Earn More Or Spend Less, Which Should You Focus On?

If you stop and think about it, there are two main parts to your personal money equation: what goes in, and what goes out. Or, in other words, what you make and what you spend.

So should you focus on earning more or spending less?

The argument for frugality

There’s no arguing with the fact that cutting expenses is a quick win. Any budget categories you can axe or reduce will result in instant savings – more money left in your pocket (or bank account). As the saying goes, a dollar saved is a dollar earned (and it won’t be taxed, either!). If really pressed, most of us could easily come up with a few areas we could cut back on today.

A great place to start is examining any subscriptions or regular costs you have going out each month. Think utilities, gym memberships, entertainment accounts, etc. For example, I recently stopped paying for Spotify and downgraded back to the free tier (though can I just say, this version sucks?!) since I’m on maternity leave and not commuting daily anymore. If you can shave $100 a month off your recurring costs, that’s $1200 a year saved!

Author David Bach made the “Latte Factor” famous – a pithy phrase to capture the cost of small mindless purchases that add up quickly. For instance, a daily $4 coffee is a $20/week habit, or $80 a month … or nearly $1000 over the course of a year. Ouch.

We don’t even realize how much we’re actually spending on these little purchases. If we did think about it and change our habits just a little, we could actually change our destiny.

- David Bach

Add to that the amount you could have earned in interest or market gains over time if you had invested that money instead, and there’s a solid case to be made for sweating the small stuff after all.

If you don’t have a good handle on your spending, then it doesn’t matter how much money you make – especially if your earnings are temporary. You need a solid financial foundation to build on, otherwise you can all too easily wind up spending every dollar that flows into your life.

The case for focusing on earnings

We all have a certain expense floor. Life costs money, after all, no matter how frugal you may be. There are limits as to how much you can cut back, but theoretically your earning potential is uncapped. And let’s face it, depriving yourself of life’s little luxuries isn’t any fun!

Personal finance expert Ramit Sethi is a big proponent of earning more in order to fund a wealthy life and says that you can’t out-frugal your way to riches. And as he points out, persisting with frugality for the long run doesn’t work for everyone.

How often have you gotten gung-ho about saving money, cut back 80% on your spending, then watched it float right back to what it was before? Anyone can make a short-term resolution, but it’s extraordinarily difficult to change behavior for the long term.

- Ramit Sethi

Sometimes you just need to grow your income, whether that’s by working toward a promotion or a new job, building up a side hustle or changing careers. If you can’t achieve your goals on your salary, despite overhauling your budget and priorities, then there’s no two ways about it. This might be easier said than done, but the benefits can be enormous. Don’t be afraid to think long-term here, as big changes often take time. If the pay-off is doubling your income eventually, that’s well worth it (could you realistically slash your expenses by 50%?).

In my personal experience, changing the income side of the equation is what’s made the biggest difference. It’s been the key to getting ahead; there’s no way I’d be where I am today if I was still on the same wage I made in my first job.

Growing the gap

Of course, these two camps of thought aren’t mutually exclusive. This is not some sort of zero-sum game! Why not do both? A big spender with a high income won’t get all that far, nor will a penny-pinching low earner.

It makes sense to start with spending less, and getting the most out of your current income. Make sure you’re not frittering away cash on things that don’t bring you joy.

Then once you’ve got that sussed, you can turn your attention to bringing in more money. You can always cut back further, but if you can find a healthy balance, why not live a little today?

The less you’re spending and the more you’re making, the wider the gap between income and expenses. If you can maximize the gap, you’ll have a heck of a lot more money to do with as you please, as long as you keep avoiding the trap of lifestyle inflation.

As Dave Ramsey puts it:

Instead of increasing your lifestyle when your income grows, increase your contributions to your financial goals!

Throw that extra money at the smallest debt on your list, use it to build up your emergency savings, or put it toward paying off your home early.

- Dave Ramsey


This is such a personal debate, and so I’d encourage you to examine your own tendencies really closely.

Maybe you’re a natural saver but frugality is only getting you so far. To really improve your financial situation, you’d need to increase how much you earn.

If you’re a natural spender, deep down you might know that you really need to rein it in and stop swiping without thinking first. Rather than striving to make more, you’d do better by squeezing more out of what you’ve already got.

But as we’ve pointed out, there’s nothing stopping you from overhauling both how you spend and how you earn. For maximum impact, mind that gap and move the needle on both ends of the spectrum!