Spending Less or Earning More

Fundamentally, money is a flow.

You have buckets that can hold some of the 'water' but the buckets tend to have a hole in the bottom, a leak which are expenses: a slow drain over time for rent and food and everything else.

Income, then, is water poured into the bucket at the top to fill it up. Your net worth is how full the bucket stays at any given point.

So if you're living paycheque to paycheque the water coming in basically equals the size of the holes draining out: there's no time for the bucket to fill, it just empties instantly.

If you're saving a lot, the bucket is filling up and up and up, you're either making a lot of money or have very tiny leaks (or both). The flow in is greater than the flow out, so it has no where to go but up.

Which is Better To Work On?

I am personally biased, but I'm currently learning the opposite argument so hopefully I can lay them both out here relatively fairly.

Spending Less

For me? I'm a no-leaks guy. It doesn't matter how low your income is if there's zero spending necessary, and if that's true you're basically bulletproof to the economy and downturns and job finding, etc etc.

All money becomes FU money in a place where you don't actually need it.

You can retire right now with $5 in your pocket if you never need to spend more than $5 for the rest of your life. But, of course, that's infeasible for most of us so we can take that logic and merely do the best we can. In fact, I spend about $1700 a month for everything I need to live - about $20k a year.

Now, for me that's very comfortable: I drive a comfy car, eat at restaurants, live in a first-class city; I do basically whatever I want all day, etc. But, it's also a prioritization thing.

But the main idea is that it's simply easier to spend less than it is to earn more.

And the less you spend, the faster you can retire because the less you need to live means substantially less lump-sum money is required for the 4% rule to work: if the 25x multiplier is used, every extra $1000 you spend per year requires you to save $25,000 more in total.

So you can quickly see where shaving off a few grand here and there (which is honestly pretty easy for most bloated budgets) leads to tens and possibly hundreds of thousands of dollars of easier saving.

And at a more immediate level you save twice the taxes: to earn more is to lose 30% on income tax and then another 5%+ when you spend it on something in sales tax. The math isn't quite this clean because of how the percentages work, but it's close enough to demonstrate and say: you have to earn $1.35 for every $1 you spend.

Which is also to say: every dollar you don't spend is worth that much more too.

And then every dollar you save is worth something like $8 down the road when it's invested.

So it's just multipliers on multipliers. It's preposterously powerful to simply not spend on crap you probably don't even really need or like anyway.

Earning More

I think most people want to earn more because they want to be comfortable, and that's very intuitive and understandable.

My position, again, is that comfort can come a lot cheaper than most people assume with a bit of cleverness, but I'm also someone who already earns way more than I need.

So for people who are making minimum wage or similar, you know, maybe the goal simply is to earn more. Maybe you physically can't reduce your budgets without resorting to ramen and lentil diets.

UNFINISHED

• Talk about Lambda school?