For most of us, we’d probably like to have a little more of it—leftover money that is.
Your leftover money is money you can spend or save however you please. It’s the amount left over after you take your income and pay all your necessary expenses. Depending on your situation, that figure could be a couple hundred dollars a month to thousands.
So how to pump up this amount? Generally, when it comes to money, you have two levers you can pull: spending and earning.
By focusing on both sides of the equation—decreasing spending and increasing earning—you can help maximize the difference between the two.
Let’s start with what you can do to spend less.
Increasing your leftover money is impossible if you match higher earnings with more expenses.
If you get a raise then buy a new car that costs $200 more per month, that higher monthly payment could wipe out the extra income. This is what is known as lifestyle creep.
Therefore, if you want to have a meaningful impact on your finances, consider which savings strategies you could implement into your day-to-day life. It could help to make an inventory of all your expenses, see what you can cut or reduce, and then move on to finding ways to save costs.
Here are a few ideas and money hacks to consider:
Implementing frugal changes into your life can also literally be more valuable than increasing your income.
For example, if you figure out how to decrease your spending by $100 each month, you’ll have an extra $100 to spend or save as you wish. However, if you earn an extra $100, you’ll have less than $100 after taxes are taken out.
There are also a few problems with focusing solely on saving.
The first is that there’s a limit to how much you can save. Even if you go to extreme lengths to cut back, you’ll still have to spend money on basic necessities like food and housing.
Second, cutting back can be physically and psychologically challenging. You may be able to cut back for a few months, and then decide you’d rather save less and have a more pleasant life now. Or, some people wind up seesawing back and forth between extreme savings and overspending—a kind of yo-yo diet with money.
Figuring out how to increase your overall income while leading a frugal lifestyle could help you avoid the teeter-totter. If you can keep it up, you may be able to watch your discretionary income substantially increase as your overall income climbs.
As with lowering your expenditures, there are many ways to go about it:
There’s no best path, a combination of several may even be key. Or, you may want to start with a side hustle, which could then turn into a business or provide enough income to pay for classes or certification courses.
If you’re trying to decide between focusing on spending less or earning more you may be stuck in a false dilemma.
While we see a value in focusing on money-saving lifestyle changes first, there isn’t an either/or answer—try to do both.
Louis DeNicola is a freelance personal finance writer and credit enthusiast. You can find him on Twitter @is_lou.