Making More vs Spending Less

When a person needs more money, he or she will have many options, but those options ultimately fall into two categories: make more money or spend less. Let's take a close examination at the benefits and consequences of each. Of course, this is by no means a "one size fits all" analysis. It is merely a study of a general case of the issue, since each situation varies with the next.

Spending Less
Whenever people need to save money, this is generally the first decision they make which is quite understandable. Spending less is a great way to save money since the effects can be seen almost instantaneously. All one has to do is eat out a little less, go to the movies fewer times a month, switch to basic cable, etc. Let's see how many pros we can list out for cutting spending.

- Can take action immediately. A person doesn't need to wait to start reducing the budget, he/she could start at any instant he/she wants to.
- Fairly easy to identify which areas in life can afford a reduction in spending.
- Can generate a reasonably accurate number as to how much money will be freed up per day/week/month/ year.
- There are a lot of options to pick from. A person could cut spending on food, entertainment, utilities, gym memberships, etc.
- The reduction in spending is on a sliding scale. A person could choose to reduce spending by just a little bit, or completely remove it from his/her budget.
- Easy access to money; you don't have to wait for it to arrive. Unspent funds is money that's in your pocket to begin with.

The list could go on and on and on. There are definitely many benefits in addition to the ones listed above. However, this does not mean that a reduction in spending is the ultimate answer to all of your financial problems. There is one major flaw with spending less, that is:

- You can only save as much as you spend.

If Sarah has an extremely high salary, let's say around $150,000 a year, then she will have a lot of working room. She could cut back on going to expensive restaurants, spend a little less on clothing, or buy less furniture. In other words, all she has to do is spend less on miscellaneous luxury goods. However, if Sarah only makes $15,000 a year, then the picture totally changes. It is highly unlikely that she is spending any of her paycheck on luxury goods. The only area that she can reduce spending in is in the basic needs category, which has a limit as to how much can be cut.


Making Money
The alternative to spending less is of course, earning more. This has its own set of advantages:

- There isn't a limit as to how much you can make. The increased income can stem from a raise, a second job, or a change in jobs. It all depends on the person.
- The effort exerted on earning more is also on a sliding scale. Of course, this sliding scale differs from person to person, but generally if someone wants to earn a lot more, then he/she will work a lot harder, but if that person only wants to earn a small amount of additional income, then he/she only has increase the workload by a small amount.
- It creates room for budget expansion. An increase in income allows for an increase in spending or saving.

On the other side of the coin, earning more money has its disadvantages which include, bu t is not limited to:
- It can be difficult to find a source of income that matches your needs.
- A person may lack the knowledge or experience needed for a particular job.
- The amount of stress that is placed on a person both mentally and physically.
- Most ways of significantly boosting income require time, and lots of it.


Personally, when presented wit the two choices above, I generally tend to opt towards making more money. There are many reasons for this, one of which has to do with my level of income. I don't make that much to begin with, so I could definitely benefit from a boost in cash flow. Also, I believe that in the long run, in order to truly become rich, you should be able to have an income that can fully cover your expenses (however little or large that may be), and then some. Plus, the extra spending freedom that you get from increased funding is always nice. =P

However, this doesn't mean that I am against cutting spending. I believe that it is a valuable financial tool that should be in everybody's budget toolbox. It's a great tool for the short run, since the extra money needed instantly becomes available. It's just that I don't think it is as effective in the long run as making more money is. There comes a point where you run out of things to cut from your budget and will need to start making more money. The need to obtain more cash is pretty much inevitable, due to inflation, unforeseen expenses, and other things of that sort, so I want to build up my income as soon as possible.

That being said, in all of the personal finance blogs that I have read, I see many articles about creating budgets or reducing the size of existing ones, which in itself is not a bad idea at all. However, what I hardly ever see are articles that have to do with making more money (aside from things like sign up bonuses). While I do think that spending less is a great way to free up some cash, I think that sometimes people just need to make more money. Humans as a whole try to minimize the amount of work done while maximizing the amount of pleasure. This kind of thinking is perfectly fine if you are satisfied with your current situation, but if you want to be richer, then sometimes you just have to get up and work to make more money. Anyone who doesn't want to work (I don't mean just the traditional sense of the word, this could mean freelance work, the occasional odd job, or researching investments) to increase their revenue doesn't have the right to complain about how their financial situation should be better.


What do you guys think?