The formula for growing your bank account is actually very simple. Either you bring in more money, or you spend less money. So what is the most successful approach? As in many other parts of life, moderation is the key. You will have greater success with your financial goals if you do a little bit of both decreased spending and increased earning. Focusing on one or the other instead of both can create too much stress for too little outcome.
Making More Money is not the Only Answer
Bringing in a larger paycheck might seem like the easiest way to increase your wealth, but it usually doesn't make that much of a difference. Most income increases are gradual, which means that you will have more time to get used to the idea of bringing home a little more money every month. You can easily put that extra money into purchases that you wouldn't have made at a lower income level. Almost everyone who earns a raise at the end of the year shifts their spending habits so that they need another raise at the end of the next year.
You Can Only Reduce Expenses So Much
Cutting back on your spending cannot be your only path to growing wealth, either. The amount of spending you can reduce carries an absolute limit. You have to pay your utilities, your mortgage or rent, your car payments, and your credit card payments. If you limit yourself to only spending money on the bills you have to pay, you will become frustrated and probably end up spending more money in a blowout spending spree than you would have spent if you had budgeted yourself a little extra pocket money for eating out or entertainment.
Income Increases not as Limited
The good news about focusing your energy on increasing your income is that you really have no limit on the amount of increase towards which you can work. Unlike spending cuts, you have no absolute line to stop at when trying to bring in more money. You will be more successful if you look for ways to increase your income gradually rather than focusing on large financial windfalls. As you begin to bring home more money, don't change your budget items. Put the extra earnings into a special savings account until they are substantial enough to invest in a high yield option.
Get Your Expenses in Order First
Although you can't grow your money through cutting expenses alone, you can improve your bottom line by streamlining your expenses right away. Look for extraneous costs that you can live without. Think about creative ways to reduce what you are spending. Maybe it is time to get rid of cable or your landline telephone. By reducing your spending just a little bit and increasing your earnings just a little bit, you will double the amount of new money that is in your account. Divide your energy between the two for the best results.
Jessica Bosari is a freelance blogger who enjoys writing about money-saving topics for LowIncomeApartmentFinder.com. The site matches renters to cheap apartments, helping people save money and live well with less.