Which one suits you better - earn more or spend less?

We all know there are only two ways to save money. The first is to reduce your expenses. If you spend less, then whatever is left is your savings. The second is to increase your income. If you keep your spending to be the same, what you earned after your spending will be your savings. But which way works better?


I think the key point here is whether your income is scalable. If your income can vary according to the amount of work that you produce, then it's scalable. If that's the case, then you might want to focus on earning more income. My job as a tutor is scalable. A salesman job whose income is tied to the commission earned from the sales made is also scalable. Focusing your energy on an active income stream which is scalable makes sense because there's a lot of benefit besides having a higher income (therefore, higher savings).


1. When you're busy, you can't be shopping. 

I'm not sure about others but when I'm in my peak season, I can't wait to go back home to rest. I understand that some others might go on compensatory shopping to alleviate the stress and pain of working so hard, but to each his own. The months that I spend the least correlates to the months that I earn the most. It's during those months that I've half or a quarter of my work load that I spend more time shopping, watching movies and eating out at restaurants.


2. Working harder might lead you to a higher base salary or a better job

If you work hard enough, you might be noticed by your superiors because of your output. This might lead to a better job prospects/promotion which can lead to higher base salary. Certainty in income is better than variability, so if your hardwork leads you to secure a higher base income, why not? Makes it easier to plan ahead too. If that doesn't work out, perhaps you'll be noticed by headhunters who can direct you to a company that pays you better. If all these doesn't happen, surely there's going to be a better bonus towards the end of the year? Still no? Then maybe you should just switch your company.


3. There's a sense of achievement from career satisfaction or from a job well done

It's not just about savings. A feel-good mentality about your work can lead to a multitude of desirable side effects that makes you happier. Imagine you're the top producer in your company. Beside earning the extra income, you'll also be regarded highly by your peers. Just don't take it that you've arrived and buy yourself an expensive car to go along with that status. A feel good feeling is internal, not necessarily externalized by material goods.


What happens if you income is not scalable? That means that the more hours you put in, not withstanding a possible promotion, you're actually getting less on an hourly basis. I think after some years in your company and looking around at your colleagues who are your seniors, you'll more or less know your chances of promotion. If you still want to stay in your company, then working so hard at work doesn't really benefit you. They know it, you know it too.


If that's the case, working on cutting cost is the option to saving more. Cutting cost forms a good foundation in which you can leverage on. Here's a few good points about the cutting cost path towards increasing your savings:


1. You live on less, so that you don't have to accumulate so much upon retirement

This is perhaps the most important reason. If you reduce your expenses until you can no longer cut without sacrificing minimum comfort, you'll increase your savings on a month to month basis. Even if you have bonus, you'll be able to squirrel that away. But in the future, this habit won't likely go away. This means that upon retirement, you don't have to use up so much per month, hence you also don't have to save up so much now. It's about living on less.


2. You can focus on a simple life

There's joy in simplicity. If you don't have the budget to go out and shop and eat out frequently at restaurants, you'll find a substitute for it. You'll find that there are pleasures that you don't need money to enjoy. A simple cup of kopi with a good book or good companionship won't cost much, but you will won't derive less joy from it. You'll be surprised by how much you need and how much happiness you can get from the simple things in life. I can foresee a healthier lifestyle, with more focus on family and relationship and also nature. What's bad about this, seriously?


3. Less stressful at work

I think once the stress of producing more is relieved from you, you might actually start to enjoy your work once again. No longer do you have to play political games to secure a better position so that you can have a higher pay. You can really say no to a couple of networking sessions. And you know even if you're not needed at work, you can survive with very little and still be sane. That's a very powerful psychological advantage out there.



For me, I focus more on earning more because my income is scalable. I also think that there's only so much cost you can cut, so the better option for me is to increase my income to offset against inflation and also save more. I already know my own spending patterns after a couple of years of detailed tracking, so lifestyle inflation (spending more because of earning more) doesn't work on me. The extra amount of spending that I do to reward myself after a month of hardwork is but a tiny fraction of the amount of money earned, so cash-flow wise, it's a net net gain. I know myself hence I can make an informed decision on where to focus my energy on.


Do you know yourself too? Which method of saving suits you best?