half! How do you do that?

  • Sell your current car. Replace it with a used vehicle, one that's fuel efficient. (Side benefit: An older, used vehicle will cost less to insure!)
  • Drive your car only when necessary. When possible, bike or walk to reach your destination. (Side benefit: Increased fitness, which also saves you money!)
  • Make use of public transportation. (Side benefit: Time to read!)

Usually when I recommend people make changes to the way they get around, I'm met with a wall of objections. No worries. I'm used to it. But let me suggest that instead of looking for reasons you can't do this that you instead look for ways you can. You'll save yourself buckets of money.

Other expenses

Together, housing and transportation consume half of the average American's budget. There are enormous opportunities to save if you choose to economize on these two categories. But there are dozens of ways to achieve big wins in other areas too.

The CES reveals that the typical household spent $1,736 on clothing in 2012, $3,556 on health care, $2,605 on entertainment, and $6,599 on food (which doesn't include the $783 that went toward alcohol and tobacco).

Because each of us is different and we spend in different ways, opportunities for big wins vary from person to person. For example, after tracking my spending for the last half of 2013, I realized that I was spending way too much on travel. This year, I hope to cut my travel costs in half. Doing so would allow me to save money toward other goals, such as, guitar lessons.

Examine your own spending. Where do you have the most room to cut back? How can you do it? Look for big wins — and make them happen.

Income

I've written before about the importance of increasing your income. While it's great to cut your spending, you can only trim your budget so far. Your earning potential, on the other hand, is theoretically unlimited. If you really want to get rich — slowly or otherwise — you're going to have to make more money.

But as with spending, some methods of boosting your income provide big wins while others don't. Here are two easy (or quick) ways to make a big difference to the amount of money you make:

  • Take a second job. Earning more in your spare time is a quick way to boost your cash flow, and it's something that almost anyone can do. Some people don't like the idea of taking a second job (they feel like it's beneath them) and others are full of reasons that doing so is impossible (they don't have time, the job market is tough). But for those who choose this path, a second job involves less risk and planning than most other income-boosting strategies, and it's likely to cause far less stress than your primary job.
  • Negotiate your salary. One of the best ways to increase your income is at the source: during salary negotiations when you land a job or during a performance review. For many folks, salary negotiations can be awkward or scary. But in his book Negotiating Your Salary, career coach Jack Chapman argues that those few minutes during which you ask for more money in an interview can make a difference of tens of thousands of dollars over your career. Maybe hundreds of thousands. That's a big win.

There are other ways to supercharge your income — become better educated, start a side business, become a landlord — but they take more time and effort. You can find a second job this week and be earning more toward your financial goals. And you can negotiate a salary increase the next time you sit down for a performance review. Both provide big boosts to your earnings for a minimum of effort.

The Bottom Line

I'm not saying you shouldn't make your own laundry detergent or collect newspapers to earn money. But I think it's important to put these activities in their proper place and to realize that you will never get rich doing them. (In fact, they're a poor way to get out of debt.) It's better to focus on actions that are easier to complete and/or yield greater rewards.

The biggest barrier between the average person and big wins isn't ability. It's psychology. Big wins generally require effort and sacrifice, which can be tough to stomach, especially if you're just getting started with smart personal finance. But the sooner you understand that these aren't fringe ideas, the quicker you'll get out of debt or reach financial independence. The small stuff forms a great basis for behavioral change, but it's doing the big things that will make you rich.

More about...Psychology, Transportation

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FI Pilgrim
FI Pilgrim
6 years ago

I agree 100% with the big wins providing the most boost. My family moved into a small house a few years back and I’m working a side job to boost our income by $1000/month. But we are also sticking to the plan and the budget when it comes to the small things. We don’t want to waste all that extra work!

AMW
AMW
6 years ago

I think that what most people who only pick one side of the “big”win and the “little” win are missing is that the big win helps you make a big step financially but the little wins help you keep what you achieved in the big win!

MoneyAhoy
MoneyAhoy
6 years ago
Reply to  AMW

I think you need a healthy dose of both. The small wins are the continuous improvement and the big wins are the step changes. Because the big wins come along less frequently, if you aren’t working on the small stuff to some degree then you are just treading water.

Emily @ evolvingPF
Emily @ evolvingPF
6 years ago
Reply to  AMW

That’s a very good way to put it!

Beth
Beth
6 years ago

Good overview – I think the diagram is really helpful! I try to combine both big and small wins. Sometimes when you’re wrapped up in the big stuff (“yay, I got a big raise!”) it’s easy to lose sight of the small stuff and allow some lifestyle creep. One caution about buying a used vehicle: I would amend that to say buying a smaller vehicle. (i.e., if you don’t need a truck or SUV, try a sedan). Used vehicles can have higher maintenance and repair costs, depending on their age. You might be saving on a monthly basis, only to… Read more »

El Nerdo
El Nerdo
6 years ago
Reply to  Beth

According to the Car Talk guys, it’s (almost) always cheaper to repair than to buy. If you actually save the money, rather than spend it elsewhere, you’ll come out ahead even with big repair bills. Besides, if the car is somehow totaled, you can just buy another used vehicle with the savings.

