Should You Focus on Cutting Expenses or Making More Money? A Balanced Approach to Financial Success

A common question many people wrestle with is this: Should I bother cutting my expenses, or should I just focus on earning more money? After all, if you’re earning more, why stress over budgeting, right?

Let’s face it—the term "budgeting" can feel overwhelming. It might conjure up images of restrictions, sacrifices, and spreadsheets. Some prefer to reframe it as "streamlining expenses" to make it sound less intimidating. But whether you call it budgeting or expense management, the truth remains: budgeting is not your enemy.

In fact, budgeting puts you in control of your money. It gives you the power to tell every dollar where it should go, down to the last penny. Instead of your money controlling you, you become the master of your finances.

‍

The Case for Balance: Cutting Expenses and Increasing Income

The key to financial growth isn’t choosing between cutting expenses or increasing income—it’s balancing both. Here’s why:

Imagine your household income is $250,000 per year, but your annual expenses are $300,000. Even if you double your income to $500,000, your spending habits might follow suit, rising to $550,000. You’d still find yourself overspending by the same $50,000.

This phenomenon, known as lifestyle inflation, highlights why solely focusing on increasing income doesn’t solve the problem. Without addressing spending habits, higher earnings can simply lead to higher expenses.

‍

A Business Analogy: Gross Profit Margins and Personal Finances

Consider how businesses approach profitability. A company with $5 million in revenue and a 10% gross profit margin might increase its revenue to $10 million. But if it doesn’t address its cost of goods sold (COGS) or other direct expenses, that 10% margin remains the same. While the dollar amount of profit increases, the underlying inefficiencies persist.

The only way to improve profitability is to scrutinize every expense and identify areas for cost savings. Similarly, improving your personal financial health requires managing both sides of the equation: earning more and spending less.

For example, if a business streamlines its processes, renegotiates supplier contracts, or adopts cost-effective technology, it can lower its expenses and increase its profit margin. On a personal level, this might look like cutting unnecessary subscriptions, shopping smarter, or cooking at home instead of dining out.

‍

The Power of Budgeting: Spending Less Than You Earn

Budgeting helps you spend less than you make and paves the way for a debt-free life. When combined with efforts to enhance your income, budgeting becomes a powerful tool for achieving financial freedom.

‍

Why Budgeting Feels Restrictive

Many people avoid budgeting because it feels like giving up the things they enjoy. But a good budget isn’t about deprivation—it’s about prioritization. A well-structured budget allows you to allocate money for both necessities and the things that make you happy, whether it’s travel, dining out, or hobbies.

‍

Tools to Simplify Budgeting

Fortunately, there are plenty of budgeting tools available to help you manage your finances like a pro. Here are some standout options:

‍

1. EveryDollar

Developed by financial expert Dave Ramsey, EveryDollar simplifies tracking your spending. This app allows you to assign every dollar a job, ensuring you stay on top of your finances. It’s available both online and as a mobile app.

For further insights, Dave Ramsey’s book The Total Money Makeover is an excellent resource for anyone looking to transform their financial habits.

‍

2. You Need a Budget (YNAB)

YNAB is another popular budgeting tool, known for its four-pillar approach to budgeting. Its founder, Jesse Mecham, also authored a book on the topic, making it a must-read for those wanting a deeper dive into the principles of budgeting.

Both EveryDollar and YNAB function as post-purchase tools. They allow you to track and categorize your spending after each transaction. For example, if you budget $1,500 for groceries in October and spend $1,300 by the end of the month, you’ll need to ensure that your next grocery trip stays within the remaining $200.

‍

3. Qube Money: A Pre-Purchase Solution

Qube Money offers a unique approach to budgeting. It allows you to pre-categorize your spending using digital "envelopes" (called Qubes) that you fund in advance. When you make a transaction, you open the corresponding Qube, and the payment is processed only if there are sufficient funds in that category.

This system mirrors the cash-envelope budgeting method of the past, updated for the digital age. With a physical Qube Money debit card linked to your digital envelopes, it provides a tangible way to manage your spending in real-time. Here's a link to sign up and get 2 free months.

‍

Tips for Success: Small Changes, Big Impact

1. Track Your Spending

Before you create a budget, spend a month tracking every dollar you spend. This exercise can be eye-opening and help you identify areas where you might be overspending.

‍

2. Automate Savings

Set up automatic transfers to your savings account or retirement fund. By treating savings like a non-negotiable expense, you’ll build wealth without relying on willpower.

‍

3. Set Financial Goals

Whether it’s paying off debt, saving for a vacation, or building a nest egg, having clear goals will motivate you to stick to your budget.

‍

4. Reward Yourself

Budgeting doesn’t mean eliminating fun. Celebrate small wins, like hitting a savings milestone, with something that brings you joy—just budget for it!

‍

Why Balance Matters

By managing your spending and increasing your income simultaneously, you create a solid foundation for lasting financial success. Budgeting doesn’t have to feel restrictive—it’s about empowering yourself to live within your means while working toward your goals.

Whether you use EveryDollar, YNAB, Qube Money, or another tool, the most important step is to take control of your finances today. With the right habits and tools, you can achieve financial freedom and peace of mind.

‍

Final Thoughts

The debate between cutting expenses and increasing income doesn’t have to be an either-or decision. Instead, aim for a balanced approach that addresses both sides of the equation. When you streamline your expenses and boost your earnings, you’ll not only improve your financial health but also set yourself up for a more secure and fulfilling future.

‍