Should You Focus on Cutting Costs or Increasing Income?
If your expenses and income do not match, you have two options: cut your expenses or find a way to make more money.
While some people will want to try both options at the same time, you still have to figure out which one to prioritize. Do you put on new clothes for your credit card interview while looking for a better paying job, or stop dining out with your coworkers to put every extra penny into your debt?
The Financial Diet has recently collected a wealth of expert advice on complex money-related issues such as “paying off a debt or setting up your emergency fund”. One of the topics, of course, was whether people whose goals were not aligned with their means should focus on cutting costs or increasing earnings.
Well, I liked the way they phrased it:
- Once you are comfortable with your current job and the way you currently spend your time, get your budget back on track while cutting down on other expenses.
- If you are unhappy with your current job, underpaid compared to the market, or have enough time and energy to take on side jobs, ask yourself if it’s time to increase your income.
- If you are unable or unwilling to cut your expenses, you will have to figure out how to increase your income, regardless of whether you enjoy your job and your life as it is.
Remember, personal finance is not about making as much money as possible. It is about making the right use of the money you actually make. If you can live the life you love with the budget that suits you and still save enough for the future to prepare for any unexpected life changes, great. You don’t always need to rush to find a better job, a bigger vacation, or new clothes.
And if you choose to focus on the “making more income” journey, even through your free time or everyday happiness, think of it as striving for something – a new home, a life without debt. – and remind yourself that you can always decide to work on something else once you reach your goal.