I was asked by a reader for a money tip for the new year.  I would typically give the save, invest, repeat spiel, but I thought I would give a tip that is even more fundamental.

If I was to give a personal finance tip for the new year, it would be about the way that we think about money.  The predominate thought in the personal finance blog world is to “spend less than you earn.”  Although I believe deeply in that concept, I think that a better way to phrase it is to “earn more than you spend.”  Simply rearranging the phrase creates a paradigm shift from one of scarcity to one of abundance.

Providing that expenses are kept in control, focusing on increasing your income is many times more powerful than reducing expenses.  Expenses can only be reduced so far (to $0), but earned income is potentially unlimited.  I know, this is strange coming from a frugal guy, but it’s really common sense and can make a big difference in the way that you think about money.

At the beginning of this year, I was very concerned about my wife leaving for maternity as she made over 50% of our household income and maternity benefits only cover 50% of her income.  Instead of dwelling on that fact however, I focused my efforts on making more income.  As a result, we now have the luxury of choice.  That is, instead of going back full time after the 1 year maternity benefits, my wife can go back part time and we still would be comfortable.

So focus on making more income this coming year, you’ll be surprised at what can happen once you set your mind to it.

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FT is the founder and editor of Million Dollar Journey (est. 2006). Through various financial strategies outlined on this site, he grew his net worth from $200,000 in 2006 to $1,000,000 by 2014. You can read more about him here.
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phoenix life insurance
12 years ago

Spend less than you earn. Earn more than you spend. They say the same thing but interesting to read them.

Bankruptcy Saskatoon
12 years ago

I think it is normal for an average human being to first start saving by cutting expenses before looking for a ways to increase what he earns. However, this is a great way to look at this concept as it is truly a motivator for someone to not only save but also increase their own net worth!

12 years ago

So how are you doing so far? Have you increased your income ? Cut your expenses ? or better both!

Personally I’ve been operating a part-time business on top of my full-time job, way easier and more profitable than cutting that extra latte! (Although I got to admit I’m trying to change that latte for a cup of tea…)

12 years ago

@ Gates VP: “You drop your quality of life to meet future goals, you don’t drink lattes from 25 to 65 so that you can drink as many lattes as you want from 65 to 85.”

I’d like to break the fabled Latte Factor ever further than you have done. If you follow the LF you will not drink one latte in your life. Why? Because whilst you are denying your taste buds between the ages of 25-65 (or more!), you are spoiling your savings account.

BUT…you are constructing your savings and retirement plan based upon a non-latte life. You are not saving or earmarking any money for future lattes. Your “future goals” contain no lattes, just as your present goals contain zero lattes. You will go your whole life, 25-85, without ever having tasted a latte.

In conclusion, the Latte Factor diminishes the quality of ALL stages of your life.

Gates VP
12 years ago

Hey FT, looks like some “Killing Sacred Cows” stuck with you. Worked on me too, I saw it from the title on the feed reader (no article required :)

This change of phrase is right on!

@Al:When I save a dollar by reducing spending, it’s all mine.

This is the “downward” mentality of money. This is the Latte Factor school of thought. This is the guy who’s tagline is “Live Rich, Finish Rich”, but goodness don’t spend your money. How am I supposed to “live rich” if I don’t spend my money? Why do I want to die with money in the bank?

The Latter Factor has a simple fundamental problem, quality of life. Bach gives you reasons not to drink the latte so that you can have a bunch of money in 40 years. However, he never “replaces” the latte. You don’t “make your own” or “chip in for a machine at work”, you just don’t drink lattes. You drop your quality of life to meet future goals, you don’t drink lattes from 25 to 65 so that you can drink as many lattes as you want from 65 to 85. Does that sound like the great life?

But that’s not what we want to do.

We want to maintain and improve our style of living and that almost inevitably takes more money. Conscientious frugality involves cutting those “expenses” that fail to provide value, it’s not about wantonly chopping expenses for the pride of having money in bank.

Yes, most people can chop expenses. Yes, most people can even reduce expenses while maintaining their standard of living. But each consecutive time you trim the fat, there’s less fat to trim. On the other side, there is no known ceiling for what one person can earn. Whatever you make per hour, there’s someone making twice that much money.

So for people who want to fix their finances next year, go ahead and trim a little. But start planning to grow, to work the problem from both sides. At some point, it’s way easier to try to make $100/month than it is to trim $50/month.