Sam
Sam
6 years ago
Reply to  El Nerdo

Agree, people always talk about repair costs or not wanting to invest money into an older car. That never really makes sense to me. If a car repair is $1000 and a car payment is $300/mo., one repair equals three months of car payments, but after that you are coming out ahead with the repaired car.

Unless you need a newer car b/c you drive clients around, new cars really make no sense in my mind.

Beth
Beth
6 years ago
Reply to  Sam

That’s why I still drive my 12 year old car! I’m getting to the point where I have to think about replacing it (hopefully in a couple of years — but the time to save up is now).

If you can buy a used car with cash, that’s great. But a lot of people finance used cars and, depending on their age, can end up making car payments and paying for repairs.

I think the real savings is in the size. Buy something smaller, more reliable and more fuel efficient.

Vanessa
Vanessa
6 years ago
Reply to  Sam

Memories of the used cars my family owned when I was growing up still haunt me to this day. I bought my very first new car 5 years ago and if I can help it, I’ll never go back to used.

BrentABQ
BrentABQ
6 years ago
Reply to  El Nerdo

I would assume this doesn’t take any sort of hassle involved into account. If you have a steady backup an old vehicle will do fine, but if you depend on it and it will take several days to fix on top of the bill, it might not be worth it.

Beth
Beth
6 years ago
Reply to  BrentABQ

Exactly. When you drive a much older car, you’re always wondering what’s going to go next. For me it’s okay because my work hours are flexible, I live near the repair shop, I have an automobile club membership and I can take a bus to work if I have to. Still, I wonder when a big repair bill will come along that’s worth more than my car…

My friends who have kids… well… it’s a different story. Quite a few of them gave up their “beaters” for a used car that was only a few years old.

El Nerdo
El Nerdo
6 years ago
Reply to  BrentABQ

Wow, I never said anything about driving “a beater.” A used car can be in excellent condition if you look after it properly. My 12-year old truck is in near perfect shape. (Sorry I see this 3 days later, but better late than never).

lmoot
lmoot
6 years ago
Reply to  Beth

I know people that have had more wrong with new cars than I’ve ever had with any of my used ones. I’d MUCH rather get a better quality used car than a lower quality new car…even if the purchase price is better, which is not often the case anyway. I had my 3 years used Mazda, paid for in cash nearly 10 years until the engine went b/c I didn’t do the proper maintenance (young and stupid and clueless). I bought my current car, 2003 Honda Accord, 6 years used and have had that for going on 5 years with… Read more »

Jon @ MoneySmartGuides
Jon @ MoneySmartGuides
6 years ago

Great post. I did a detailed write up on my blog about hybrid cars when I was looking to save money and realized that in many cases, it would take too long for me to recoup the gas savings from the purchase price.

I make it a point to encourage my readers to ask for a raise and become invaluable at work. That is the path to a higher salary but unfortunately many aren’t willing to put in the work.

MoneyAhoy
MoneyAhoy
6 years ago

Creating this type of Ease/Impact matrix (4×4) is a great way to prioritize all things in life. Great overview, very helpful!

You can use the same sort of this for prioritizing what to work on at work, things around the house, etc. If you find yourself working on stuff in the bottom left quadrant, you’re probably wasting your time!

El Nerdo
El Nerdo
6 years ago
Reply to  MoneyAhoy

Yes! It reminds me of the 7 Habits matrix of important vs. urgent (you want to do the important but non-urgent to stay sane). So if it was inspired by it, it’s a good transposition. Makes good visual sense and helps sort out wheat from chaff at a glance.

Matt
Matt
6 years ago

I find it somewhat humorous that you put ‘blog for bucks’ under low reward.

J.D.
J.D.
6 years ago
Reply to  Matt

Ha. Yeah, I got a kick out of that. Obviously, it’s not ALWAYS low reward. But mostly, it is.

Mrs PoP
Mrs PoP
6 years ago
Reply to  J.D.

For us, the blogging bucks have mostly been found as a way of reinforcing the daily habits and keeping us on the lookout for big wins. We’re definitely a lot more focused on those with the blog helping us in terms of accountability, and provides a much bigger win than any meager “blogging bucks” we have earned.

Emily @ evolvingPF
Emily @ evolvingPF
6 years ago
Reply to  Mrs PoP

I totally agree. Our blog has had a big impact on our finances due to accountability and developing better organization, even though we haven’t earned much money.

Kelsie
Kelsie
6 years ago

Agreed. We live in a small house in an affordable town. Our mortgage is cheaper, our property taxes are cheaper, and our utilities are cheaper. Someday we want to move into a bigger house, but we’re enjoying our cheap house until we feel more financially stable.

