Frugality can only take you so far on the road to financial independence. That’s because there’s a limit to how much you can save. We all need a place to live, food to eat, Netflix to watch. It’s right there on Maslow’s Hierarchy of Needs.

Strip your budget down to the bare bones and you’re still left with a skeleton of fixed and variable expenses; from mortgage or rent payments, to groceries, transportation, insurance, maintenance – the list goes on. And, at the end of the day, your savings rate is determined by that gap between your expenses and your income.

So why do we spend so much time talking about cutting out lattes and avocado toast, and almost no time talking about ways to increase income?

Ramit Sethi, author of I Will Teach You To Be Rich, makes a profound statement when he says:

“Stop asking $3 questions and start asking $30,000 questions.”

Mr. Sethi hates all the tired personal finance advice about making budgets and cutting out lattes. He says if you focus on the big wins instead, then you’ll never need to worry about the cost of lattes and appetizers.

One of his best tips is to cut back relentlessly on the things you don’t love so you can spend lavishly on the things you do love.

What is a $3 question?

Lattes are a perfect example. We’ve all heard about the Latte factor and how eliminating your $5 a day coffee habit can turn you into a millionaire in retirement. Great in theory, bad in practice.

If you like spending money on good coffee then why should you cut that out of your budget just to save $150 a month? And why would you do that every single year for the rest of your life? It doesn’t make sense. Find the $150 somewhere else.

What about interest rates on savings accounts? I get asked all the time, so-and-so bank just dropped its rate by 0.10 percent. Where should I move my money?

If you have $10,000 saved and earning 2 percent, and your bank drops its rate to 1.9 percent, that’s a loss of $10 whole dollars of interest over the course of an entire year.

Another example of a $3 decision. Netflix just increased its monthly subscription fee by $3. Should I cancel?

Do you enjoy watching Netflix? Yes. Can you afford an extra $3 a month to access hundreds of hours of content? Of course I can!

Credit cards. I always get asked which credit card is best for earning cash back or travel rewards. Most cards pay 1 or 2 percent back, depending on the spending category. You’re really delving into the minutia when you start comparing 3 percent on dining versus 4 percent on groceries. At most you’re squeezing an extra $100 out of your rewards – but that’s optimizing your spending with multiple cards.

I haven’t even touched on gas prices or coupon clipping. I mean, who has time to wait in line at Costco to save $3 on gas? Or to drive around to three different stores to save $3 on chicken?

Heck, I literally pay $4.95 to buy my groceries online and have Save-on-Foods collect the items and deliver them to my house. It’s one of the best decisions I’ve ever made.

What is a $30,000 question?

If you can’t out-frugal your way to financial independence then you need to look at the other side of the equation. How to earn more money.

I remember combing through budgeting spreadsheets trying to figure out how to pay down my credit card faster. I had student loan debt, credit card debt, mortgage payments, and probably had too many nights out on the town. But I was also earning just $26,000 on a one-year contract. There was simply no room to wiggle. I had to earn more money to start moving the needle on my finances.

I made it clear at my performance review that I wanted to stay on permanently, but not at that salary. Other employees may have been happy with simply having their contract extended. I negotiated a $13,000 raise, and some breathing room in my finances.

One year later I got passed over for a promotion. Instead of sulking, I got to work on improving the skills I was lacking, namely on the leadership side, and joined two community boards to broaden my experience. Six months later I was ready when the new director didn’t last beyond her probationary period. The net result: a promotion and another $13,000 raise.

Finally, when the hospitality industry was struggling and I had reached my ceiling in terms of earning potential at that position, I started looking for new opportunities. That landed me in the public sector with a $10,000 increase in salary.

There’s nothing more powerful than your human capital when you’re just starting out in your career. A $10,000 increase in annual salary at age 30 can compound into hundreds of thousands of dollars in lifetime earnings.

More $30,000 questions

Sometimes there’s just no room to negotiate a salary increase or move to a higher paying industry. Take it from someone who has been through five years of salary freezes before finally getting a 4 percent raise this year. The economy can be tough.

That’s why my big decision to start a side-hustle paid off. I’ve been writing about personal finance for nine years. When I started earning $100 or $200 a month, I thought – WOW – that’s our electricity bill. Years later the $100 or $200 a month turned into $1,000 or $2,000 a month. That’s a mortgage payment!

Now the side hustle has reached a point where it out earns my day job. It has provided our family with tremendous flexibility to reach our financial goals and add new ones.

A side-hustle can be anything you’re passionate about. It doesn’t have to be a blog, or web design, or anything to do with the Internet. Even in retirement, adding a part-time job at a golf course, hardware store, or yoga studio can be enjoyable and contribute to your annual income.

What about investing? Many of us ask the wrong questions about our investments and spend too much time chasing last year’s winning stocks or funds.

A $30,000 investing decision would be to switch to a low cost, globally diversified indexing strategy, whether through a robo-advisor or a do-it-yourself discount brokerage. The key is to save on annual fees AND automate your investments to prevent you from tinkering with your portfolio.

Your investments are automatically rebalanced when you use a robo-advisor. You can also get automatic rebalancing and diversification with a one-ticket ETF solution like the one I invest in – Vanguard’s VEQT. You’ll save hundreds of thousands of dollars in fees and increase performance over your investing life, compared to a conventional portfolio of bank mutual funds. Best of all, you can set it and forget it.

Credit cards. I changed my mindset around earning rewards and now focus on signing up for 3-4 new credit cards a year that come with massive sign-up bonuses. This new approach has more than doubled my credit card rewards and partially funded our trip to Scotland and Ireland.

Finally, what about increasing your savings rate? At some point in your life you decided to save 10 percent of your income and set up an automatic contribution. Ten years ago that might have been $400 per month. But now you make $80,000 a year, and so your $4,800 annual savings now makes up just 6 percent of your income.

Make a point of increasing your savings rate each year – at least move it up with your annual raise (if you get one) so your savings rate stays in-line.

Sometimes we pay off certain items like a car loan or line of credit. What do we do with the extra cash-flow? It probably goes back into lifestyle inflation, unless you have a plan. Allocate a portion to your savings and watch the compounding grow even faster.

Final thoughts

We win when we can make the big financial decisions count. For me, that’s meant negotiating raises early in my career, earning extra income with a side-hustle, keeping my investment costs low, and cutting transportation costs (no car payments).

Those big wins have allowed me to increase my savings rate to the point where I’ve fully maxed out my RRSP. Now I’m working on catching up on our unused TFSA room at a $2,000 per month pace.

Without a car payment we can shift those dollars to travel, something we feel really passionate about at this point in our lives.

The bottom line is to stop giving so much attention to $3 questions. You can’t cut your way to wealth. That doesn’t mean turning into a spendthrift. But automate where you can and focus your mind on $30,000 questions that will have a bigger impact on your finances.

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