The Two Ways to Increase Your Money: Income and Spending

Two Ways to Increase Your Money: Income and Spending

When it comes to achieving financial freedom and building wealth, it all boils down to a simple equation: you need to increase your money faster than you spend it. In essence, there are two primary ways to make this happen – boosting your income and managing your spending. Let’s delve into these two crucial aspects of financial success.

1. Supercharge Your Income

Increasing your income is like pouring fuel into your financial engine. It accelerates your journey toward your financial goals. Here are some strategies to consider:

Diversify Your Income Streams:
- Relying solely on one source of income can be risky. Explore side hustles, freelancing, or investments to supplement your primary income. Diversification not only increases your earning potential but also provides financial security.
Invest in Education:
- Investing in yourself through education can lead to higher-paying job opportunities or entrepreneurial success. Consider acquiring new skills or certifications that are in demand. However, here it’s important that you find a balance between the 3 F’s of business: Freedom, Fulfillment, and Finance which you can listen to more about in this interview by Ali Abdaal.
Negotiate Your Salary:
- If you’re employed, don’t be afraid to negotiate your salary or seek raises. Research industry standards and be prepared to demonstrate your value to your employer.
Explore Passive Income:
- Investigate ways to generate passive income, such as rental properties, investments, or creating digital products. These streams can generate money while you sleep. As a creator, I started Lizsfijourney with the intention of authentically sharing my personal finance journey – as well as help others on their personal finance journey through education and resources. This involved creating not only free resources, such as this blog or some digital products, but also paid products as well! You can find my products (free and for purchase) here on gumroad!

2. Master Your Spending

Controlling your spending is like plugging the leaks in a financial boat. It helps you retain more of your hard-earned money. Here are some tips to manage your spending effectively:

Create a Budget:
- Establish a clear budget that outlines your monthly income and expenses. This will help you identify areas where you can cut back and allocate more funds toward savings and investments.
Prioritize Needs Over Wants:
- Distinguish between essential expenses (needs) and discretionary spending (wants). Focus on covering your needs first and allocate a portion of your income to wants. Typical advice is the 50/30/20 method of budgeting – which allocated 50% of your income to needs, 30% to wants, and 20% to savings. If you’re interested in reading more about this method of budgeting, check out this article here.
Track Your Expenses:
- Keep a detailed record of your expenditures to identify areas where you may be overspending. This can help you make informed decisions about where to cut back. However, it’s important to know that tracking your previous purchases only goes so far – it can’t get that money back as this is already a sunk cost (read more about the sunk cost fallacy here). However, tracking your previous spending can be a great place to start to see what your budget shows as your priorities. If there is a discrepancy between what your budget is showing as a priority, and what you actually feel is a priority – it’s time to make a change in your budget!
Build an Emergency Fund:
- Having an emergency fund in place can prevent you from going into debt when unexpected expenses arise. An emergency fund is a financial lifeline that you create for yourself. It’s a smart move where you tuck away some cash specifically for those unexpected surprises life throws at you – like a flat tire, unexpected medical bills, or a sudden job loss. By having money set aside, you’re empowered to handle these challenges without losing sleep or relying on credit cards. It’s always a good idea to keep your emergency fund in a HYSA – you can use this link to get an EXTRA 1% APY on a Marcus HYSA for your first 3 months (that’s 5.4% APY!). Typical advice is to aim for at least three to six months’ worth of living expenses in your emergency fund. To find out what this looks like for your specific financial situation, download my FREE Emergency Fund Calculator here!
Review and Adjust:
- Periodically review your financial plan and make adjustments as needed. This can help you stay on track and adapt to changes in your income or expenses.

Conclusion

Remember, financial success is a journey, and it requires a combination of increasing your income and managing your spending. By carefully balancing these two aspects, you can work toward your financial goals, whether it’s achieving financial independence, building wealth, or securing a comfortable retirement.