Jules @ Lovely Las Vegas
12 years ago

Warm greetings! It seems like everyone has a different opinion about this, but doesn’t it seem that these two concepts are on a continuum, or somehow interlinked? For example, if your goal is to save money, and if your income is a constant, then you need to figure out how to reduce expenses somehow in order to have excess money to save. But if you can’t reduce expenses or don’t want to change your spending habits, then the only way one can save is to increase one’s income. Depending on one’s situation one or both of these scenarios may not be possible, but with time, conscious evaluation and effort, I think everyone can figure out how to save or save more by using one, or a combination of the two principles mentioned in this article, even if the shifts in either instance correlate to minor changes. For the most part, past generations were able to some how save for rainy days. Even though my grandparents were poor by definition, struggling with their farm and paying bills, they lived minimalistically, were frugal, took on extra work when needed, and somehow were able to provide for their family through cutting costs sometimes and from taking on extra, non-farming work other times. Everyone’s scenarios are different, of course, and times definitely are different, but I think the “earn more than you spend” and the “spend less than you earn” are equally valid points. They may not always work at every step of the way for everyone, but overall, both can have an positive impact on a families ability to save in the long run.

12 years ago


“I’m not arguing that it isn’t possible to make more money, I’m arguing that you will need to find a balance inbetween work and family and that will limit your willingness to get a second job.”

Shall we dissect that paragraph:

1. “I’m not arguing that it isn’t possible to make more money” — then don’t argue, offer solutions instead of “I hate…” comments.

2. “…you will need to find a balance inbetween work and family…” — that’s true. There are only so many hours in the day. A single mother of three has to provide not only monetary support for her family but also ‘in-person’ support. But, there are also times in life when a person has to choose the best path for their family and not themselves (ie what is best for the children). It’s called making sacrifices. Mother is the hardest job in the world.

3. “…and that will limit your willingness to get a second job.” — again, it’s all about the mindset. As you say, “LIMIT YOUR WILLingness”. How much strength of character does that mother (or anyone else wanting to make extra money) have? How much will power do they have to actually overcome those LIMITS (whatever they may be)?

No, paper routes and collecting cans will not rake in the millions, but if you want to make extra money, then you have to research and asses the avenues available to you. If you are in the same situation as your example family, then you have to realize that your ‘extra income’ stream won’t double your regular paycheque. But think differently: if the paper route brings in an extra 5% of regular income per month…great! I’d like 5% more money a month too! Double that with cutting costs: add 2.5% more income; cut 2.5% expenses = same result with only HALF the work as initially forecasted!

Single mother with no education and three kids doesn’t have the same money making options as a Harvard law grad. It all comes down to choices. Our past choices determine our present and probable future. If we don’t deal with the problem at hand then we have to deal with the consequences. As time goes on, those consequences compound (like savings).

“A logical person in this situation will START somewhere by cutting expenses before resorting to a second job.” That’s fuzzy logic. My kind of logical person would feel like maybe flipping burgers isn’t the best way to support his/her future family and would go about doing whatever it took to secure a better financial base — raising the standard (more income) rather than lowering it (cutting costs). Endure the short-term pain to avoid the long-term pain.

After writing all that, reality has to play a part in all of this. Not everyone has the mentality or fortitude to be a “middle-class” citizen (I seriously wish I didn’t!). Nature hates a void, they say. There will always be poor people. Unfortunately, there looks to be a whole lot more coming your way in 2009!

The Plummet of ’08 is a great example. The majority of people only see red (I know I’m seeing a LOT of it!). But there are plenty of people caught in the plummet who are also looking for opportunities. They will be the ones who are further ahead (making more money) in five years, not the ones who only cut costs to “save” money today.

12 years ago


A paper route and collecting cans and bottles will generate very little income.

“or even…gasp!…get a different job that pays more! ”

This is exactly what I hate about MSN articles talking about saving money. They offer vague and often useless solutions to problems. Need to save money? Stop driving two cars and only drive one! So simple!!

I’m not arguing that it isn’t possible to make more money, I’m arguing that you will need to find a balance inbetween work and family and that will limit your willingness to get a second job.

FT, you have a kid on the way, right? Imagine if you were flipping burgers while your wife is in labour… or you can’t go to school plays, birthdays and other events because you have to make an extra buck. A logical person in this situation will START somewhere by cutting expenses before resorting to a second job.

debt relief
12 years ago

I don’t think I’ve seen a more complete list. I agree with your charity suggestion. There are reports that charities are really suffering with the current economic conditions. Let’s do our best to help the ones we can.

12 years ago

@Brandon: again, excuses for one’s situation. FT’s post is trying to show the value of a ‘glass half full’ approach to personal finances, regardless of who or what you are. Instead of always looking at how much is going out, focus on how much is coming in.

Single mother, no education, three kids = no options for earning more? Let’s explore options shall we?

Government funded education programs; paper/flyer route; collect cans/bottles; baby-sit; or even…gasp!…get a different job that pays more!

It’s all about mind set. Yes, there is also reality. But the thing is, you have to START somewhere! Don’t just flap your arms and huff in defeat or you truly won’t earn any more. No one said life, or making money, was easy.

I was raised by a single mother as well. Let me tell you, I definitely respect her now that I’m older because she really busted her a$$ to provide for her kids and create her own success (she bought a house and paid it off in ONE YEAR!).

It can be done and it is done, every single day, all over the world.