I have been and continue to be a shareholder in successful businesses. In a few businesses which I saw closely, I realized that they all had one symptom – shortage of cash. The businessman thinks of this as a problem. Sure, if there is a cash shortage, you have a problem – but it is actually a symptom of selling goods below cost price – or not having a correct product which the market is willing to buy at cost + margin.

While it is so obvious to the outsider, it is not so obvious to the promoter.

Now see how it is for an individual. When it comes to the personal finance and wealth creation, there seems to be two separate groups and each have their own opinion. One view / group who maintain that cutting expenses and being more frugal is the ONLY way to build wealth. There is no doubt that cutting expenses and living more frugally will help you reach your financial goals, I think there is a better way to go about building wealth – earn more money and make your money work harder. The two sides seem to be like 2 religions – each one believes that ONLY what they think will work. My take is YOU NEED to do both, at the same time. However, like in a business, I’m solidly planted in the earning more money camp – if I have to take a stand. There are several reasons why I think it’s better (actually easier?) to earn more instead of spending less to reach your financial goals. It is easier to ask a 23 year old to earn more, reallocate assets for a 30-50 year old, and ask a 55 year old to spend less. As in personal finance there are no easy and ‘one size fits all’ answer…here are some arguments for earning more camp…

  1. Lifestyle changing is difficult: If you have a lifestyle that you like, it is difficult for you to make changes in that quickly. For many people having a sustainable lifestyle, with a few built-in splurges now and then, that doesn’t leave them feeling deprived is the key to avoiding burnout! Plus lifestyle deflation from cutting back on your spend can be hard to cope with emotionally. You just downgraded your vacation from Europe to Coorg – how much more will you want to come?
  2. Cost cutting has a limit: How much of costs can you really cut? Can you shift from your Toyota Corolla to using a local train? Can you eat out on the footpath with your family instead of going to a restaurant? Can you really downgrade on the locality where you stay? Again emotional cost.
  3. Earning More has no upper limit: if you are younger you can study more, get some training, shift industries, shift countries, ..do what it takes to increase your income dramatically. Such options are purely lying unexplored – and waiting to be exploited. As you get older your options reduce, but today options like ‘work from home’ can help you seek a job in a company based in Indonesia or Singapore! See what YOU can do to earn more in YOUR circumstances. Your earning potential is only limited by your own creativity and worth ethic, while on the flip-side you can only cut your expenses so far.

While I am totally planted on the “earn more” side of the equation, it may not be really applicable for many people. Some people genuinely cannot earn more money – given their physical or mental limitations. If you are in a desperate financial situation, cutting your expenses is something you can do IMMEDIATELY and see its impact on the bottom line, so to say! The impact on the cash flow will be immediate and felt quickly.

Earning more money is a great way to help you maintain your lifestyle and reach your financial goals. However, it takes some time and effort to see results. It might take a couple of months for you to get a raise from your boss or to find a new job  to help you earn more money.

Personally, I still think the best way to reach your financial goals is to find creative ways to earn more money instead of spending less.


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  1. “Can you eat out on the footpath with your family instead of going to a restaurant? ”

    Could not help laughing out at that one 😀

  2. Hi, very informative article.
    I am 28 years old and I am searching for good investment options. I just came to know about peer to peer lending as an emerging platform in India and wanted your views on that.

  3. I had talk with my friends about peer to peer lending and they are suggesting me to invest a small amount of money. I am thinking of going with one of them

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