On the most basic level, improving your finances is about widening the gap between what you earn and what you spend. What are the two simplest ways of achieving this? First, you can spend less money, and second, you can earn more money.
Yep, it’s as simple as that. However, depending on your personal situation, one approach may be more beneficial than the other.
When cutting back spending is vital
When you find yourself in the middle of a financial emergency, going out and trying to earn more money usually isn’t going to provide immediate results. Cutting back spending, on the other hand, immediately frees up money in your checking account, and helps you make it to the next paycheck.
Knowing how to budget and reduce spending when necessary is a vital skill to have, because you’re going to need that skill whenever you’re faced with an immediate financial challenge.
However, what if you’re on a strong financial footing, and you’re still looking for ways to widen the gap?
When it’s Time to Make More Money
If your finances are in order, and you have some free time you might find yourself wondering how to make more money. You’ll be better off spending that extra time looking for ways to improve your income rather than looking for ways to cut spending. That’s because, when it comes down to it, there’s only so much money you can save by cutting spending.
Here’s when saving money isn’t doing you any favors: when you’ve already squeezed so much out of your paycheck that you’re spending all your time looking for more ways to save. Coupon cutting, for example, can take hours of your day and only earn you a few bucks in savings.
If you’re already doing a few things to save money, when you keep adding ways to save it becomes more time consuming and you get less and less in return.
Making more money, on the other hand, is potentially limitless.
Improve Yourself to Make More Money
No matter how much money you make, you can always make more. It may take a great deal of effort—going back to school, searching for a new job—but it’s the best way to improve your cash flow in the long run.
So if you have some extra time to spend on the weekend, think about ways to improve your earnings rather than scouring for coupons.
Finding Financial Balance
Nobody wants to have to go through a financial crisis, but many of us will experience it several times in our lives. The best way to avoid a crisis in the future isn’t to focus on just one of the two approaches. Looking for ways to get more money without also saving money will only leave you vulnerable, and just saving without trying to improve your earnings won’t help you build up as big of a cushion as you might need.
You should always strive for a balance between the two; keep your most effective saving strategies, and always learning how to make more money at the same time.