Diane C
Diane C
6 years ago
Reply to  Kelsie

Kelsie, you are so smart to have figured this out early. DH and I upsized our housing this year, as his mother (and her Alzheimer’s) now live with us. Everything costs SO much more than before! Fortunately, we have no debt and a good retirement plan in place. Also, it’s still a lot cheaper to have his mom live with us than in assisted living or a dementia facility. By being frugal all those years, we have the confidence that these new, higher expenses aren’t going to break us.

Dave @ The New York Budget
Dave @ The New York Budget
6 years ago

I am changing my housing situation as soon as my lease is up, but you may have inspired me to start looking for a second job!

Stefanie @ The Broke and Beautiful Life
Stefanie @ The Broke and Beautiful Life
6 years ago

This year I joined NYC’s new bikeshare program, citibike as my primary mode of transportation. On December 1st, I had been using the service for five months so I did a run down of the numbers- transportation costs pre citibike and post citibike. In just 5 months I had already saved $239.57. Even if I’m off the bike for these few wintry months, the savings have already been huge and I get an extra workout each day.

SLCCOM
SLCCOM
6 years ago

What is your Emergency Room copay? You need to factor that in, especially when biking in NYC.

cathy
cathy
6 years ago
Reply to  SLCCOM

Y’know I hate to say this, but your comments are always so pessimistic. And since a person could need ER care for almost anything, it seems unnecessary to “factor in” a co-pay just because the person is riding a bike more often.

Finance and Fitness Dreams
Finance and Fitness Dreams
6 years ago

Cut down on the Big 3 of Housing, Transportation, and Food and you will Win Big. Little things do add up, but do you want to walk to Financial Independence or jump on a train to ge there.

lmoot
lmoot
6 years ago

AMEN! That’s the big secret here folks. Catch yourself before overspending in those 3 things.

Donald
Donald
6 years ago

The only way making laundry soap is a “pyrrhic victory” is if you find making soup at home too complicated, because making laundry soap requires you to mix three ingredients – soap flakes, washing soda, and water – together in a bucket. That’s all. You buy washing soda at the grocery store and you can make soap flakes in about two minutes using a grater and a bar of soap – or, if you’re really lazy, you can just buy a bag of soap flakes. All you do is put one cup of soap flakes, one cup of washing soda,… Read more »

Jane
Jane
6 years ago
Reply to  Donald

I largely agree that J.D.’s use of the term “pyrrhic” is somewhat misplaced in the case of homemade detergent, since (like you say) it is not much more difficult than cooking. But I nonetheless dispute the savings you lay out in your comment. Based on your numbers, my family would be “saving” over $50 a year on making my own laundry detergent, instead of using Tide, the most expensive mainstream detergent on the market. Your “savings” shrink even more if you use a cheaper alternative. Regardless, since I only spend $15-$20 a year on Tide, these “savings” don’t add up.… Read more »

El Nerdo
El Nerdo
6 years ago
Reply to  Jane

Tide gives me rashes! (I thought I’d mention it. I can’t use that stuff.)

Jane
Jane
6 years ago
Reply to  El Nerdo

Having two little boys (and one more on the way!) made me a Tide convert. It is the only detergent that fully gets out the food and dirt stains that daily grace their clothes.

It’s a shame it gives you a rash, but that just means more money in your pocket – that is, unless you have to buy some uber-expensive, specialty detergent to keep the itches at bay.

El Nerdo
El Nerdo
6 years ago
Reply to  El Nerdo

I used to buy the pricey good hippie stuff (Ecover, 7th Generation), which was pretty great but pricey. In my search for cheaper stuff, even some “environmentally friendly” Costco detergent sent me to the dermatologist with nasty red spots on my face (it was from my face on the pillow, and it started to expand, I was alarmed). So while Costco took the return, the savings were undone by the doctor’s bill and the cortisone. Now I’ve settled for All free & clear which is cheap but doesn’t irritate. Still though, I’m planning to make my own detergent for the… Read more »

Holly@ClubThrifty
6 years ago
Reply to  Donald

I have considered making my own detergent simply because I don’t enjoy buying the large plastic containers and recycling them over and over and over. I would much rather make a batch in a huge bucket that I could use indefinitely. It seems a lot less wasteful.

Karen
Karen
6 years ago

Holly, good point about containers. I have not really been interested in making my own laundry detergent but the container comment gives me some food for thought…

Donna Freedman
Donna Freedman
6 years ago
Reply to  Karen

Save a couple of those giant containers and use them to mix and store your homemade soap-goo.
Although I’ve done (and written about!) a LOT of frugal hacks, the laundry one was not among them. With coupons and sales I always got supremely good deals on detergent — and I always use 1/4 to 1/2 of the recommended amount, which stretches those savings even further.
On the other hand, some people would think that making their own yogurt is too time-consuming. It isn’t, in my opinion, but YMMV. Do what works for you.

sheila
sheila
6 years ago
Reply to  Donald

Making laundry soap has not been a Pyrrhic victory for me, either. My husband has very sensitive skin, and I cannot use commercial detergents. The cost difference between my homemade soap and something like Mrs. Meyers or Seventh Generation is substantial. It’s also more sustainable to make my own, and no worries about packaging or even heavy fuel use for manufacturing and transportation. To save time, I split my ingredients into zip-loc bags with enough for a single batch. When I am ready to make a new batch, I just grab the zip-loc bags and go to it. The whole… Read more »

Brian@ Debt Discipline
[email protected] Debt Discipline
6 years ago

A good way to look at it. Defiantly think you need balance between the options. The Low difficulty, daily victories can help build momentum for the higher difficulty higher rewards.

