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Should You Increase Your Income or Reduce Your Expenses?


I’m still on a money-making kick lately, although it hasn’t been too fruitful yet. Karen left a comment that brought up a very good point when you are wondering whether to increase your income or reduce your expenses:

I read an interesting tidbit this week. It said that if you earn an additional $100 (from a part time job, for example), after taxes and working expenses you net about $60. But if you cut expenses by $100, you have $100 extra. I thought that was food for thought…

Karen’s right. That does give some food for thought.

It made me pause and think about how we could reduce our expenses even more. The most likely culprit for us is with our groceries and dining out. I believe with some planning we could cut our grocery bill by $100/month and we are already starting to work on a plan. I’ve said that in the past, but it never came to be. This time, though, I’m really making some progress with getting it ready. (If my plan ends up working to reduce our spending, I’ll share it with all of you. I think it will work…but we’ll have to see.)

Thanks Karen for the food for thought 🙂


  • Reply Dawn |

    Isn’t it a bear to try to get that grocery bill down? It seems like the harder I try, the more they keep raising the prices of everything. But like my husband says, look what we would be spending if we didn’t keep up with our effort. Good luck with your plan! I can’t wait to hear your results 🙂

  • Reply Randall |

    I’ve always looked at it like this. Which is harder to do? Usually increasing money is harder than finding things NOT to spend money on. If I had to make a choice, I’d go for the more money, since I might not have the opportunity again. I can always cut back on spending anytime I choose to.

  • Reply A.J. - thenewself.com |

    I think this post missed part of the bigger picture. Part of the goal should not be to merely improve the numbers. It’s about changing behaviors.

    An increase in income of $100/mo may seem to help initially, but many people would eventually increase their monthly obligations by that much (given a fair sample of time).

    It’s just like people who take out debt consolidation loans. If you got a lower interest rate and paid exactly the same amount that you are paying per month now in debt payments, this is an always win. But debt consolidation loans often fail because it doesn’t address the cause of the problem which is spending more than one makes. More often than not a person begins to run up additional debt (use credit cards, etc.) after they take out a debt consolidation loan.

    Tricia, I know you already know these points, it’s evident across your blog, but it seems to be missing from this particular post and is an important/integral part in considering between the two?


  • Reply Anitz |

    One way we reduce costs is that we garden… and eat fresh produce. It is time consuming, so we choose to get our fresh air, movement (excercize) from this form of *relaxing* work, which helps to reduce costs. The stuff is organic and not sprayed with pestisides etc.

    We are a 7 headed family and our grocery bills run between 80-150 € a month (sorry, living in Germany here!) and we only give out over 100€ when we have non-food items like toilet paper, shampoo and diapers…

    Another interesting, slightly (ok, barely) related article I read somewhere else… I was instantly remined of it while I read this post:
    How to save money by increasing your expenses…

    I interviewed all children who can vioce an answer your 10 questions about money… what a blast! I will post them on my (German language) blog… Thanks for all the great ideas!

  • Reply Lucy Lastic |

    I’ve mostly got a handle on grocery expenses. What always threatens to floor me instead are the letters the kids bring home from school requesting money. I budget for the school photo every year, but there constantly seem to be letters coming home asking for money for Arts Week, Book Week, Yet Another School Trip This Week, We Wanna Bankrupt You Week… etc, etc

    The only way to reduce these expenses and increase income would seem to be to stick the kids on eBay 🙂

  • Reply Beth |

    On the other hand, you get to a point where you really can’t cut much more and the best option is to increase income. It really depends on where you are in the income/expense balance. Every person’s situation is different. If you’ve already trimmed the fat from the budget, then the right approach is to focus on increasing income.

  • Reply Matt |

    Good luck with your plan. I’ve always found it really hard to plan my food budget in extreme detail let alone stick to it.

    As for Saving versus Earning more, rather than question which one of the two is better why not go for both? Even if that $100 is taxed and you only get $60 thats money you didn’t have before now add it to saving and not spending that $100 and you’re up to $160 rather than either amount.

