You Can’t Cut Your Way to Wealth

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You Can't Cut Your Way to WealthOne of the most talked about principles in personal finance is living within your means.  Basically, don’t spend more than you make.  While the principle is solid in concept, many people don’t follow it or have trouble keeping up with it.  As a personal finance writer, I have spoken about how to cut your expenses over and over again.  After some time, I feel like a broken record.  Cut your grocery bill, cut your gas bill, cut your utilities, cut your cell phone bill.  Cut this, that, and everything else.  When I was first in debt, I thought all I needed to do was cut my expenses.  I was living above my means, so why not cut my expenses?  It is the first step to becoming debt free.

What about afterwards?  What happens when you actually cut your expenses?  Will it free up enough money to allow you to pay off all your debt or retire?  Probably not.  Cutting your expenses will only get you so far.  You can only cut so much before you are eating just beans and rice and washing everything you own with one bar of soap.  I have no issues with those who want to make their own food or hygiene products, but if you only focus on one side of the equation, you missing the other half.  How do you grow your wealth?

Wealth is Earned Through More Income

You see so many sites just talking about cutting expenses.  Why is that?  I think it’s because cutting expenses is something everyone can do.  Are we afraid to show people how to make more money?  Do we think they won’t want to hear our harsh reality check?  Well, we are not afraid to talk about it here on Sprout Wealth.  That is how whole spiel.  We talk about strategies to make your money grow.  Earning extra income is a cornerstone of our concept.  We could show you 1,001 ways to reduce your expenses, but those are finite.  You can only drop by so much.  We want to show you how to grow your wealth.  We want to provide you with ways to make more money.

You can’t cut your way to wealth.  Wealth creation is two-fold. You have to live below your means and make more money.  There are so many ways to earn more.  The issue is most don’t think they can earn more or don’t want to put in the work associated with doing it.  Sorry to be harsh, but earning more requires creativity, discipline, willingness to succeed, and a couple more traits.  You can’t just hope for more money and it show up.  You have to go hustle for it.

The people who earn more typically do so because they put themselves in demand.  They seek out the opportunities and don’t wait for them to arrive.  They learn how to grow their money organically and passively.  They learn techniques to have their money make more money.  That is how you become wealthy. Your money needs to work for you, you don’t need to work for it.

Always Focus on Both Sides of the Equation

Wealth = Increased Income + Reduced Expenses

Remember, income comes in a variety of ways. You can earn it through human capital, such as working, but you can also earn it through investing.  If you want to learn more about the basics of investing, then check out our top 5 books for beginner investors.  You can’t get to wealth without focusing on both reducing your expenses, but also growing your income.  It just won’t happen.  A plus nothing does not equal C.  A+B does.  It is a simple equation and it works for many.  If you aren’t sure how you can grow your income, then just follow Sprout Wealth. We provide you with different ways and show you how to start investing.  We aren’t trying to make it difficult for your to create wealth.  Our hope is more can become wealthy and have a lifestyle they want.  We will just focus on the income portion and leave the expenses to someone else.  I know I would rather take an extra hour earning more than not taking a shower for a couple of days just to lessen my water bill by a few cents.

 

 

 

*This post was featured on Money Smart Guides, The Investing Monk and Financial Nerd.

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22 COMMENTS

  1. Great insight Grayson! I definitely think people really focus a lot on the “spend less” side of the equation because it’s something they are more in control of than going up to their boss and praying they can convince hir to get a promotion/raise. But definitely, especially for young people, increasing income is pivotal to accruing wealth.
    Taylor Lee recently posted…Am I Ready To Buy A House?My Profile

  2. Very good points Grayson. Maybe I don’t talk about that much yet is because… well I am learning myself on how to make more money! But I guess one thing I do talk about on the income side is investing. You need to do something with your money once you get your expenses below your income.
    It is great to learn though about ways to increase my income without having to go into a job that would require more work hours. I like a bit of variety in work, so I need to learn to side hustle :).
    Kipp recently posted…Net Worth Update – AugustMy Profile

  3. You have a point but making more money won’t get you anywhere if you don’t take control of your spending. There are a lot of people who make millions and are dead broke. At the same time there are others who don’t make that much money and have accumulated a good amount of wealth because they save a lot of what they make. If you want to be a Billionaire, then yes, you probably need more money, but if your goal is to build enough wealth to retire early and live the same life you’re living now, you can do it without having to make more money.

    It definitely helps to make more money but only if you’re disciplined and know that all the extra money you make is to save or invest.

    People preach about cutting expenses because that’s the first step you should take. Once you know what you need to do, making more money will help you build wealth faster.
    Aldo @ Million Dollar Ninja recently posted…I Got Two Awards!!!My Profile

    • I agree Aldo. The cutting side of the equation is talked about so much it is like beating a dead horse. Sprout Wealth is for people who want to know how to take their wealth to the next level. Yes, you can save your way to wealth, but that depends on how you define it. By earning more and cutting your expenses, you will get to wealth faster and are able to change the way your decisions are made.
      Grayson Bell recently posted…Support a Charity While You Shop with AmazonSmileMy Profile

  4. I for one could not have paid off my debt as quickly as I did had I just relied solely on cutting down expenses and living more frugally. It took me getting out there and making additional income through side hustles and negotiating a raise, which I then applied to my debt. I just didn’t want to drag my debt around more than absolutely necessary.
    Kassandra @ More Than Just Money recently posted…Embrace Your WeirdnessMy Profile

  5. I have been holding on to that equation that in order for everyone to obtain wealth, they have to have better job income and spend less that they usually do. Plus, investing and doing some extra business help to obtain wealth quickly. Hoping everyone know this trick of yours.

  6. I’ve been saying this for awhile too. Once you get those bad habits under control, it’s time to start working on the other part of the equation. I feel like the bad spending habits that get you into debt will scale with your income if you don’t get them under control first though.
    John McKinney recently posted…How to compare life insurance storesMy Profile

  7. Well $10 saved is equal to $10 earned. It is still worth $10 at the end of the day whether you reduced your costs by $10 or earned another $10. Now if you truly are in wealth building mode you work first on reducing costs because you control of that from day one and increasing income while investing early and often and increasing investments over time. Reduce costs $10 and earn $10 more and suddenly your money is doubling. Reduce, increase, invest, repeat, enjoy being a millionaire.
    Lance @ Healthy Wealthy Income recently posted…Best Online Finance Articles This Week September 19 2014My Profile

    • Well, I would disagree that $10 saved is $10 earned. I just wrote on Debt Roundup last week about how saving money is not making money. Just because you saved money, does not mean you made $10. It just means you saved it. You didn’t spend $10, but your net worth doesn’t increase, it actually still decreases because of the money you spent when you saved the $10. Example would be if you were going to spend $100 on an item, but ended up spending only $80. Your net worth just decreased by $80. You didn’t make $20 and you already earned it from your job or other source.

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