Increasing Income vs Decreasing Expenses (DO BOTH)

When I was first interested in personal finance I listened to all of the mainstream guru’s.

The one thing they all have in common is hammering home the point that you need to reduce your expenses, but rarely do they talk about increasing your income.

I’m not talking pyramid scheme’s using “Rich Dad Poor Dad” as a religious text.

The reality is, Americans have a debt AND income problem.

The Debt Problem

We all know American’s are saddled with debt. We know this is true because statistically, it’s you and it’s me and it’s everyone we know.

According to, here’s the average amount of debt for each age group:

Under 35: $67,400
35–44: $133,100
45–54: $134,600
55–64: $108,300
65–74: $66,000
75 and up: $34,500

That’s obviously a huge problem and we need to address it, but it’s not the only problem.

The Income Problem

According to the U.S. Census Bureau, “The 2017 nominal median income per capita was $31,786. The mean income per capita was $48,150.”

In 2017, 43.1 million Americans lived below the federal poverty threshold. That’s $24,858 for a typical family of four.

This is obviously a problem as well. Everyone wants to point to low minimum wage and stagnant wage growth. That’s fine, but it’s not the reality.

According to the Bureau of Labor Statistics, “Among employed teenagers (ages 16 to 19) paid by the hour, about 8 percent earned the minimum wage or less, compared with about 1 percent of workers age 25 and older.”

The reality is, 99% of workers over the age of 25 are earning more than minimum wage, yet still have a problem making ends meet and more importantly saving for their financial future.

The problem is the lack of ownership and the dependence on the government to solve our problems. There are 2 financial levers completely within our control.

  1. Decreasing Expenses

  2. Increasing Income

Need some income ideas? Here are 41+ Proven Ways to Make Money Fast from Money Life Wax

Decreasing Expenses

I believe you should decrease your expenses. In order to do so, you have to implement a budget.

A budget is the most important thing you can do for your family and marriage in my opinion. It forces you to communicate about money, understand your money and know which levers you can pull to change your financial situation.

One of those levers is decreasing your expenses. Let’s say you implement a budget and discover you’re spending $5,000 month. You determine that $500 of that is not essential to your survival.

You decide to reduce your spending to $4,500 and save yourself $6,000 per year. Think of what an extra $6,000 could do for your future.

If invested in the total stock market, it could be worth $89,000 in 10 years:


The Problem With Decreasing Expenses

Decreasing expenses is great, and that alone can change your life. The problem with decreasing expenses is it can only be decreased so much. There’s a point where you cannot decrease your expenses any further and still have your basic needs met.

Decreasing expenses goes hand in hand with sacrifice, and is perceived as a negative by many when they’re first interested in personal finance.

Expenses you should decrease:

  • Debt

    Payback the money you owe and stop borrowing.

  • Subscriptions

    Cancel the subscriptions you don’t need or use.

  • Restaurants

    Reduce the frequency in which you eat out.

Increase Your Income

Increasing your income is the approach that EVERYONE should be hammering, but we don’t because of a small group of people gets triggered by it.

Your income potential is infinite, but decreasing expenses can only get you so far.

Let’s take the same example from above. The family is spending $5,000 per month (true expenses are $4,500). Instead of decreasing their expenses by $500, one of them worked to increase their income by $1,500 a month ($18,000 a year).

If invested in the total stock market, it could be worth $266,000 in 10 years:


How To Increase Your Income

That story is great, but how am I supposed to increase my income by $18,000 a year?

Short Answer: Figure it out.

My earned income wen’t from $14,400 in 2017 to $42,000 in 2018 to $70,000 in 2019 by finishing my bachelors, going to work, earning 2 promotions and an MBA degree.

We further increased our household income by my wife teaching full-time rather than being a part-time preschool teacher (going from $1,000/month to $4,000/month).

We took our household income from under $30,000 per year to over $130,000 in just a couple years. I called it the slingshot effect and we had been working towards it for the better part of a decade.

The problem with increasing your income is that people are unwilling to do what’s necessary to make it happen. It won’t happen on its own and nobody is going to do it for you. It’s a lot of hard work.

Here are the ways we increased our household income:

  • Changing jobs/careers/industries

  • Learning to sell myself to employers

  • Moving from hourly wage to salary

  • Moving states/cities for employment

  • Getting a salary + commission job

  • Negotiating salary

  • Earning a college degree(s)

  • Combining finances with my wife

  • Supporting my wife so she can work full-time

  • Learning a valuable skill/trade

  • Starting a side business

Income Trajectory

There’s a law of income that circulates the personal finance community. It’s the idea of income trajectory. This is the idea that your income will continue to increase until it peaks at some age in the future.

According to Barrons, For women, peak earning years are about 40 years old, and for 49 years old for men.

The higher your income is earlier in life, the higher your trajectory and thus, the more you’ll earn in your lifetime. If you’re making $50,000 in your 20’s, your lifetime income trajectory is much higher than if you’re earning $30,000 in your 20’s.

You can increase this trajectory by increasing your income. A common idea is to change jobs every 1-3 years after college. Not frequently enough to be considered a “job hopper” or “dabbler,” but often enough to get higher salaries each time.

Often, the best way to earn a higher salary is to take a new position and negotiate.

Unlike decreasing your expenses, working hard to increase your income won’t just help you in the short term, it will help you for the rest of your life.

Increasing Income AND Decreasing Expenses

If you want to supercharge your financial future, you should be increasing your income AND decreasing expenses.

Reducing expenses by $500 AND increasing income by $1,500 a month:


Nobody Talks About Increasing Your Income

Dave Ramsey is the anti-debt guy. His content is about 90% anti-debt and very little about increasing income and investing in yourself. It’s because of his demographics.

He’s largely working with individuals who max credit cards on junk, spend everything they make and then some. It makes sense that he has built a career on being anti-debt. Nothing against the guy, I love his stuff and he’s a bonafide expert of his craft.

The reason he doesn’t give the same amount of time to increasing income is for 2 reasons:

  1. People don’t want to take ownership

  2. It’s not a quick win

You see, if he spent all of his time talking about the long arduous road of investing in yourself, increasing your income and waiting 3-5 years to see the fruits of your labor, he wouldn’t have a $49 million mansion.

He wins because he gets people to cut up their credit card and fear to open another one. Thus, they save money and get out of debt. He’s made a scapegoat out of the credit card. People can put all of their blame on credit card companies and not take any responsibility for their financial choices.

Increasing your income is difficult, time-consuming and requires sacrifice, but the payoff is 10 or 20 fold compared to decreasing expenses.

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