  • Reply Tricia |

    AJ – Agreed that it is about changing behaviors. But when you are at a point where you need more money, a lot of times you think about bringing in more income (like I was). But now that I think about it more, reducing your expenses and adapting a frugal lifestyle (and good spending habits) will probably pay-off more in the long run. I still haven’t mastered our grocery spending. If I try my “method” and it works – I can keep with it even when our debt is paid off – that’s money that can go towards savings.

    It does definitely depend on where you are in your life.

  • Reply Colleen |

    Tricia, I have found that I save money on groceries by staying out of the store as much as possible. Try to come up with what you need for a week and then make it last. It is too tempting to go back again and again when snack foods are gone, etc. My grocery bill is easily $200 or more a week when I go more than once a week, but if I go only once I can keep it around $130.00. It’s easier to me to limit what I buy at the store then to work extra hours to make up that difference!

  • Reply Curtis |

    Being someone who has a lot of work experience as a financial and cost analyst for big business, I can say this, “There is only so much you can reduce your expenses.”

    Yes, you get to keep all the savings from reducing your expenses, but there is a final limit you can not cross (you must eat, you must have shelter, etc). Sure make smart decisions to reduce, but not by forsaking an ability to earn more income.

  • Reply Colleen in MA |

    I like that idea of more income thru saving. For me I think it works best when I try to go for that extra $100 savings a month when I concentrate on one category at a time. For instance, one month I may feel extra motivated to cook more and eat out less; however, another month I may end up going out for celebrations, etc, so I’ll try to cut back in another category like utilites (keeping the heat a little lower than I normally would and piling on the sweaters and blankets). Being flexible is what works for me.

  • Reply thisisbeth |

    Even if your savings plan doesn’t work, I hope you share it with us and why it doesn’t work. It’s just as helpful to know what doesn’t work for someone as it is to know what does work for someone else. (But I hope it works! Good luck!)

  • Reply Our Debt Blog |

    I have to agree, if you save that 100 you’ve already made and don’t spend it, that’s more money in your pocket! we are also trying to reduce our grocery budget so we can send more money to a HYSA!

  • Reply Susan |

    Cutting down your food budget can work, but you must purchase healthy, quality food and not cheap food. In the long run the better the food you eat; the healthier you’ll be. As far as increasing income; have you thought of doing seasonal work like tax returns? Everyone’s tax situation is different, but I think paying 40 percent in tax and work related expenses on 100 dollars is very high if you are self employed. I’d estimate that 15/20 percent is a more likely figure, especially if you are working from home.

  • Reply Karen |

    For making extra money, a home-based business or personal small business, such as mystery shopping, for example, can not only net you extra money but can serve as a tax write-off. I use mine to write off both mileage, office supplies and internet access, which I would otherwise consider more of a luxury if one is really cutting back; Hi speed access being over $40/month in my area. One can always go to the library but you wouldn’t want to pay bills for example, on a public computer.

    Another category that I would be interested to see on your blog is holiday gift giving, particulary in the workplace. This can really add up and feels like an “obligation” more than anything….and can be politically “uncorrect” if you don’t participate. I would be interested to hear how others who are trying to live more “frugally” deal with this issue (since it is right around the corner…..)

  • Reply Cat |

    So save more AND earn more. So many people use incorrect tax logic to justify laziness and a lack of motivation (I’m not saying that Karen was doing this). Furthermore, few lower- to middle-class people actually pay 40% in taxes, so you are actually taking a lot more than that home with you.

  • Reply Mark |

    I agree with Chris – do both. The only way I would NOT do both is if the extra income comes with a great cost (time away from family, stress, etc.) Otherwise, the extra $100 in income, if it is salary, will lead to future raises that are the much higher. Then if you cut expenses as well you have $160 more per month than before.

  • Reply Tricia |

    Cat – I agree. But in my case, I was looking for little “gigs” to do for some extra cash. Maybe instead I should tackle an expense that has been bothering me for some time (groceries).

    I think too, that it’s also something to think about when making purchases that are a “want” versus a “need.”

    Great conversation everyone! I’m so glad my comments are back!

  • Reply Mar |

    Depending on which state you live in, your income, etc., 40% is actually very close to what you might pay in taxes for that extra $100. SSA is 7.5%, then there’s a small percentage for Medicare, plus federal income tax and state income tax. The extra $100 per week will be taxed at your current full tax rate (15%, 28%, whatever) and could potentially push you into a higher tax bracket.

