Should You Spend Less or Make More?

The most sound financial advice you’ll ever read is also the most basic: Spend less than you make.

Sure, a successful financial life is a bit more complicated than that. After all, you have to decide just how to make that extra money work for you. But it all starts with this basic principle. If your outlay is greater than your income each month, you’ll dig yourself into an impossible financial hole. But if you’re spending even $10 less than you make each month, you’ve got a place to start for saving, investing, and becoming financially free.

But there’s another saying that applies here: There’s more than one way to skin a cat.

In other words, there’s more than one way to do what you need to get done. In the case of staying out of the red each month, you’ve got two options: spend less money or earn more money.

But which is best? Which should you focus on first? As with most things in the world of personal finance, the answer is less straightforward than you might hope!

The Pros and Cons of Spending Less

Spending less is the tack many of today’s personal finance blogs take. Just look for money-related pins on Pinterest, and you’ll find thousands (maybe millions!) of frugal living posts focused on how you can spend less money.

Cutting your expenses is great. But, at the same time, it can only take you so far. Here’s what you need to consider when strategizing to spend less:

Pros

Its effects are immediate. You can start spending less right now and immediately feel an impact on your financial situation. Every dollar you don’t spend is a dollar that can be dedicated to another financial goal, like getting out of debt.

It creates discipline and ingenuity. Just take a look at those aforementioned posts on Pinterest, and you’ll see all the discipline and ingenuity that can be a product of learning to spend less.

It simplifies your life. Spending less money often results in having less stuff, which reduces clutter in your life. Plus, if you become organized enough to spend less, that organization is likely to flow into other areas of your life, as well.

It magnifies your efforts to earn more. We’ll talk more in a moment about combining spending less with earning more. For now, remember that when you get into frugal habits, you’re much less likely to succumb to hedonic adaptation, or the tendency to adjust your lifestyle upwards as you increase your income.

Cons

It’s limited. Many of us could find ways to cut a lot out of the monthly budget. Depending on your current expenses, you may be able to cut your spending by 50% or more. That’s powerful, but it’s also limited. At some point, you won’t be able to cut your spending any further. You have to meet your basic needs, after all.

It can go too far. Being frugal is great. But if you become a miser who never enjoys life, you completely miss the point of money management. If you end up so obsessed with frugality that you don’t take advantage of your financial freedom, you’re doing it wrong.
It may not be enough. There are plenty of powerful stories of families who paid off massive amounts of debt and now live comfortably on a relatively low income. But let’s be honest: in some cases, cutting expenses may not be enough. This is especially true when you’re trying to snowball your debt, but your monthly minimum payments are almost more than you can handle. Even after trimming the fat from your budget, you may need more money to start your snowball.

The Pros and Cons of Earning More

For every finance blog that focuses on spending less, there’s probably a counterpart that focuses on earning more. Side gigs. Career development. Blogging for income. These are all great ways to earn more money, which can also solve the problem of spending less than you make.

But, like spending less, earning more has its upsides and downsides.

Pros

It’s practically limitless. Once you start finding creative ways to earn more money, your earning potential is basically limitless. It may not feel that way at times, but there’s truly nothing holding you back if you’re willing to hustle.

It creates discipline and ingenuity. Working a side gig when you have a full-time job takes discipline (just ask me how I know!). And finding new ways to earn money takes ingenuity. Just like spending less, learning to earn more can create healthy habits of mind and time management that you keep for life.

It’s more effective over the long run. Because you can only cut your spending to a certain basic level, the impact of spending less will be less over time. But if you earn more, especially if you continue leveraging your efforts to earn even more, the long-term effects will multiply.
It can be fun. Most people don’t like cutting spending (though for some people this can be an exciting exercise). But earning more money — especially if you’re able to earn it doing something you love — is almost always enjoyable. Plus, let’s be honest, seeing those bigger numbers hitting your bank account every month is a rush!

Cons

It usually takes time to get started. Despite the plethora of blogs-on-blogging that say you can earn thousands overnight, that’s usually not the case. Starting a side gig or reaching your day job’s earning potential usually takes time and effort. You may not notice an impact on your finances for several months.
It takes work. Yes, living frugally does take some work. But many people have systems in place that allow them to keep saving without spending loads of time clipping coupons. Earning more, on the other hand, takes time. Whether you earn hourly with a regular side gig or spend a ton of time up front creating a passive income stream, you have to put work into earning more money.

It can go too far. Anything taken to an extreme can be bad. This is true of working harder to earn more money, too. If too much work is damaging your family or personal life, you may need to cut back.

So, Which is Best?

Is it better to earn more or spend less? It really depends on your situation.

For instance, let’s say you’re in dire financial straits right now. You’re drowning in debt. Or you just lost a job. Maybe you have zero emergency savings.

In these instances, spending less will likely serve you better. As I mentioned above, spending less can have immediate effects, which is important if you’re in a financial emergency. Cut back on your expenses right away, and use what you save to stabilize your situation.

Another instance where saving more would probably be most helpful: if you’re already a high income-earner. If you’re making six figures but still feeling the crunch every month, where could you cut back? Are you eating out multiple times a week? Living in a house that’s bigger than you need? Driving a nice car with a huge monthly payment? Cutting back on these types of expenses could seriously boost your ability to save.

Learn More: So, You Want to Buy a Car from the Dealership…

But what if you’re already living fairly modestly? Maybe you have a few extra expenses you could cut back on, but you’d really rather not. In this case, you might focus on earning more to throw more money into savings or investments. Especially if you can find a side gig you love, or can develop your current career to earn more.

Or what if you’re already on a stripped-to-the-bone budget because your income is very low? In this case, focusing on earning more is almost essential. If you want to build wealth and work towards financial freedom, adding a side hustle or stepping into a higher-earning career may be essential.

Of course, for many of those with average financial circumstances, the right key will be both of these things working in tandem. Cut expenses where it makes sense, and find a way to get a raise or start a side hustle. Pulling both levers at the same time can make a huge difference in your personal finances.

If you decide to pull both of these financial levers at once, you’ll have to find a good balance. Sometimes in order to make money, you’ll have to spend money. For instance, I have a small monthly coffee shop budget. Do I really need to spend money at coffee shops? No. But with two small children at home, sometimes spending $5 on a Saturday morning at a local coffee shop nets me my most productive hours all week!

This goes the other way, too. If you get yourself so busy trying to earn extra money that you don’t have time to cook at home, you may wind up spending more dining out. If meals at home are important to you — and saves you significant amounts of money — it might be better to cut back a few hours a week so you can enjoy cooking in your own kitchen.

As you can see, this is a complicated issue that doesn’t have a single straightforward answer. Whether you decide to spend less or earn more may even change during different seasons of your life. The key is to consider how you can have the most financial impact while still enjoying your life and making progress financially.

So, which do you choose? Spend less? Earn more? A little of both? Tell us in the comments!