Should You Spend Less or Earn More?

Spend Less Earn MoreThere are two diametrically opposed camps among personal finance writers, bloggers, and professionals: those who tout the benefits of minimizing your spending and cutting costs wherever possible, and those who propose finding ways to maximize your income and earn more money to cover the lifestyle you want.

Some bloggers take an approach which blends these two concepts, but it is an interesting study to look at the advantages and disadvantages of both sides.


The Spend Less Camp

One of the pioneers of the “spend less camp” was David Bach. His “latte factor” brought the power of saving money to the mainstream. The “latte factor” essentially lays out the amount of money that you can save by cutting out a daily latte and investing that money, or saving that money for future expenses.

Many other personal finance bloggers such as Trent from The Simple Dollar and even Dave Ramsey fall into the “spend less camp”. Their main goal is to teach folks first, the value of saving money and keeping a very strict budget, and second, practical ways to actually save that money.

This is a powerful concept because we all have expenses in our lives that are needless, and it is imperative that we spend less than we earn if we want to ever have a hope of being financially sound. Analyzing the expenses we have and finding ways to cut those expenses can save you hundreds if not thousands of dollars each month. If your monthly budget is tight, this is a very practical and often easy way to make your budget work.

The “spend less camp” has take a hit in recent years and been criticized for extreme actions. This has likely been the result of reality shows such as Extreme Couponing, which highlight out of the ordinary individuals. The folks on these shows are not your average “I just want to cut my extra expenses” but rather those who are borderline insane about trying to cut costs. The funny thing is that these same folks often become hoarders, and spend even more money than they would have if they had shopped normally.

Spending less has its benefits, but it can only take you so far.


The Earn More Camp

There are have many proponents of this concept in the past but the person who is at the forefront in 2013 is Ramit Sethi. On his blog and in his book, Ramit blatantly tells us that he hates the “latte factor” and that he does not cut costs that inconvenience his life, choosing rather to earn more money to cover those expenses. His main philosophy is that you can only cut your expenses so far, but your earning power is virtually limitless.

This concept can be a powerful motivator and Ramit has created an empire around teaching his students how to earn more money. You may not agree with his brash tactics, but it is hard to deny his results. He has helped coach hundreds of students into generating successful side businesses which are generating additional income and funding the expenses they are unwilling to cut.

Ramit, and others, believe that by creating a side business you will be able to generate at least a few hundred dollars extra each month which you can then us to meet your savings goals, or use to ay for those expenses each month that you are unwilling to cut. The eventual goal does not have to be owning a business, or starting a large operation. It can be as simple as earning some extra money each month to make ends meet, rather than cutting expenses. That is the core of his message.


The Bottom Line

Which camp do you fall in?

Would you rather cut out an expenses each month or create a new way to earn extra money to pay for that expense?

I believe there needs to be a balance of these two camps. It’s pointless to earn more money if you cannot control your spending. As your income grows your spending will grow and you will still be in debt. Or, if you cut expenses and do not focus on earning any more money you run the risk of cutting out anything exciting in life, and living a boring life.

I believe it is all about your priorities. Decide what your goals are, and then determine which of these approaches will help you best reach those goals. My guess is that a combination of both approaches will help you best meet those goals!

Get Rid Of Your Student Loans - Legally!
Sign up below and discover 3 ways to ditch your student loans.

A lot of places will tell you that you can't get out of your student loans. But guess what? There are ways to do it, and I give them away for free right here.

  • Mark Ross @ Think Rich. Be Free.

    I’m with the earn more club. If a person really need to save more money, then why not try to find ways to earn more. By doing so, he or she will be able to save a lot more and in a shorter amount of time. Right?

    • DJ Wetzel

      It sounds like you are definitely a firm proponent of “Earn more”!

  • Emily @ evolvingPF

    It depends on your primary job, too. I’m technically disallowed from having a second job, and I think working for yourself would fall under that ban if it takes up enough time. They want to keep us poor so we are motivated to graduate faster!

    • DJ Wetzel

      HAHA! I’m curious what your primary job is? However, I would imagine there are certain activities you could engage in that would allow you to fly “under the radar” and not have to report any additional income. Although, you certainly would never want to justify your primary job. Earning more is also not just about a second job, it could very well include managing your primary job better to earn more income (raises, bonuses, promotions).

  • krantcents

    I agree there needs to be a balance. You always need to have good control of your expenses and should always save and invest. Now that you have control of your expenses, you should make more income.

    • DJ Wetzel

      It is much easier to earn more if you have control of your finances. Agreed!

  • Michelle

    I’m all about both. We like to keep expenses low (but still enjoy life) and earn more money.

    • DJ Wetzel

      It does seem to be a trend among personal finance bloggers in 2013. Thanks!

  • Lance @ Money Life and More

    I think a balance between both is great. However, I think there is more upside on focusing on increased income for most people.

    • DJ Wetzel

      I agree with you. I think simple math will show you that you can only cut so far, but the upside of earning more is unlimited.

  • Andy Hough

    You can do both. I’ve done about as much as I can on the spend less side. I need to focus on earning more now.

    • DJ Wetzel

      Sounds great! What ways are you considering for earning more?

  • Ryan @ RLD Investments

    I agree 100% with everyone who says that a balanced approach using both camps in key. I cut my costs where I can, but only to a certain point. I place a high value on my quality of life. Therefore I also put some time and energy into earning more money. I found that I have knack for advising on financial decisions so I do some consulting on the side to earn extra income.

    • DJ Wetzel

      @Ryan – That is awesome that you have found a niche in financial consulting! I think that would be a difficult niche to break into. I completely agree with you that a proper balance on managing costs, while increasing income is the way to go!

  • Derek @

    I think it is best to work on both at the same time! Also, the ultimate goal should be to put any savings into assets or instruments that earn money over time (investments). Otherwise, you’re just falling further behind due to inflation.

    My website is devoted to getting better at all three of these. Try taking the simple money quiz I created here to see how you fare in each of the three categories:

    • DJ Wetzel

      Double dipping does seem to be the general consensus. Thanks for stopping by!

  • Pauline @ Make Money Your Way

    I have reduced the waste in my life, and am only buying things that I need or that bring me value. Those value things, like quality food, travel, experiences, have value in my eyes and extreme frugalists would find it wasteful. But the purpose of life is to enjoy it so I would rather make more and afford my luxuries, life on rice and beans is pretty dull.

    • DJ Wetzel

      @Pauline. “Life on rice and beans is pretty dull” – While I do genuinely like rice and beans, I completely agree with your point. If you are meeting your savings goals, and have cut the waste from your life, why not spend money on the things that make you happy!

  • Jeff

    Either extreme won’t work long-term in my opinion. If you cut your expenses to the point where you’re truly unhappy, you’re defeating the purpose. Likewise, while I agree that there’s more upside in earning potential, I also believe that there’s no such thing as truly “passive” income. If you focus so much on making more money that you no longer have time left to enjoy it, then again, you’re defeating the purpose. Ultimately, you just have to find the balance that makes you happy.

    • DJ Wetzel

      You make a good point Jeff. I would disagree with you on there being no such thing as passive income streams, but I do completely understand what you mean. Focusing too much on cutting costs or earning more both have similar results. Balance is key!

  • Daisy @ Suburban Finance

    I try to do both, because balance is important and there is no value to making tons of money if its all going out as soon as it comes in.