    Which to do – earn more or spend less – is really an individual decision. Despite the tax impact, some people just prefer to spend more time working and earning; others, such as myself, prefer to spend the time working at cutting back. Cutting back can be work, but planning menus, making food from scratch, growing a garden, cutting out coupons and planning shopping trips are the kind of work I would prefer to do. To each their own, just as it’s always been…

  • Reply Kathy |

    About a year ago my book club read Your Money or Your Life, Transforming Your Relationship with Money and Achieving Financial Independence by Joe Dominguez and Vicki Robin. It’s an excellent book with a nine step program and lots of exercises. It also addresses the emotional stresses and other human foibles we’re all subject to. Have a look at your library-it might be a good resource for interested bloggers. Best, Kathy

  • Reply Anitz |

    Here is an idea which we are working on (hopefully bring it to *fruit* next fall): Home Industry. We have a great pumpkin marmelade recepie and other great food ideas for pumpkins and out here in Germany, people are starting to “discover” this vegetable.
    My home advantage is multifold.
    First off, I am a born and raised Canadian, so I have knoweledge.
    Second, I am a stay-at-home mom, so I have time to dedicate to tending to the gardening.
    Third, we have a fairly good sized lot here (especially for Germany standards) as well as a “rental” garden–we do not rent it though, but that is what it is called. If you do not have a garden, do you know of someone who would free up some space in their yard for you, say for 10% the produce you harvest? Get creative, you will find ways.
    Fourth, my kids are hype about selling.
    Fifth, pumpkins are actually easy to grow and there is a huge market for non-chemical produce here that even if we sold the pumpkin pure, we would still make a profit.
    Sixth, a pumpkin has so many seeds in it and each plant produces multiple pumpkins, you virtually only need to buy that initial seed package (for what, a buck or two?).
    Seventh, if NO ONE buys our stuff, then we have a whole bunch of soup, pie, marmelade, cake in the freezer to feed us over the winter.
    It is a win/win situation. The kids learn about marketing, farming, money management, healthy food.
    You do not have to go all Pumpkin Mania like we are, but how can you be creative, involve your whole family (or most of it), increase your income while saving money? There are a lot of resources out there for family industries… think local, think family, be creative… and blog about it please 😉 !)

  • Reply Mandi |

    If there happens to be a store like Aldi in your area this blog might right up your ally. http://www.momadvice.com/blog/ Check out The Aldi Queen along with many of the other things there.

    I coupon shop. I did try the Grocery Game and found it wonderful, but I also found that I can do it my self or with http://www.couponmom.com which is free. I have a store in my area that will double coupons up to and including $1.00. I follow the sales with the coupons and find amazing deals.

    I don’t pay for Shampoo, conditioner, toothpaste, and deoderant. I take that back, I do pay tax. I pay as much as $.50 a box of name brand cereal, and got 3 boxes today for free. I watch the markdown produce, seeing as we use it almost instantly here, $.19 a pound for bananas that will be gone in less than a day. $.83 is the most I have paid for name brand fruit snacks for my sons snacks at school and cold lunches, and I also get Lunchmakers for free as well.

    There many ways to lower your grocery costs, but you have to be willing to not be Brand Specific, and get the Sunday paper just for the coupons. I get 4 a week.

    $16 a month for coupons
    $15 a week for groceries
    Thats under $100 a month…

  • Reply tom |

    With my job, my income varies each month. NO matter how hard I try, I always want to spend more when I make more. This was a great quote though and it’s absoultely true. Great post!

  • Reply Katie |

    Hi Tricia, I don’t know if you’ve heard of it, but TheGroceryGame.com is a great website for you to check out. It allows you to get coupons and save a ton of money when you stock up on certain items at your local grocery store. It’s worth just reading the success stories of people who’ve tried it; it might really work for you too!!

  • Reply FinanceIsPersonal.com |

    I think it requires a bit of both. Before I started doing the whole personal finance thing, I worked at a crappy service job and made all of $7.00 an hour. I spent pretty much every dime I make on random crap. Now I make $17 an hour, and spend less than I did when I was working fast food. Funny how that works.

