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The Only Two Factors in Personal Finance

Updated on January 13, 2014

How will you begin having more money each month?

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With the endless advice on the web about personal finance, all of the tips, budgeting, tricks, and coupons really boil down to two simple conclusions.

It does not matter what your goal is: To retire early, to pay off debt, to go on a vacation, to stay at home with your children, there are two ways you can get there,

Spend Less or Make More

There is no way around it(yes there are exceptions like a windfall or inheritance, but for the majority of us this is the case). It’s one of the two, or a combination of both. So how does this realization help you in your journey? Let me use an analogy, because I love analogies, and if you have read anything else I have written, food and money are very interchangeable topics to illustrate a point.

Suppose the goal is to lose weight. People have this goal for many reasons, much like with money, there are two basic ways to get there. You can eat less (calories) or become more active (burn more calories). These directly relate to money as we either have to go with less (spend less or eat less), or we have to do more (make more money or be more active).

This is helpful because it begins to build the framework for you to plan and create a method to reach your goal. Pick one of the two categories and dig in. I recommend starting with trying to spend less, as you will see instant results that can be implemented very quickly. Examples include: cutting cable, selling a car to pay off a loan, eating out less, increase your deductible on insurance, and on and on we could go. The point is to start on activities that eventually equal you spending less on them, or cutting them out all together.

For many, you can achieve your goals by only spending less, and redirecting the savings to other sources, such as a vacation fund or paying down debt. For others, they will make some changes, but will not want to go to the extreme of others that could save them more money, but there is still a disparity between what they make and what they spend. If that’s the case, move on to the second option.

Your second option, to make more money. Some people may not want to change any spending habits, but still want extra money at the end of the month. You will not need to look for ways to bring in more income. This may mean asking for a raise, getting a second part tome job, starting a blog, starting a side business, renting out part of your home, and on and on we could go. This option can take more time to find and start, and may also take more time to see some real affects, since we only have so much time to work, gaining more income is a consistent, but sometimes lengthy process.

My recommendation? Do a combination of the two. Start finding ways to cut spending, while keeping your eyes open for additional income opportunities. I also recommend having some defined goals in mind. Determine how much extra money you want each month. Then work on saving, if you hit your goal, great, now just maintain. If you’re still short after doing all you can think of or tolerate, pursue a second income harder.

To circle back, you hear from all the experts that a combination of diet and exercise is the best way to reach your goals, personal finance is no different.

The reasons have to do with diminishing returns mainly. The further you go in one area, the more you have to do to see smaller results. But if you pursue your goals in two unrelated areas, the gains are higher with less effort.

For ways to reach your goals of either spending less or making more, read my blog http://stewardology.com/blog, or my other articles on hubpages.

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