Lulu
Lulu
6 years ago

I agree with you for the most part by oh my god making laundry detergent is one of the easiest things in the world. It is easier than buying laundry detergent. 1/4 c baking soda, 1/4 c liquid Castile soap, 2 tablespoons salt, 4 cups of water and stir. Done. Takes 2 minutes, lasts 2 months. I actually don’t even do it for frugality reasons anym

Mrs. Sbs
Mrs. Sbs
6 years ago

We’re now at that point where we “maxed out” the small wins as there is not much we can still save on each month. It’s definitely time to look into those big wins, especially career wise.

Michael @ Financial Ramblings
Michael @ Financial Ramblings
6 years ago

I couldn’t agree more. Our biggest steps forward involved a job change for a significant (roughly 45%) salary increase and the sale of a side business. Of course, these aren’t the sorts of things that you can just wake up and decide to do, but they’re the sorts of things that you can always be working toward.

Ramblin' Ma'am
Ramblin' Ma'am
6 years ago

“Think about it: If you’re an average American who spends slightly more than $50,000 per year, $1,408 is going to housing every month.” The median salary is around $26,000–are you sure these figures are not for the average household, rather than the average person? I agree with your overall point, though. The whole “latte factor” thing is big in personal finance. But are those few dollars a day really what is driving people into debt? I have known people who deny themselves every little expense (dinners out, coffee, cable, whatever), but then think nothing of spending most of their income… Read more »

El Nerdo
El Nerdo
6 years ago
Reply to  Ramblin' Ma'am

That’s why I like the Balanced Money Formula– it keeps obligations within reason and it allows money for fun.

imelda
imelda
6 years ago
Reply to  Ramblin' Ma'am

I was confused by that sentence, too. Isn’t average (or median?) household income in this country just around $50k? So the average family is not spending that much, unless you’re counting taxes, SS, etc etc.

Karen
Karen
6 years ago
Reply to  Ramblin' Ma'am

I don’t think the latte factor is what creates debt but I do think (and I think someone else pointed this out) that having the discipline to get a handle on the little things gives you the discipline to tackle the bigger things.

Rebecca
Rebecca
6 years ago

I have and still do so many little things to save but I really have noticed the big wins are what makes a difference.

For instance it wasn’t until I got a raise a few years back I could finally scrounge up enough to start a Roth in addition to a 401k. It was an instant and dependable bump that comes with no extra effort.

freebird
freebird
6 years ago

A couple of adders for those who have more coming in on 1099 than W2– low difficulty/high reward would include reviewing your mutual fund expense ratios and moving into best of breed (think Vanguard). Also for traders, harvesting losses throughout the year to minimize capital gains taxes– don’t wait till yearend when there’s a stampede for the exits and loser share prices react accordingly. Finally in high difficulty/high reward is to do (or buy) a critical review of your trading diary to see if there’s any recurring pattern on the losers. Finding something here can pay big dividends for the… Read more »

mike
mike
6 years ago

I wonder where having kids fits in this matrix or choosing not to. You talk about a matrix to wealth, well financially having kids is very expensive and for many people a reason their financial well-being isn’t sound. Although you could argue they receive a different type of wealth. Daycare alone can be a mortgage payment depending on how many kids, where you live, if you have a stay at home spouse. The avg. of over 200k per kid through 18 isn’t far off (actually low I think) depending on your situation and that assumes your not stashing money in… Read more »

Scondor
Scondor
6 years ago
Reply to  mike

I do wonder about this line of thinking, that kids are bad for your finances, or somehow make it harder to become wealthy. My own situation was such that my wife and I didn’t even have a budget, and had pitiful retirement savings for our age. We were eating out all the time and ordering in the rest, completely blowing cash, but paying the bills fine and so we never even considered analyzing our spending…until the hospital bills got to our home seemingly even before our daughter did. So I started reading up on personal finance and got hooked. A… Read more »

Marsha
Marsha
6 years ago
Reply to  Scondor

With two sons in college (and doing our best to help them remain debt-free), we’re in the most expensive time of our lives when it comes to having children. But we’re miles better off than we were 21 years ago when our first son came along. And we weren’t just starting out–we had been well paid professionals for the better part of a decade. But, as you said, having a kid puts everything in focus. When we looked at the helpless human being that we had brought into the world, we wanted a more secure life for him. We got… Read more »

Carla
Carla
6 years ago
Reply to  mike

I’m also someone who chose not to have children for financial reasons. 80% finance, 10% age, 10% health (depending on how I feel on any given day).

