by Do you hate the sight of an empty bank account or low cash? There are basically two ways to fix it: increase your income or decrease your expenses.
You can do both. They aren’t mutually exclusive. But most people tend to focus their energy on one side or the other, building habits, routines, and financial plans that eventually shape their entire way of life.
Let’s take a look at both methodologies and what they can do for the money-minded individual.
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How to Increase Your Income
Aside from the obvious tips like “get a higher-paying career” or “go on a game show and win big like Slumdog Millionaire,” there are a variety of ways to increase your income. They can be roughly divided into two categories:
Active Income
Active income is the kind that you earn through paid work. It could be a job, your own business, or even a hobby that you’ve turned into a side hustle. It could also be things like taking surveys online or completing freelance projects. Most money-making ventures are based on the concept of active income
Passive Income
Passive income is the kind that you earn without having to be involved in active labor. For example, you might own rental properties, set up affiliate marketing on your website, or invest in a high-yield savings account. Many passive income ideas require you to put in some kind of capital before you can start earning on your initial investment.
The Pros and Cons of Increasing Your Income
Why should you dedicate yourself to bringing home more money? The obvious answer is that you’ll have more to spend, and you won’t have to change your shopping habits at all. Make enough and you can even upgrade your lifestyle and start to live luxuriously.
The downside to increasing your income is that it requires more of your time, energy, focus, and attention. You’ll have to work longer hours; you’ll have to take on added stress. You’ll essentially sacrifice other areas of your life for the pursuit of extra money. It might even have a monetary cost if you’re trying to “spend money to make money” on things like stocks or start-ups.
A lifestyle dedicated to making money can also lead to psychological issues. A common one among entrepreneurial folks is the constant and obsessive monetization of time.
How to Live More Frugally
The opposite of increasing your income is living frugally. Without working more, you can increase the amount of money that you have in the bank.
Sounds nice, right? It’s easy to get started. Frugal living tips can be as simple as:
- Canceling unnecessary subscriptions
- Rearranging your billing cycles to avoid monthly late fees
- Going to thrift stores
- Buying generic brands
- Using coupons and planning purchases around offers
- Cooking at home
- Taking public transportation
There are many other ways to curb your spending habits as well. Every little bit helps.
This brings us to the next benefit of living cheaply: It compounds over time. You aren’t just saving $5 on that one canceled subscription; you’re saving $60 per year. That $60 can also earn you some interest when invested, used to support a money-making side hustle or put into a high-yield savings account.
In other words, frugal living isn’t just a collection of cost-cutting ideas. It’s an entire shift in lifestyle that can change the way that you spend and save.
The Limitations of Frugality
You can save a lot of money with a thrifty mindset. However, there are limitations to this way of life.
The biggest roadblock is that you’ll eventually hit a point where you’re unable or unwilling to reduce your spending anymore. You don’t have to be living in abject poverty like the characters of Parasite (available on DIRECTV STREAM), either. With the rising costs of inflation, even average income is becoming increasingly difficult to live on, meaning that your frugal habits will mean less and less to your bottom line.
It’s also easy to get tired of a frugal lifestyle. What you save in dollars you might miss out in social gatherings, friend and family events, and even professional networking opportunities. You’ll have to ask yourself if that $20 in your pocket is better kept in a savings account or spent on creating a memory with your loved ones.
Combining Both Approaches
As previously mentioned, it is possible to increase your income and increase your frugality at the same time. In fact, as you get savvier with your finances, you might find yourself naturally incorporating both money-earning and cost-saving measures into your lifestyle.
The key is to keep things in balance. Don’t let one method cancel out the other. For example, if you think “I worked overtime today, so I deserve to splurge on this purchase,” you’ve essentially canceled out the extra income with the lack of frugality. You gained nothing. You worked even harder than usual, but you weren’t left in a better position than you were before.
Another tip is to find money-making or money-saving ventures that seamlessly integrate both schools of thought. Build an app for your personal use and sell it. Use your assets to generate further income through things like tax breaks. There are countless ways to put more money into your wallet; you just have to find them and utilize them.
Income Vs. Expenses: Which Focus Is Right For You?
At the end of the day, you can choose to look at your finances through either an incoming or outgoing lens. Do you want to focus more on bringing funds in, or do you want to focus more on preventing funds from going out?
There’s no right or wrong answer. It all depends on the individual. Maybe you already have two jobs and can’t take on another; in this case, frugality is the only way to add a little padding to your bank account. On the flip side, maybe you’re hurting financially with nothing more to cut out of your budget. In this scenario, you’ll have to look at increasing your income in some way.
A smart financial future begins by taking an honest look at your money, your goals, and your lifestyle. Once you’ve taken stock, you can decide where to go from there.
