Hot topic debate in the realm of personal finance – the answer to the question, “Is it better to make more money or to save more money?”
For some reason, a lot of responses thrown at those who ask this question seem to group absolutely everyone together. But as usual, which option will work best for you really depends on the nuances of your situation. In this case – namely two things: how easy it would be for you to make more money, and what end goal you’re actually after.
Factor 1: How Easy Making More Money Would Be
The way I see it, if you’re currently in the type of situation where making more money is not only an option for you, but it’s both viable and easy for you to do, you’re in a completely different boat from anyone who would have to work a hell of a lot more or one heck of a lot harder to make much extra.
Whatever extra money you could potentially make essentially needs to be more valuable to you than the trade off. If you’re a full time teacher and working a side hustle like tutoring would take away valuable time you want to be spending at home with your kids, is it worth it? Probably not.
If you’ve got extra time to kill on a side gig you enjoy grinding away at or are over-qualified for your job and could probably get a new one that paid you better for little to no change in your job satisfaction level, you should probably work on making or getting paid more.
Factor 2: The End Goal You’re After
The end goal you’re currently after also has a lot to do with which option will work best for you. If you’re fixated on the idea of being more wealthy – having more savings stashed away for a rainy day, more investments, or getting your mortgage paid down faster – you’re probably going to want to concentrate on saving more, as it will likely have more of an impact in the long run on wealth generation.
Why? If you’re making more money, you have to not only account for the fact that you’re going to be paying more taxes (and thus, making X amount extra salary-wise won’t mean you’re taking that extra X amount home), but chances are also quite high that if you’ve not trained yourself to save, you’re going to increase the amount you spend along with the amount you pull in, thus negating the value of the extra income from a wealth-generation-over-time perspective.
But let’s say you don’t really care about wealth generation – you’re happy with what you have or you’re not interested in building up wealth for one reason or another. If your end goal is to make a lot more money than you currently do to have more to spend each day, you likely need to concentrate on earning more.
To get there you may need to consider a different career trajectory, potentially going back to school and specializing, or starting a business if being self-employed is something you can see yourself doing.
You can obviously supplement your income with odd jobs (I mentioned tutoring before, even simple ideas like that can easily do the trick). These side gigs work well if you’re hoping to have a slightly higher income, but don’t work if you’re hoping to double or even triple your current income. Yet again, what you should do depends a lot on what you’re after.
When to Make More Money VS Save More Money
The best time to push to make more money is therefore when:
- It’s easy for you to get paid more with little extra time or effort on your part.
- You want to earn more month to month so you can spend more money in your day to day life.
While the best time to concentrate on saving more money is when:
- You want to have more wealth (cash in the bank, investments, etc.).
- The trade off for earning more takes too much time, effort, or happiness away for it to be worth it.
The ideal time to do both saving more and making more:
- When making more is easy or the trade off of time, energy, and effort is worth it.
- When you’re interested in generating more wealth and not simply interested in making more to spend more.
The best order if you’re attempting to do both and want to maximize wealth? Learning to save more, then raising your income, but not spending any more than you initially did. That way, whatever extra you make is extra you save.
Where do you stand on the making more vs saving more debate?