Ramblin' Ma'am
Ramblin' Ma'am
6 years ago
Reply to  Carla

For me the finance is part of it, but it’s more the lifestyle changes. Especially since I am not married–if I chose to have kids as a single woman, there would never be a break. No sleeping in. No spending a rainy day relaxing with a book, etc. Those things may seem minor, but they are not to me.

Beth
Beth
6 years ago
Reply to  Ramblin' Ma'am

Yes! Some of my married-with-kids friends can’t understand why I don’t go it alone. They don’t seem to understand that even having a child is expensive if you have to go the artificial insemination or adoption route. Singletons who work full time are not good candidates for adoption or being a foster parent anyway.

Ramblin' Ma'am
Ramblin' Ma'am
6 years ago
Reply to  Ramblin' Ma'am

My brother and his wife are currently in the process of adopting from foster care. It actually doesn’t cost anything, at least in the US. But of course, it’s a huge time investment and would be difficult to swing for a single person working full-time. Single people can adopt, but they may need a flexible work environment.

Tyler Karaszewski
Tyler Karaszewski
6 years ago
Reply to  mike

Small win:
Not having kids saves you money for the next 20 years.

Big win:
Having kids improves your family’s earning potential for the rest of eternity. How much money would Bill Gates have if his parent had chosen not to have kids?

Frankly, while there is a financial aspect to raising children, it’s a horribly incomplete reason to decide to have kids or not. If your line of thinking is mostly about how much your potential kids might cost, you probably shouldn’t have them even if you *can* afford it.

Carla
Carla
6 years ago

@Tyler – I have a paralyzing fear of poverty. Its easier to struggle without kids than with kids. My earning potential is not very high given my life circumstances. I am working on changing that but what are my chances?

Trust me, I do grieve my decision from time to time so please don’t make assumptions.

Tyler Karaszewski
Tyler Karaszewski
6 years ago
Reply to  Carla

I don’t know what assumption you think I’m making. If you don’t want to have kids for whatever reason, then don’t have them. I don’t know what part of my post made you think I thought something other than that.

Carla
Carla
6 years ago
Reply to  Carla

“Frankly, while there is a financial aspect to raising children, it’s a horribly incomplete reason to decide to have kids or not. If your line of thinking is mostly about how much your potential kids might cost, you probably shouldn’t have them even if you *can* afford it.”

Sounded pretty backhanded and judgmental to me.

Tyler Karaszewski
Tyler Karaszewski
6 years ago
Reply to  Carla

I didn’t mean it that way. I’m just all about pragmatism so I don’t see too much of a difference in reasons why you might have chosen *not* to have kids. Either way, the result is the same. On the other hand if you can clearly afford to have kids and are thinking, “well, I could afford the kids no problem but them maybe I wouldn’t be able to afford this other thing I like” I don’t feel like the result is the same if you do decide to have kids with that attitude, it seems like you’re a lot… Read more »

lmoot
lmoot
6 years ago

At nearly 30 I’m pretty sure I am not having children. There is no guaranteed good reason for me to procreate. People have this romantic idea about having kids, that there will be someone to take care of them in old age, and carry on the good family name. For every example someone gives of how worse off the world would be if so-and-so’s parents didn’t have them, I can give one of how better off the world would be if someone was never born. It’s a moot point unless you can tell the future. Yeah Bill Gates earned a… Read more »

El Nerdo
El Nerdo
6 years ago
Reply to  lmoot

All good reasons and all, and much respect, but in a way a pity, because by not passing along your spirited genes you’re helping bring about Idiocracy in the near future. Brawndo. It’s got electrolytes. It’s what plants crave!

Carla
Carla
6 years ago
Reply to  lmoot

@LMOOT – Your post reminds me of a family friend of ours while I was growing up. They are now still “raising” their 33 year old son. He’s physically disabled and can’t talk (or even communicate), eat, dress, and change his diaper. Any thoughts or feelings he has, they don’t know.

As much as we would like to think of our kids as the next genius to change the world, they can just as easily be like this guy.

lmoot
lmoot
6 years ago
Reply to  lmoot

@ ELNERDO…ha! Au contraire mon frere, without children of my own though I am free to roam and indoctrinate others’ children, starting with my own niece and nephews. Their poor parents are so worn out from the daily drudgeries of child-rearing that I get left with the enrichment duties. My niece is well on her way to becoming my mini-me and I couldn’t be prouder. And thanks for reminding me that I still need to see that movie! @ CARLA….exactly. I was thinking the same thing and hesitated to mention it, but you are right. It’s a sad possibility, and… Read more »

Laura
Laura
6 years ago

Just FYI on this entire thread, and forgive me if the point was raised and I missed it – but getting pregnant and having children isn’t always (or often) by choice. People, including and perhaps especially poor people with less access to birth control and/or education, get pregnant without intending to. That poor person with 2 or 3 kids may not have “chosen” to get pregnant with any of them. While adoption is an option, I think as a whole that society still villianizes those who give up their offspring for adoption. I’ve heard that about half of all pregnancies… Read more »

mike
mike
6 years ago
Reply to  Laura

Read the end of the thread. I don’t buy the accidental excuse I subscribe to personal responsibility. Most “accidental” births are the by-product of sex unless you subscribe to virgin births. If you choose to have sex the end-result may be a child regardless of what type of birth control you are using. There is always abstinence if you are unwilling to get pregnant or take responsibility for your decisions. I accidently drank and drive. It was an accident, I was looking at my phone, I accidently dropped my phone in the toilet (why do you have over open water),… Read more »

