There are only really two things you can do to improve your personal finances:
- earn more money.
- reduce your expenses
But the bigger question is which one should you put your time and energy into?
I’m sure that if you want to make big changes, you should be working on both.
Some people may already know this, but I think it’s important to explain more fully why this is the case.
Either one doesn’t work.
We’ve all heard stories about people who won the lottery and spent all the money in a few months. Most people know someone who makes six figures but is just one paycheck away from being broke.
Having a lot of money isn’t the answer if you’re alone. It helps, but it’s not the only way to get out of debt and be financially free.
“A fool and his money don’t stay together for long.”
People tend to spend more money as they make more. Rarely will you find someone who keeps making more money but never spends more.
In the same way, there are limits to how much cutting costs can help you.
In fact, only one of the two, cutting costs, has a natural limit.
You can only cut back on your spending so much.
If you usually spend 25,000 a month, you can save no more than 25,000 a month by cutting costs. It’s impossible to spend less than 0. That’s all you can do.
This is not a dig at people who try to save money.
In fact, I think that spending money wisely and efficiently is a virtue that only a few people can master. But if that’s the only thing you work on, you’re really putting yourself in a bad position.
Even if you make a good living, you won’t be able to build up much wealth, and it will probably take you your whole career to be financially free.
Pay attention to costs first
One good thing about paying your bills is that you can do it quickly.
You can cut costs literally overnight. Cancelling services, reducing the size of vehicles, and taking other steps to save money don’t take much time or work.
You could spend like a drunken sailor one day and live well within your means the next. The same can’t be said about how much money you make.
So, if you’re just getting started with trying to improve your finances, you should probably start by looking at ways to cut costs. It’s the easy thing to do.
Mastering real frugality and smart spending will take time, but you can get started.
Once you’ve cut your costs, you should start looking for ways to make more money.
I would say that once you’ve cut your expenses to a reasonable level, it’s better to figure out how to make more money instead of finding more ways to cut costs.
Next, work on making more money.
When it comes to increasing your income, you don’t have any natural limits like you do with your expenses. Your income can go up as much as you want, but it might not happen right away.
If you don’t have a job, you can get one by going to school. If you do, you can get a raise by asking for one or by changing jobs.
Some would say that a career salary still puts you in the “slow lane” to financial freedom. Those who are willing to risk time and energy on a business idea can get there faster.
There’s no doubt that the holy grail of making money, the small business, has unlimited income potential.
Obviously, not every small business owner is successful.
But I would argue that small business owners have the fastest and most profitable way to get rich. Businesses that are in high demand and can grow can make as much money as they want.
Look at any successful blogger who writes about money. How did they “get out of debt” or “save a million dollars” in such a short amount of time?
Not just by cutting costs. Most of the time, they did it by building a small business that made them more money.
Are you ready to do both??? Think, Act and Earn More Money.
You are considered RICH if and only if you are able to buy time with your money.
You are considered POOR if you are only able to make money by selling your time.
Which one are you? Ask yourself and plan accordingly to get to the RICH’er side of the world.
