Should You Focus on Cutting Expenses or Growing Your Income?
If your expenses and your income don’t match up, you have two options: cut back on your spending, or figure out a way to earn more money.
While some people will want to try both options simultaneously, you’re still going to have to figure out which one to prioritize. Do you put a new interview outfit on the credit card while you look for a better-paying job, or stop going to lunch with your coworkers so you can put every extra penny towards your debt?
The Financial Diet recently collected multiple expert opinions on complicated money-related topics such as “paying off debt vs. building your emergency fund.” One of the topics was, of course, whether people whose ends aren’t quite meeting their means should focus on reducing expenses or earning more.
Well, I loved the way they framed it:
- If you’re happy with your current job and the way you currently spend your time, get your budget back on track by cutting back on the rest of your spending.
- If you’re unhappy with your current job, underpaid relative to the market, or have enough time and energy to pick up a side hustle, ask yourself whether it’s time to increase your income.
- If you can’t or don’t want to cut back on your spending, you’ll have to figure out how to increase your income regardless of whether you like your job and your life the way it is.
Remember, personal finance isn’t about earning the most money possible. It’s about using the money you do earn appropriately. If you can live the life you love on a budget that works for you, while saving enough for the future to prepare for any unexpected life changes, great. You don’t always have to hustle for the better job or the bigger vacation or the newer outfit.
And if you do decide to focus on the “earn more income” path, even at the expense of your free time or your day-to-day happiness, think of it as working towards something—a new home, a debt-free life—and remind yourself that you can always decide to work towards something else once you achieve your goal.