Jane
Jane
6 years ago
Reply to  mike

There’s no doubt that having kids costs money and that if we hadn’t had them, we would be in a better position financially. But I struggle in general with financial considerations when it comes to choosing the existence of another human being. I’m probably not in the minority when I say that at 30 years old, finances did not factor into my decision to have children. We wanted to have kids, so we had them. When I talk to someone personally who decided to not have children, I can’t help but think that other considerations probably outweighed the financial ones.… Read more »

Ramblin' Ma'am
Ramblin' Ma'am
6 years ago
Reply to  Jane

“If you read any article these days about the minimum wage debate, invariably the article will highlight a parent (single or not) of three or more who can’t make ends meet on his or her minimum wage job. Most of the comments end up being about how stupid and shortsighted the person was for having kids they couldn’t support. To me, that implies that procreation is just one other thing to which only the well off are entitled. I find this conclusion disturbing and rather abhorrent.” For me, it’s not that poor people shouldn’t have children, or that only the… Read more »

Carla
Carla
6 years ago
Reply to  Jane

When I was younger I would have been more likely to have children regardless of my financial situation if I was married (I was divorced at 23). I think time and circumstance has made me more fearful (and jaded) of taking the plunge, and now that I’m married again at 35, I could come up with a gazillion of “practical” reasons not to have them – finances are #1. The subject of personal finance, PFBs, recessions, expenses related to my chronic illness, has definitely left me with the feeling that children are for the well-off. Any decision made to go… Read more »

SLCCOM
SLCCOM
6 years ago
Reply to  Carla

There are lots of neighborhood kids who could use an adult “auntie” or “uncle” friend to help them grow and learn different points of view. My adopted Grandmas really changed my life.

Of course, these days you need to be careful to meet the parents first. Sad times we live in.

mike
mike
6 years ago
Reply to  mike

I chose to raise this issue because I knew it would be polarizing with points made on both sides that were valid. As a parent of 1 who knows how expensive it is I personally find it very irresponsible for people to raise kids who can’t afford it or can’t handle the responsibility of a child. I’m not talking about deciding to have kids if you want to and then making the financial sacrifices necessary to which other posters have alluded. I think the demographics of the readers is skewed in that, most if they choose to, could have a… Read more »

imelda
imelda
6 years ago
Reply to  mike

I happen to think that’s a disgusting point of view. Sorry (not sorry) to word it so strongly.

In our society, the ability to earn money has become the moral rubric we judge people by. Just as it used to be race. Should slaves have had children? Is it really your place to say?

We don’t have to classify people based on their income. We don’t have to segregate people based on what they can afford to pay. But somehow that has become acceptable.

I don’t accept it.

N
N
6 years ago
Reply to  imelda

“Disgusting”? Really? REALLY?! Mike raises an excellent point. What I find disgusting is the indignant view that one is entitled to the privilege of having children. I didn’t say “bearing” children. I said “having” children. “Should slaves have had children? Is it really your place to say? We don’t have to classify people based on their income. We don’t have to segregate people based on what they can afford to pay. But somehow that has become acceptable. I don’t accept it.” So just as rightfully, I don’t have to accept paying for your selfish and undeniably inadequate poor-decision making. If… Read more »

mike
mike
6 years ago
Reply to  imelda

@Imelda and Ely below -I don’t equate finances and responsibility and I stated having kids isn’t wholly a financial issue. I focused more on the responsibility factor blended with finances. I know that peoples finances may improve or just the fact of having kids may help many align their priorities and do better in life because of new found responsibility, I account for that. I don’t buy the emotional argument that the two of you present because it only takes into account one part of the equation: people who lack or initially lack finances but are otherwise are responsible which… Read more »

imelda
imelda
6 years ago
Reply to  imelda

@mike: I presented a philosophical, humanistic argument, not an emotional one.

I encourage you to stop and think the next time you want to dismiss a woman’s argument as “emotional” compared to your “purely numbers-based” standpoint. That is a completely innacurate claim in this context, and probably in many other instances where you are inclined to make that accusation.

Ely
Ely
6 years ago
Reply to  mike

I don’t think this has anything to do with finances. People can be good, responsible parents – or lousy neglectful ones – at any income level. If you’re equating finances with responsibility, you are in error; if you’re trying to create a reasoned argument for denying services to the poor, you’ve failed.

imelda
imelda
6 years ago
Reply to  mike

I was going to come back here, and respond to the extremely reactionary comments I knew I’d get, by apologizing for being so provocative.

But instead, I’m going to double down on what I said, because N’s comments made something clear. What you guys are talking about is eugenics. Class-based eugenics.