  • Reply Jim ~ mydebtblog.com |

    I think everyone has a basis of what they need to survive. As long as you’re able to meet that, anything over and above that is icing on the cake to me. To me if you earn $100 extra but only keep $60 after taxes and expenses, that’s still $60 you did not have before. Cutting your expenses by $100 doesn’t give you anything you did not have before, you just restructured things to appear that way. The only people who need to be doing that is the government because taxes are already too high from spending. I know a lot of people suggest doing both, I just think you should keep making money instead of trying to find it.

  • Reply Tina Su |

    What a great idea. I really enjoy the content of your blog. Keep up the awesome work.
    Love & Gratitude,
    Think Simple. Be Decisive.
    ~ Productivity, Motivation & Happiness

  • Reply Shana |

    That argument is flawed and defeatist. Why not work on doing BOTH? And what’s to say that some part-time venture (whether doing crafty things, selling things, or providing a service) is only going to have the limited income of $100/month.

    I agree that earning an extra $100/month isn’t a big amount (in the grand scheme of thins) for most people, but I vehemently disagree that there should be a choice between the two options. Think of it this way, if someone reduced their grocery bill by $100 for a month, and earned $60 net from a side job, that’s a total gain of $160.

    Why do people limit their options so much? It’s defeatist attitudes that prevent people from achieving more.

  • Reply Shana |

    Susan: if you are self-employed, 40% is not unexpected. If someone is claiming that income on their taxes, and they are not LLC’d or incorporated, the person *must* pay an extra 15.4% Self Employment Tax.

  • Reply Anitz |

    I think I found something new to learn: what, please tell, is *self employment tax*? Sounds mighty contra-productive to me… is that to encourage people to become self-employed?

    The mind is baffled.

    Another idea (again, I know not enough about you to know if this would work, but the idea of generating ideas is key here): what about networking with others in your area to get benefits from collective ambition?

    I mean, if there are say 12 grocery stores in your area of all shapes and sizes, can you team up and divide the stores amoungst you so that collectively you are getting the best buy/unit on many staple items? Instead of going to each store yourself for 2-3 items, you commission that off to someone specific. Make a monthly deal, organize from a church, local library or somewhere “central” and get organized.

    Saves time (if you had to go to each store, even once a month… that would take ages! Organizing would not be quick, yet there are many tools which you could use to your advantage: blog it, for example).

    Saves gas money (you are now only driving to your favorite store for your fresh produce and once to that central location once a month for staples.)

    Saves on other money you may give out by spontaneous shopping.

    Helps you to find like-minded people in your vacinity. You may even find someone who connnects with you with whom you produce shop in a similar manner.

    Cooking together once a month is also fun and you can take advantage of bulk (check price/unit! to ensure best prices), and you find / learn new ways to use “extras” (leftovers).

    So. That is another idea about Groceries.

  • Reply StaciCarsten |

    I guess I think it depends. For me, there’s only so much I can reduce my expenses before I start to feel beaten down and like life is too much work. At the same time, making more and more money can beat you down and make you feel like life is too much work too! So I try to just find a balance.

  • Reply Tim |

    the only flaw in the logic is that you haven’t created or netted an extra $100. it always has been there. If you want to improve your situation, then earn an extra $100. Of course, you can do both. earn $100/month in cash, under the table and don’t worry about reporting it. Consider it a gift since it is under the annual gift limits. of course, no one would ever do this. ;o)

  • Reply Shana |

    Self-employment tax is to cover things like social security and medicare payments. Since someone is working for themselves, and they are (as a sole proprietor) only paying income tax, contributions to social security, etc are not being made.

  • Reply Anitz |

    thanks shana… it did sound like something one would prefer not paying, but since there is a benefit (I assume), then i guess it is not that bad!

  • Reply Tezz |

    Cutting expenses is a band-aid solution to the rising cost of living, the future aint gonna get cheaper… It seems we have a new breed of rich, globaliising, monoplising then ripping us off ie: the banks, the oil companies and if it wasn’t for aldis the damn supermarket chains would be doing it. So my thought, cut expenses use the money saved to increase your earning capacity by education for a higher paid job, or business building. In this day and age one income isn’t enough, buying a home is almost out of reach for most…

So, what do you think ?