When it comes to putting more money in your pocket, there are really just two things you can do: Cut expenses or increase income. And while most money management advice focuses on cutting expenses, many experts agree this advice is short-sighted. When it comes to your financial future, increasing your income will provide a better long-term plan to create the financial future you have always envisioned.
The immediate change: cutting expenses
If you think about what you can do today to put yourself in a better financial position, almost all of them will be about cutting back on your spending habits. It probably wouldn’t take long for you to realize the areas of your life where you are spending money that isn’t necessary, whether it be unnecessary memberships, dining out at restaurants, or buying excessive amounts of clothing. And while it’s true that cutting these expenses is a great way to provide some financial relief in the short term, it will only get you so far.
For instance, if you earn €1,000 per month and cut 25% of your expenses (which is a HUGE cut), you are limited to saving €250 per month. Any additional money in your pocket will have to come from somewhere else. This makes the benefits of cutting your expenses quite limited.
Instead, if you want to have a potentially unlimited financial advantage, you should look toward increasing your income.
The long-term benefit: increasing income
While it isn’t easy to increase your daily income, focusing on ways to bring in more cash over time could lead to a better financial future. There are ways to make extra cash that you can easily do today, while others will require more time and energy to get the ball rolling. However, these methods of increasing income come with unlimited benefits and could grow your wealth exponentially over the coming years.
Here are a few ways you can increase your income:
Change careers
Are you stuck in a job that doesn’t pay enough? Time to think about a career change. And no, it doesn’t have to be as overwhelming as it sounds. In today’s world, changing careers is much more common than it used to be. Do your homework beforehand to fully understand how to prepare for your next career and if it will ultimately lead to an increase in your income.
Negotiate your salary or find another employer
You may be on a career path you find meaningful, but your employer doesn’t value you. If this is the case, it might be time to negotiate a higher salary or find another job in the same industry with higher income.
When it comes to negotiating, do your research to present a valid argument as to why you deserve more money. It also helps if you have tested the waters at other companies to see if you can obtain a higher salary. Doing so makes a strong case to your employer that you are worth more than your current income. If your current employer disagrees, it might be time to hit the road and work where people are willing to value your skills and increase your income appropriately.
Get moving
You might be in the right career but the wrong city. Some cities have a tough job market, as well as a high cost of living. If you happen to live in a place where your skillset isn’t being valued or you can’t find a good job, consider moving to another city or county. Or if you’re feeling adventurous, you could even try moving to a new country.
Take Finland as an example. While the median household income in Finland is €21,150, if you move to neighboring country Sweden, you’ll more than double your median household income to €43,402.
Learn a new trade or get another qualification
Enjoy woodworking? Or maybe you consider yourself a businessperson but never had formal training. Learning a new trade or earning a degree or tertiary qualification is easily one of the most surefire ways to increase your income. You can use your new skills to build on your current employment or add income in other ways. It will be one of the more time-intensive ways to earn more money, but at the same time, it could result in significantly more income throughout your life.
Invest
It’s no secret that the world’s wealthiest people earn more money from their investments than from their day job. Investing provides a comfortable, hands-off way to increase your income without having to do much extra work. This is especially true if you utilize the power of compound interest to increase the value of your investments over time exponentially. There are plenty of investing options; from the stock market and real estate to p2p loans, cryptocurrencies, and everything in between.
Start a side business
You could start a new business that leverages your already existing skills to make extra money. Even if your new business starts slow and doesn’t make much money today, the earning potential in raising your income is limitless, and therefore provides a much higher financial upside than cutting your expenses.
For instance, content is a great way to increase your income steadily over time. Let’s say that you are an expert in the construction industry. Instead of taking on a second job, you could begin creating content for the industry. By becoming a thought leader in your area of expertise, you can utilize the knowledge you already have to increase your income. Maybe you will only sell a few articles in the first several months and bring in an extra €100. However, as you grow your new source of income and get more business, there is unlimited potential for how much you can earn.
Adding or subtracting—what’s best for you?
Think about your life. Do you feel that you’re an over spender? Are there areas of your life that you could cut back on? Or, are you content with your spending habits and are already living a quiet, simple life? Alternatively, do you have time to dedicate towards adding another source of revenue, or do you already feel overwhelmed with everything you have to do?
These are some of the critical questions you must ask yourself when thinking about cutting expenses or increasing your income. In truth, both options are viable for building wealth, but only you can know which one suits you better.
Yet, the way to increase the quality of your life while also putting yourself in a position to grow your wealth is more dependent on the money you bring in than the expenses you can cut. Even if you implement just a few of the previously mentioned options, you are likely to see your income increase over time, leading to a more secure financial future.