And that’s why I call it disgusting.

imelda
imelda
6 years ago
Reply to  imelda

Ugh, and the comments won’t let me edit. I wanted to add:

And before anyone says I’m out of line, let me quote N: “If you can’t provide, you don’t procreate. Period.” Yes, you are promoting the basic principle of eugenics – restricting procreation to those who fit your personally determined qualifications.

Having children is, indeed, a basic human right, not a privilege. In my opinion, it may be THE basic human right, after life.

mike
mike
6 years ago
Reply to  imelda

@Imelda I don’t go as far as N and I certainly don’t promote eugenics as you indicate. Although I certainly don’t advocate irresponsible parental decisions which you seem to be fine with. I don’t see how being a responsible human being not only to your fellow human beings, yourself, the world and your own children is eugenics. You contend procreation is a basic human right, I say it is biological truth that, barring any medical issues, any female can give birth. A fact that I would not want to control like China does with their 1 child policy. What you… Read more »

imelda
imelda
6 years ago
Reply to  imelda

@mike: Fair enough. But I agree with other commenters that financial situation is only one of many considerations, and will rank differently for each person. That does not mean anyone is having children as an “afterthought,” an occurrence that is probably much less frequent than you imagine. All poor, or even broke people are not irresponsible. I guess what I mean to say is that lack of responsibility can manifest in many ways, and being irresponsible with money does not automatically make you a bad parent. It is important to provide for your children. If you need to use food… Read more »

mike
mike
6 years ago
Reply to  imelda

@Imelda what percentage of births as an afterthought is an acceptable percent, 10, 20, less, more? I believe it happens more often than you think. I have been in the situation to see it my own family and the consequences that the kids have had to endure. I have seen it in the schools, in health care facilities, you don’t have to look anywhere but the news to see the consequences on thousands of kids on a NIGHTLY basis. Furthermore I will say some of the wealthiest parents can be the worse because they don’t all raise their kids, they… Read more »

Ely
Ely
6 years ago
Reply to  mike

“I wonder where having kids fits into this matrix.”

Short version: it doesn’t. Having kids is something you do because you want to, not because it’s a good financial decision. Yeah, you can make financial arguments pro and con, but they aren’t reasons.

Not to mention, so often the financial awakening comes after the kids (or pets) have already arrived. At this point they are part of your starting equation, as non-negotiable as yourself.

Tiara
Tiara
6 years ago

Regarding the previous poster, Mike, yes I did make a choice not to have kids partly for financial reasons, although that was not the most important reason. I also recently moved to a different city where my housing costs were a bit higher, but had a great public transportation network so I was able to get rid of my car, for a net gain in savings.

Creativelypaid
Creativelypaid
6 years ago

Great article! I think however, this topic is not complete if it doesn’t mention that anyone’s biggest expense is actually the tax we pay. Everyone should appreciate this fact, and evaluate how efficient they are at managing this.

J.D.
J.D.
6 years ago
Reply to  Creativelypaid

It’s incorrect to say that taxes are everyone’s biggest expense. They’re not. The average American pays 28% of her income in taxes, which is less than the 32.8% average housing expense.

To me, taxes are a separate issue.

Paul in cAshburn
Paul in cAshburn
6 years ago
Reply to  J.D.

J.D., that’s 28% just in federal income taxes. Plus 5% or more in state income taxes 14% in Social Security and Medicare taxes, property taxes, sales taxes, excise taxes on our phones and internet, etc., etc.
I’d say that adds up to way more than what we pay in housing expenses.
So… which quadrant should reducing your taxes be placed in? And does voting Republican still count as a positive step toward reducing your taxes any more? Or are they all tax and spend politicians now – regardless of party?

Mrs. PoP
Mrs. PoP
6 years ago
Reply to  Creativelypaid

We lump the big win of taxes in with choosing where you live since that tends to be the easiest way to influence the tax you pay (at least to your state or locality). For example, we choose to live in a state with no income tax, low cost of living, and generous homestead exemptions that keep our property taxes affordable as well.

lmoot
lmoot
6 years ago

Great post J.D. I used to think high difficulty things were things I could and would never do (getting rid of a car, moving to a less expensive place, asking for a raise or getting a higher paying job), but the key is to focus on the “difficult things” that are less difficult to you. For me getting rid of a car or moving to a less expensive city is a) either too difficult or b) not worth the big win to me…so I won’t do them. But, I found I could do other things that someone else may find… Read more »

Vanessa
Vanessa
6 years ago

High reward: having a spouse or SO to split the bills with. I can’t think of any other method with the potential to instantly reduce one’s expenses by as much as half. Low or high difficulty? In my case, high, but seems quite achievable for the average person.

lmoot
lmoot
6 years ago
Reply to  Vanessa

Maybe, but it’s not even close to being a guarantee. Often times one part of the couple ends up spending more in a relationship than when they were single (as is what happened to me).

