What’s a Better Financial Strategy—Making More or Spending Less?

What’s a Better Financial Strategy—Making More or Spending Less?

4 min read
Craig Curelop

Craig Curelop (aka the FI Guy), is stationed in Denver, Colo., and is a real estate agent, investor, author, and employee of BiggerPockets. He is primarily known for taking a very aggressive approach toward achieving financial independence.

Experience
Starting with $90,000 in student loan debt and a negative $30,000 net worth in 2017, Craig used various tactics to make more, spend less, and invest the difference wisely to become financially independent 2.5 years later in 2019. In over 50 articles, Craig has written about all of these strategies and more on the BiggerPockets Blog.

Craig’s story has caught the attention of media outlets like The Denver Post and the BBC and many real estate/personal finance podcasts, including ChooseFI, Side Hustle Nation, the Best Ever Real Estate Podcast, not to mention a repeat guest on the BiggerPockets Real Estate (#252 and #350) and the BiggerPockets Money (#35 and #95) podcasts.

Craig has read hundreds of books, listened to thousands of podcasts, and talked to thousands of people in the real estate and personal finance community. With all of the knowledge gained, he was able to write a book called The House Hacking Strategy, which is the perfect blend of real estate and personal finance.

Over the past 2.5 years, he has done three house hacks, a flip in Jacksonville, Fla., and lent on a condo-conversion in Boston, Mass. He is now looking to step up his real estate game by doing BRRRRs in Denver and other areas.

Education
Craig earned a bachelor’s of science in Business Administration with a concentration on Finance and Management Information Systems while minoring in Economics at Northeastern University.

Accreditations
Real estate broker in Denver, Colo.

Follow
LinkedIn
Instagram @thefiguy

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So you want to achieve financial independence, huh? You fantasize about telling your boss to take a hike, traveling the world, spending time with your family, and pursuing that passion project.

You’re not alone. I dream about the same—and so do many of the 1,000,000+ members here on BiggerPockets. At this point, most of us understand what we need to do to get there. We need to invest in assets such as the passive income from these assets exceeds our living expenses. If we boil it down, the equation looks like this:

Passive Income > Expenses

Since passive income is our assets multiplied by the return of the assets, we can rewrite the financial independence equation as:

Assets X % Return > Expenses

So what is exactly the best way to satisfy this equation?

Related: Behind on the Path to Financial Freedom? Here’s the Good News You NEED to Hear

If you listen to the BiggerPockets Money Podcast, you might think it is spending less money. If you are a fan of Grant Cardone, you might think the answer is to make more.

Like the answer to almost every personal finance or real estate debate, the answer, of course, is… it depends!

It depends on where you are in your journey toward financial independence and how aggressively you want to pursue it.

This post is going to articulate the advantages of making more money versus the advantages of spending less. In this case, the advantage of one is seemingly the disadvantage of the other. For that reason, I will only be describing the advantages of each.

Let’s get into it.

Asian woman saving money and dropping coin to piggy

Spending Less Money

Works Both Sides of the Equation

Let’s take a look at the financial independence equation again.

 Assets X % Return > Expenses

Once this equation is satisfied and your passive income is greater than your expenses, you are financially independent. By spending less money, you work both sides of this equation. Spending less money will increase your savings rate and thereby increase your assets—while simultaneously reducing your expenses on the right side of the equation.

Taxes

When you save $1.00, you save after tax dollars, so you can realize the entire savings. However, when you earn $1.00, you will be taxed on that dollar. The amount of the tax will be based on your tax bracket.

Let’s say you are in the 33 percent tax bracket. To earn and keep that same $1.00, you would have to earn $1.50.

Actionable

If you were to look at your spending over the past few months, I bet that you could start making changes immediately when you finish reading this article. Maybe you spend too much on dining out? Tomorrow you can pack your lunch. Perhaps you spend too much on gas? Tomorrow you can start biking to work.

Whatever it may be, it is likely that you will be able to take action and refine your spending much quicker than you would be able to increase your income.

Making More Money

As everyone knows, making more money and keeping your living expenses the same will also widen the savings gap, increase your assets, and take you one step closer to satisfying the equation for financial independence: (Assets X % Return) > Expenses.

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Unlimited Upside

There is only so much you can save, right? If you spend $5,000 a month, the absolute most you could save is $5,000 per month. I understand that having $0 in expenses is unlikely, but I think you get the point. It’s limited.

The great part about making more money is that you can always make more. The amount you can possibly make is infinite.

There is an endless amount of side hustles that you can take up to make you more money. Some are easier to get into, while others take more time. For example, driving for Uber or getting a part-time job at a restaurant could take just a few days to start, whereas flipping a house could take a couple of months and starting a blog or business could take years.

No Sacrificing

Many people in the financial independence community will talk about how relieving it is to spend only on the bare necessities and to rid yourself of all the things you do not value. Personally, I do agree with these members, decluttering and spending only on what you need feels great!

However, I know that there is a large group of people out there who want the luxurious living situation. They want the nice car, the nice clothes, and to dine at the fancy restaurants a few times a week. If you make enough, you might be able to both save more while also living a slightly more luxurious life. But please, do not fall into the traps of lifestyle inflation. This will do nothing to enhance your financial position.

Remember that saving is still important. The more you spend on these frivolous items, the longer it will take for you to buy your freedom.

Related: At Age 26, I’m on the Brink of Financial Freedom: Here’s How I Did It

So What Do You Do?

OK, Craig, you still haven’t answered the question. Which is better? Spending less or saving more?

My best answer? Do both.

But if I had to pick one, I would skirt around the answer again and say, it depends on where you are along your journey toward financial independence. If you are just getting started, I would find it hard to believe that your spending is fully optimized. I would track your spending on Mint.com and see what excess spending you can trim down. Spending less is the first step in the journey toward financial independence.

If you are a bit further along in your journey and you believe you are fully optimized on the spending front, then making more money should be the higher priority. But remember, as you make more money, do not fall into the trap of lifestyle inflation. Otherwise, you will be no closer to becoming financially independent.

After all, what is it that you want? Freedom from work? Or a nice a boat that you never get to use?

First attain the freedom, then attain the boat!

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What do you think? Do you think one is better than the other?

Share your thoughts below!

If you listen to the BiggerPockets Money Podcast, you might think it's better to spend less money. If you are a fan of Grant Cardone, you might think the answer is to make more. Here I share my take.