Many times, when we analyse our financial status, we sit and think about the following financial dilemma:
What is best for me at this moment: to save more money or to do something to earn more money?
Before choosing one of them, you must know that these two activities should never be in a competition. In order to have money, you have to do both: first of all, you need to earn (more) money and, second of all, you need to know how to save them.
The problem occurs when we are focusing more on one aspect and we neglect the other one. The more we focus on one hand, the more we lose the other one.
Let’s analyse what activities each of them implies:
To save money implies:
- Using a personal budget for planning the money;
- Monitoring each penny used;
- Focus on financial education both in the family, as well as at work;
- Knowing how to save money?
- Knowing the ways in which a might waste my money ;
- Analyse financially each month and take measures for the next month.
To earn (more) money implies:
- Permanent education, attending trainings, achieving all sort of new skills;
- Having multiple jobs;
- Working more at my job;
- Make money from home, from passion;
- Make financial promises to myself.
For sure, it all depends on the moment and on the selected period. Saving money is an activity beneficial on long term, whereas making more money helps us on short term.
I am a person developing for myself very much the part of earning a lot of money, I try to develop as many income sources as possible and then think about how to save them.
I know many people emphasising the saving part and then are thinking on how to earn more.
People who want to earn more, try to earn more in order to fill the gaps generated by expenses, because they do not want to make financial sacrifices. Others are people who understood that their income cannot grow more and the only way is to save money.
How do we decide which is the right direction?
In order to decide which main decision is the best for you, first of all you have to analyse your financial status.
You can always earn more money if you have the necessary potential and knowledge. Everyone knows that you cannot earn money if you do not have the potential to earn more money.
If you do not have the personal, educational, professional potential to earn more, it means that savings is the best alternative for you. Saving is what will help you on the long run.
Also, if you will ever find yourself in a distressing situation and you will be unable to earn money, then you previous savings can help you go over that difficulty.
As a result, there are 3 alternatives:
- You can earn more money if you have potential. Everyone knows that you cannot earn money if you do not have the potential to earn more money;
- If you do not have the possibility to earn more, it means that savings is the best alternative for you. (beneficial on the long run);
- Previous savings can get you out of future rough spots.
Now let’s analyse the theory for a little bit:
What you save = What you earn – What you spend.
Going a little into details, we can have control over each indicator, namely:
- What you earn: We are responsible for how much we earn, when we earn and from how many places we earn money. If you earn more, it means you can save more.
If you earn less, it means that the savings you can have are small. This means that the value you can save depends mostly on the value of your earnings.
- What you spend:This is an easier activity than when you have to earn money. The only factor that matters here is YOU. There is no other factor controlling the level of your expenses.
You alone decide what kind of expenses you make, if they are necessary and if they will bring a benefit in the future.
Of course, there are also expenses over which we cannot have too much control (rent, utility bills, telephone etc.), but I am convinced that we can have quite high expense cuts also in this respect as well.
Compared to “what you earn”, what you spend can be the first thing you can work on and it is the easiest thing you can do starting right now.
- What you save: The third factor, resulting from the difference of the first two indicators, is considered the result of our daily activities – result of earnings and result of expenses.
If we would earn a lot, but we would spend a lot as well, it means that there is little money saved. If we would earn a lot and we would spend less, it means a lot of money saved. It all depends on you.
Do I spend less or Do I earn more
Without a doubt these two are complementing each other, yet due to the limited time we have, we must focus more on one of them. They are both very important, yet one of them has to be no. 1 priority.
It depends on you which one you choose. It depends on how much you could grow your income and how much you could reduce costs.
If you are barely at the beginning with your financial education and you do not know what your priority should be, let me show you 7 steps you should follow:
- Step 1. Analyse your expenses and monitor each penny you have. Use a personal budget.
- Step 2. Set yourself savings targets.
- Step 3. Constantly monitor your expenses in order to meet your savings target.
- Step 4. Analyse each place you earn money from.
- Step 5. Elaborate a plan for growing each income source and set objectives for them.
- Step 6. Constantly monitor each income you have and always think on how you can grow it.
- Step 7. Always work on your education, your skills, your abilities, in order to grow your earnings potential and your savings potential.
These steps are standard for anyone.
Before following them, try to analyse yourself to see where you are. If you are at Step 3, try following Step 2 first. Each time we tend to over-evaluate ourselves, this is why it is better to start a step behind the step we think we are.
It all depends on you to make your life financially better. If you want to have money, you are the person able to do so (both by more earnings, as well as by less expenses).
Try to think on how you can develop both of them on yourself. If you can manage to earn more and spend money only on things you really need, you will never have to suffer because of money.