When to stop cutting expenses and increase your income

When I first dove into the world of personal finance, it seemed like in order to get to the place of not living “paycheck to paycheck,” and be able to reach any semblance of financial stability, I had to do some serious cutting in my everyday life. While I think the idea of cutting out unnecessary expenses keeps getting touted as the solution to make your budget work and coincidentally, I think it is also what scares people away from any sort of “budgeting” is that, cutting out the joy in your spending. 

What if we stopped trying to cut out things and focused on increasing our income?

Short Term: Depending where you are on your financial journey, sometimes cutting can be very advantageous in reaching your goals. 

Cutting expenses -

If you are working with an income of $1,000 and you realize that you have been eating out a lot and have been spending more than usual. If you begin taking your spending and realize you can cut back your monthly spending about $250 each month, that is HUGE. That is 25% of what you can now use elsewhere. 

Long Term: Sometimes cutting out things can only take you so far. While it is easier to cut back on discretionary spending, cutting back on core expenses like housing, food, and fixed utilities can be a bit more difficult. I think at this point it would make perfect sense to look at ways to bring in more revenue. 

Side hustles - 

When trying to pay off my debt I was hungry and energized so I would take odd jobs like cleaning and catering to make a little bit extra cash so that I can make an extra payment on my credit balance and also some extra cash so that I can do some fun activities. While I love side hustles and random infusions of cash, I would like to place these in the short term category, unless it is something that can be scaled and made long term. It is hard to enjoy life when you are always working.

Negotiating a raise or change employers - 

If you have been with an employer for a couple of years and feel that your skills are under-appreciated, it might be time to spruce up your resume and begin applying to other jobs. Current research by Zippia found that the average salary increase for switching jobs is 14.8% An employee is usually in a good place to negotiate a raise if you have been doing significant work outside of your described role OR have recently been doing the work of multiple positions. Moreover, keep in mind that the best time to negotiate a raise with your current employer is to bring another job offer from another company to the negotiating table. 

Changing careers - 

If you feel that you are currently in a career that is not paying you as much, focusing on transferable skills can help you pivot into a role with a higher growth potential.

Learning a new trade or getting new certifications - 

Learning a new certification that can bring value to the company you currently work in and can help in creating your case for a salary increase. Moreover, acquiring certifications can also prove fruitful in any future job search. These can be substantially cheaper than going back to school for a more expensive degree. 

If you are wondering how these can be financed there are a couple options: 

• Asking your employer to pay for these: oftentimes employers will have a tuition-reimbursement program for any courses that can bring value to your role and the company.

• Take advantage of free certifications like Coursera and Alison. If you are unsure if you can commit financially, you can audit some courses for free - you will not receive an official certificate but can help you in deciding if that course is for you before you financially commit.

• Good ‘ol budgeting: if none of the above options work, consider revising your budget. Forgoing dining out in lieu of saving for a course or certification is the epitome of “invest in yourself.” Dining out is great, but so is getting a raise. 

The Takeaway - 

When it comes to budgeting and making your budget work. Sometimes it makes sense to cut back on certain spending to meet short term goals. When it comes to a lifestyle, it will often make more sense to increase your income. While long term income increasing will not always come as quick as saving money, sometimes it can work out best in the long term.