Should You Increase Your Salary or Decrease Your Spending?

When it comes to advice on how to become financially independent, there are two schools of thought:

  1. Increase your salary as much as possible.
  2. Decrease your spending as much as possible.

There are personal finance gurus who scoff at the idea of cutting out lattes and other minor unnecessary expenses as a path to wealth and security. They instead advise you to spend your time making as much money as possible. Then there are others who extoll the virtues of thrifty living and frugality in the extreme. They champion a spartan lifestyle in which you can retire early by spending minimally.

So who’s right? Which method will lead most quickly to financial independence? Which to a life in which you no longer have to worry about money? And which tactic for peak prosperity should you pursue?

You are capable of doing both

There’s nothing about being thrifty that takes away from your ability to make more money, and vice versa. It’s not like packing a lunch instead of ordering out is somehow getting in the way of asking for a raise. No one has ever said “Well, I would love to be frugal by not buying new shoes today. But gosh dang it I just CAN’T because I also have to apply to a higher-paying job!” The two are entirely unrelated. They have little impact on each other.

Sure, you can argue that cooking at home instead of dining out and applying for higher paying jobs instead of toiling away for a low salary both take time. Likewise running a side hustle and riding a bike instead of driving both take time. But they are not mutually exclusive. And when you tailor your life to prioritize both forms of financial savvy, you are achieving a level of god-like efficiency that would make MacGuyver weep.

The income to spending Pac-Man mouth

Look at it like this: the lifetime path of your spending and income should form an imaginary wedge.

The top line of the wedge represents your income and the bottom line represents your spending. Where the two lines  of the wedge meet is the point at which your income matches your spending exactly. This is bad: while you’re not in a deficit, you’re also not saving anything.

The angle of the wedge gets wider as you increase your salary and decrease your spending. The empty space in the middle therefore represents all the glorious moolah you’re saving by both earning more and being frugal.

(You will notice a distinct qualitative difference between my graphics and Kitty’s. Whatever. I don’t need her fancy artist skillz to make a visual point! It took me twenty minutes to make that thing in MS Paint and I’m damn proud of it. Judge me. I dare you.)

In other words, why wouldn’t you want to open the mouth of your savings Pac-Man as wide as you can to chomp up as much money as possible?

The benefits of both

The more you increase your salary, the more money you have. Yet it’s amazing how quickly things like frivolous spending, lifestyle inflation, and racking up debt can eat away at that increased income. Meanwhile, the less money you spend, the farther your income can be stretched. This is why you should focus on widening the earning-to-savings wedge, rather than allowing its bottom axis to rise along with the top axis. 

You don’t have to spend money just because you have it. Even if you’re earning six figures a year, it behooves you not to waste it on things you don’t really want or need, things that don’t fit into your overall financial goal. Whether it’s to retire early, pay off your debt, or buy a home.

So think real hard about why you’re earning a big fat salary, why you’re trying to make as much money as possible. Is it so you can buy a $50k SUV and drive it a mile to the store to buy Mountain Dew once a day? (I’m guessing not, but hey, everyone has a dumb hobby and this one happens to belong to my father-in-law.) Or is it so you have more money to spend on the shit you actually care deeply about?

When do you have to choose to increase your salary or decrease your spending? 

Riddle me this: when is your time worth more than your money?

Earlier in this article, I lied when I said frugality and high earning had no bearing on each other. Sometimes they actually do. Sometimes you’re going to have to choose between earning more money and doing something frugal on a case by case basis. We’ve already established that being frugal and earning money both take time. So time will be the deciding factor in this prisoner’s dilemma.

I recently had to choose between buying groceries to cook a homemade meal and cranking out some freelance work. My husband had a late meeting across town, and I had taken on a big freelance project outside of my day job. We were out of food in the house, but we are both human mammals who require sustenance to not die, so we needed dinner. Cooking at home costs significantly less than ordering decent take-out, but it would take me at least an hour to buy groceries and cook a meal. Meanwhile, I was getting paid $65 an hour for the freelance project.

I had to calculate which option, thriftiness or earning, would most positively impact my savings in that moment. The variables:

  • Groceries to cook at home: $10
  • Pizza delivery: $20
  • An hour of my time: $65

If I’d chosen to buy groceries instead of work on the freelance project, I would’ve saved $10 but lost out on the chance to earn $65 in the same amount of time. But if I worked on the freelance project and ordered pizza, I’d still net $45. Not an ideal scenario by any means, and definitely an indication that I need to manage my time better. But the choice was clear.

Most of the time, you should shoot for both. But in the event that you have a Sophie’s Choice related to your time management, it’s best to calculate the highest return on your invested time. For while there’s no cap on how much money you can earn and save, your time is a sadly finite resource.

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8 thoughts to “Should You Increase Your Salary or Decrease Your Spending?”

  1. It’s difficult for a lot of people to live this kind of life. For poor people, increasing income is harder while living below your means as a newish doctor or lawyer can also be difficult. It’s definitely not something that you can just figure out. It takes quite a bit of effort, requiring someone to actually pay attention to what they’re doing with their money and how they’re living. In the situation of pizza vs. grocery shopping, the vast majority of Americans wouldn’t even stop and think. They would just do. I think that’s a big problem with our society as a whole.

    Great post, Piggy!

    1. This is a really great point. I want to write on the topic of lifestyle inflation, and how it’s really vilified even when “inflation” means “I had literally nothing but $100k of debt and now that I have a job I can afford to go to the doctor and buy a new winter coat.” The Pac-Man of income-to-spending is definitely an ideal goal, something to work toward. Thanks as always for reading!

  2. Both for sure! But growing my income has resulted in way better ROI than frugality. No way could I have cut my spending by half on an already low income, KWIM?

    Agree on your point about lifestyle inflation. I now spend more on my health, can afford a dry warm house, and pets. I don’t spend more on consumer stuff just because I can.

    1. Absolutely agree! When it’s an unavoidable choice I always try to side with increasing my income rather than pinching pennies. You just can’t argue with the math.

  3. I agree that both make sense – this is why I’m trying to start some side hustling, so I can keep working as a legal aid lawyer (which I love). I would hate to have to leave this job and take something soul-sucking just to increase my wealth. For me, I prefer, and actually don’t mind, being frugal. To me, frugality is a lifestyle! It sparks an interesting debate though. I also relate to the idea that you don’t have to spend money just because you have it. I’m trying to incorporate a practice of “voluntary hardship” more often. Where I can indulge in something, especially when I have money leftover in my budget at the end of month, but still chose not to. I find that it makes my indulgences all the more gratifying when I do spend money on them. 🙂

  4. >You don’t have to spend money just because you have it.

    I had a friend once who told me their “financial philosophy” was “if you have money left over after you paid the bills, why not spend it?”

    I almost died when they told me that. “Are you crazy?!” I screamed… internally.

    1. I had a crazy moment earlier today, thinking about exactly this… I garden a lot, and I used to try to “save” things for as long as I could. But gardening punishes you for that mentality. You have to use things while they’re fresh and alive, because they’ll die whether you use them or not. I ripped up a bunch of perfectly beautiful marigolds today and fed them to my chickens, thinking “ugh but they’re still so beautiful!” But I know I have to because I’ll come out after the first frost and find them brown and useless. It’s a brand new way of thinking that’s very hard to acclimate to, and I realized it must be just as hard for people who’ve learned to think the opposite to see things “my” way. (The “lunatic who compulsively saves everything” way.)

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