not spending money is more important than earning money
On reflection, I think this is an oversimplification. Which is more important depends on how easy they are. For most of us, reducing spending is easier than increasing income. But if you’re poorly enough paid, reducing spending may be incredibly hard and at least in principle you can increase your income a lot (special case: by taking a job, if you’re currently unemployed and the tax/benefit system isn’t too badly screwed up where you are).
Increasing income probably has a higher return on investment.
Sure, coming up with a presentation on why you should get a raise/promotion takes hours of preperation, vs deciding to not buy a latte, but after you’ve taken the 5-7 hours it takes to build that presentation, you’ll make more in one year from it than you’ll save in 5 years from not getting that latte.
I find it helpful to think of all nontrivial expenditures, income gains, etc., as (1) representative of a consistent “strategy” and (2) annualized. So when you choose to buy a latte, you should consider what general principle you’re acting on (e.g., “have a latte every day”, “have a latte on Monday mornings when thirsty and in a hurry”, etc.) and then figure out what annual difference it will make. If you get a raise it’s automatically annualized (though you should also think about its effects on your future salary, hireability, status, etc.). If you get a one-off bonus from your employer, you should consider it (something kinda like) equivalent to the annual income you can get from investing it. Etc.
(Of course you don’t want to be doing this in detail every single time you make a decision with financial consequences. But if you get into the habit of thinking this way, your quick judgements will probably get better.)
On reflection, I think this is an oversimplification. Which is more important depends on how easy they are. For most of us, reducing spending is easier than increasing income. But if you’re poorly enough paid, reducing spending may be incredibly hard and at least in principle you can increase your income a lot (special case: by taking a job, if you’re currently unemployed and the tax/benefit system isn’t too badly screwed up where you are).
Increasing income probably has a higher return on investment.
Sure, coming up with a presentation on why you should get a raise/promotion takes hours of preperation, vs deciding to not buy a latte, but after you’ve taken the 5-7 hours it takes to build that presentation, you’ll make more in one year from it than you’ll save in 5 years from not getting that latte.
I find it helpful to think of all nontrivial expenditures, income gains, etc., as (1) representative of a consistent “strategy” and (2) annualized. So when you choose to buy a latte, you should consider what general principle you’re acting on (e.g., “have a latte every day”, “have a latte on Monday mornings when thirsty and in a hurry”, etc.) and then figure out what annual difference it will make. If you get a raise it’s automatically annualized (though you should also think about its effects on your future salary, hireability, status, etc.). If you get a one-off bonus from your employer, you should consider it (something kinda like) equivalent to the annual income you can get from investing it. Etc.
(Of course you don’t want to be doing this in detail every single time you make a decision with financial consequences. But if you get into the habit of thinking this way, your quick judgements will probably get better.)
That’s a cool way to think about it.