Have you ever thought to yourself whether it would be better for your money to earn more or to be more serious about budgeting? Though I’m sure most people would think that their budget would take care of itself if they simply had a higher salary, I think some good arguments could be made either way. However, there may also be some dangers to polarizing toward one way of thinking versus the other.
In this post, I’d like to explore the pros and cons of earning more vs better budgeting and show why they should both have a place in your overall financial plan.
Is It Better to Earn More?
On the surface, doesn’t making more money just sound like such an obvious solution? If your budget is short $500 this month and you found a way to earn an extra $500, then problem solved, right?
There are many ways to deal with your financial problems, and here’s why so many people see earning more money as the ultimate solution.
Unlimited Upside
One of the greatest benefits of earning more is that the sky is the limit when it comes to your income potential. There have been countless stories of people working an average desk job and then moving on to start their own business that generates hundreds of thousands or even millions per year.
The same is not true for budgeting. If your budget is $5,000 per month, it’s probably unrealistic to think that you can get it down to $3,000 or even $2,000 without making some deep sacrifices. As the old saying goes, there’s only so much juice you can squeeze from a lemon.
Better Opportunities
People want more than anything to feel valued and to be compensated fairly for their work. This is actually one of the biggest contributors to the Great Resignation of 2021 following the initial onset of the COVID-19 pandemic.
According to Forbes, 63 percent of respondents cited low pay or no opportunities for advancement as a major or minor reason why they quit their jobs and moved on to something else. Even if the job was a parallel move to another company, they took it because they believed it could give them the platform or connections they needed to move into higher-paying responsibilities.
Greater Self Fulfillment
There is something about having a career or even being an entrepreneur about challenging yourself to overcome the odds. Every day, you’re faced with some kind of task or problem to solve. It forces you into critical thinking and to be creative about what you will do next.
While budgeting requires some analysis of its own, it’s simply not the same. Especially for the ambitious, being forced to solve these problems can be mentally stimulating. Even though higher income or profits are the fruits of your efforts, it’s really this sense of self-satisfaction and accomplishment that you seek.
Is It Better to Budget?
Budgeting certainly doesn’t have the same excitement or appeal as becoming your own boss or the next office big-shot. However, there’s a reason why every successful business in the world prepares a budget and has teams of people dedicated to making sure they stick to it – because it’s necessary!
There’s a lesson in this to be learned that can be applied to your household finances. Here’s why budgeting can be such a powerful force in the way you manage your money.
It’s Within Your Control
One incredible aspect of budgeting is that it’s within the reach of nearly everyone. You don’t have to have any special education or talents to decide how you’d like to spend your money. All you truly need is just control and discipline.
This is a stark contrast to earning more. Let’s be real – starting your own business or trying to impress the higher-ups to get that better position is a ton of work! And as hard as it is to be this blunt, there’s no guarantee that your efforts will even be successful.
On top of this, budgeting is not as hard as some people would like you to believe. You don’t have to download some complex spreadsheet and track every penny you spend. Instead, sign up for a budgeting app like Buxfer and let your smartphone basically do all of the dirty work for you.
Better Financial Foundation
When you budget, it forces you to become aware of how much money is going in and out. This can give you a much better framework to establish long-term financial goals – especially as your income naturally increases over time.
Many experts refer to this as lifestyle creep. As you get small raises or bonuses, your spending naturally adjusts to this additional income. However, with a budget, you’d strive to keep your spending the same and apply the additional income towards other more fruitful purposes.
Without this foundation, it’s easy to become a victim of lifestyle creep. Even executives and celebrities who earn millions eventually go bankrupt because their spending begins to outpace what they earn. Creating a budget and sticking to it will force you to cut out needless or wasteful purchases – no matter what your income level is.
More Satisfaction Out of Your Purchases
You might think that earning more money will allow you to take that dream vacation or buy that big house in a nice neighborhood that you’ve always wanted. However, vanity purchases aren’t the things that will bring you joy in life.
People who are mindful of their spending will engage more with friends and family. They’ll also be more likely to be creative about how they spend such as pursuing meaningful hobbies and interests. It won’t matter how much they spend on experiences because in the end they’ll understand that the people they shared it with was what made it truly special.
The Best Strategy – Do Both
So after all that, what’s the verdict? … Do both!
For instance, someone who’s making around $60,000 per year ($5,000 per month) should figure out how to live within these boundaries – cutting out as much unnecessary spending as possible and saving whatever they can.
But once they achieve this achieved, why not take your income to $80,000 or even $100,000? If they could stay at that $60,000 budget and not let lifestyle inflation creep in, that would give them an extra $40,000 to put towards their goals.
Just like a healthy person needs both diet and exercise for their well-being, the same is true for your finances. A budget will get your spending under control and teach you discipline and appreciation. But earning more will give you the chance to take it to the next level.
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