The following post is by MPFJ staff writer, Chonce. You can read more articles by Chonce over at her personal blog, My Debt Epiphany. Enjoy!
Should you spend less or earn more? This is a common question with a tough answer. While the answer heavily depends on who you are and what your financial situation and preferences are like, I’ve always been in favor of spending less and adopting a frugal lifestyle before you start to earn more. It’s one of the best ways to improve your finances quickly and truly get what you want out of life.
To fully understand the concept of spending less over earning more, you have to understand the benefits of earning more and how they are only sustainable after you’ve committed to living on less.
So why live on less when you can just work on earning more money right away?
Adopting a Frugal Mindset and Lifestyle Forces you To Work with What you Have
Living on less helps you prioritize your wants over your needs since there is a limited amount of money to go around. When you start living frugally and cutting your expenses, all of the sudden, budgeting becomes more of a necessity as you learn to strategically spend and save your money and make do with what you have.
When you have more money to spend, it’s easy to not take your budget seriously and splurge on items that you don’t truly need.
Back when I was in college and taking care of my son, I’d be happy if I earned $10,000 per year annually. While I definitely wanted to earn more money, I learned how to make ends meet so we could live comfortably and prioritize what our main expenses were, and which ones we didn’t need.
To help get through my low earning years, I gave up a lot of non-necessities and losing out on those expenses never made me any less happier. It actually gave me a relief because I didn’t have much to worry about each month.
Living on Less Motivates you to Learn More about Personal Finance
If you really think about it, why do most people turn to personal finance websites and resources? Often times, it’s because they want to learn more about how to manage the money they have, increase their income, get out of debt, or grow their money.
If your financial situation is perfect and you’re earning plenty of money, what motivation do you have to increase your knowledge about personal finance?
What piqued my interest in learning more about how to manage my money was having student loan debt and a low entry-level salary of $28,000 per year when I obtained my first job out of college. Today, I’m so thankful for my student loan debt because without it, I never would have started reading about personal finance nor started my own blog to document my journey out of debt.
Learning more about personal finance can educate and empower you to improve your habits and manage your money better but it all starts with living on less.
When you Should Work Toward Earning More
I’m definitely not against earning more. I just believe it’s crucial to understand that frugality can be a choice and not just a necessity. If you don’t have a lot of money, it’s obvious that you’re going to be interested in adopting a frugal lifestyle. But once you experience the benefits of frugality, it’s not hard to realize that you can choose to live frugally to optimize your income even when you do start earning more.
Ever since I graduated college a few years ago, my income has consistently doubled each year. While I’m so grateful to have the opportunity to increase my income, I realize that I could very easily be tempted to increase my spending and fall into lifestyle inflation as well.
Lifestyle inflation involves spending more just because you have more to spend. If you get a raise or start side hustling, it’s easy to want to treat yourself with the extra income you bring in and purchase something you feel you’ve always wanted. There is often no value behind this method of increased spending though and the extra purchases you make probably won’t help improve your life in the grand scheme of things.
If you spend everything you earn, you’ll never ever get ahead. This is why it’s best to start improving your finances by lowering your expenses and making ends meet with the income you have first. Then, when you start to earn more money you can use the additional income to go toward major goals like paying off debt, building your retirement fund, or saving up for a down payment on a house.
You’ll know that you’re ready to start earning more when:
- You’ve lowered your living expenses as much as you possibly could
- You’ve embraced frugality and gotten creative with making ends meet
- You’ve educated yourself about personal finance and determined how you will make the most of an income increase
- You know how to manage your money properly to avoid lifestyle inflation
- You want to earn more money to help meet your financial goals and work toward stability, not because you believe more money will make you happy
Once you’ve mastered the art of living well on less, you’ll know that you don’t actually need the extra money to live when you start to earn more and you can use it for other purposes.
How about you all? When it comes to spending less and earning more, do you favor one concept over the other? Do you use both strategies to improve your finances?
Share your experiences by commenting below!
***Photo courtesy https://www.flickr.com/photos/bradipo/4333249778/