Beth
Beth
6 years ago
Reply to  Vanessa

As a singleton, I used to think that — but I’ve seen costly divorces and marriages where one spouse undermines the family finances. Having a spouse isn’t a guarantee of anything.

When I buy a home, I’d consider rent out a room. Roommates can share expenses too.

Vanessa
Vanessa
6 years ago
Reply to  Beth

Of course there’s no guarantee. Neither is going to school, starting a business or moving to a new city. There’s risk in any decision, but it’s a risk that pays off for many. A committed couple with shared goals will outearn and outsave a single person any day.

BrentABQ
BrentABQ
6 years ago
Reply to  Vanessa

That would be huge for me, but I can’t find someone I want to live with that much. So High difficulty for me. It wouldn’t cut my costs in half, but maybe 1/3.

Diane C
Diane C
6 years ago
Reply to  Vanessa

Oh Vanessa, don’t lose hope. I didn’t get married until I was 54. DH was absolutely worth waiting for. Best of all, we are both financially stable. Once we joined forces, it really did make everything easier.

Debbie M
Debbie M
6 years ago
Reply to  Vanessa

It doesn’t have to be a spouse or SO–you get most of the advantages just from having a roommate. I wouldn’t call it saving half, though. We still eat just as much. I spend more on A/C in the summer because of him and he spends more on heat in the winter because of me.

Still, sharing a residence is generally a huge savings.

Jen @ Jen Spends
Jen @ Jen Spends
6 years ago

If you haven’t formed good (frugal) habits, big wins are not going to do very much for you. So, yes, definitely both.

Trish C
Trish C
6 years ago

Not sure I’d put “downsize your home” in the Low Difficulty category, at least not if you own rather than rent. Selling one house to buy and move into another one is a giant pile of work even if you aren’t trying to simultaneously downsize your stuff.

Well, unless you get to the stage of moving where setting it all on fire and starting over looks like a viable option.

Syed
Syed
6 years ago

Wow incredible post. Really puts personal finance in perspective. Not all financial actions are created equal. We could do a lot better cutting out or even outsourcing those things which don’t save us much in time or money.

Sam
Sam
6 years ago

I don’t clip coupons, etc. In general, I’ve decided that my limited free time is too valuable. As for big wins, we’ve had some good ones over the last couple of years. We refinanced our home, saving $250,000+ in doing so. We also stick with used cars, no car payments for us. We also spent quite a bit of time redoing our insurance last year, new car insurance, new umbrella policies and life insurance, etc. I was kicking myself that we had for years been overspending on car insurance (for crappy coverage too). We got new great coverage for great… Read more »

SLCCOM
SLCCOM
6 years ago
Reply to  Sam

Don’t forget the disability insurance!

That Career Girl
That Career Girl
6 years ago

Great post. I’m changing careers AND obtaining a new degree this year. Two things in the ‘high difficulty’ and ‘high reward’ table. Just have to keep thinking about the ‘high reward’ part to get me through it!

Amanda
Amanda
6 years ago

Agree with this. Small things can lead us to a big win. The thing is many people try to chase a big win in the beginning and that is why we found so many of them gave up in the end.

Sheri
Sheri
6 years ago

I’ve often worked 2nd jobs to make ends meet. My biggest mistake was a working a contracted job with minimal deductions. The 2nd job threw me into a higher tax bracket and the money I made went to paying self employment taxes. I absolutely came out with zero. I basically worked the 2nd job for free. Sigh 🙁

S.E.
S.E.
6 years ago
Reply to  Sheri

What you said can’t possibly be true, or you aren’t providing the whole story. The U.S. has a graduated tax system. Even if your 2nd job threw you into a higher tax bracket, you would only be paying that higher tax % on some portion of the additional amount earned, NOT on all of your income. Also the self employment tax is an additional 7.65% over what you would have paid through normal employment, but again that tax is only levied on the portion of your income that was earned through self employment (presumably your 2nd job). Your 2nd job… Read more »

Jocky Wiz
Jocky Wiz
6 years ago

My favorite parts:

“Imagine how much you could save if you could cut your car costs in half! How do you do that?

– Sell your current car. Replace it with a used vehicle, one that’s fuel efficient. (Side benefit: An older, used vehicle will cost less to insure!)
– Drive your car only when necessary. When possible, bike or walk to reach your destination. (Side benefit: Increased fitness, which also saves you money!)
– Make use of public transportation. (Side benefit: Time to read!)”

As usual, very useful and practical tips!

Crystal
Crystal
6 years ago

Kids are expensive no doubt. That is one of the primary reasons why I don’t want to have any. Plus, I only get one life and I don’t want to sacrifice my time, freedom, and money for kids. While kids are expensive, there are many families with kids who live on a very modest income and manage to do fine.

Lisa E. @ Lisa Vs. The Loans
Lisa E. @ Lisa Vs. The Loans
6 years ago

I live pretty far from work, which means I have a considerable commute everyday which leads to a ton of money spent on gas, tolls, BART, etc. However, if I move closer to where I work, my housing costs would shoot up significantly. I’m currently trying to find a middle ground.

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