You Can Make More Than You Can Save

There’s more to personal finance than frugality…

Spend less than you earn and invest the difference.

That’s the game, and there are three parts: spending less, earning more, and investing wisely.

The third pillar stands on it’s own, but the first two are just different approaches of doing the same thing: creating a surplus.

So which approach is better? Yesterday, I laid out the case for frugality, which you can read here:

A Dollar Saved is More Than a Dollar Earned

Today, I’m making the case that building your income, not pinching pennies, is the most effective technique for building your wealth. Let’s talk about it.

Diminishing Returns vs. Exponential Gains

Let’s imagine for a second that you make $50,000 after taxes and spend $40,000. Great job, you have an annual surplus of $10,000. Hopefully you are investing it wisely.

Now, saving $10,000 a year is great, but you think that you can do better. How should you go about it?