The most effective long-term strategy for most people may be a combination of both
Spend less than you make - that's sound financial advice most of us have probably heard many times.
Of course, the details often end up being more complicated. But having some money left over every month is a good starting point for saving, investing and becoming financially free.
There are two ways to do this: spend less, or work to earn more.
Both are important, but it can be difficult to identify which approach to focus on first, as both have their pros and cons.
For most of my (admittedly short) working life, I have tried - with varying degrees of success - to prioritise spending less.
I don't consider myself a profligate spender. For one thing, I don't find it worthwhile to splurge on branded bags, clothes or shoes.
Also, I try as much as possible to take buses and trains instead of taxis, unless time is of the essence.
I do like having a varied wardrobe, though, so I still shop more than I should.
Like a stereotypical millennial, I also enjoy checking out new cafes and restaurants (to the naysayers - I am already a home owner, which surely means I can have as much avocado toast as I want).
This means I definitely have room to cut back even more.
My (newly minted) husband is a role model in this regard. He is loath to spend more than $5 on a meal and has to be arm-twisted into buying new clothes.
"I am never spending any money again for the rest of my life," he informed me recently, in the wake of significant expenses related to our wedding and new home.
This brings us to the first downside of the "spend less" approach - it has a limit.
Obviously, it is not actually possible to cut spending to zero. People need to eat, bills need to be paid, household appliances need to be replaced. It is also possible to take things too far and turn into a miser who never enjoys life - thus completely missing the point of money management and financial freedom.
But there are also obvious benefits to cutting back on expenses. The impact of frugality on one's financial situation is immediate - money not spent can go towards other financial goals.
Cutting back also makes for a more simple, uncluttered life - after all, if you make a conscious decision not to spend more than $5 on lunch, it becomes much easier to decide what to eat.
Getting into the habit of being frugal also means that one is less likely to succumb to hedonic adaptation - the tendency to adjust your lifestyle upwards as your income rises. All in all, spending less is clearly good for a person's financial health.
Getting into the habit of being frugal also means that one is less likely to succumb to hedonic adaptation - the tendency to adjust your lifestyle upwards as your income rises.
All in all, spending less is clearly good for a person's financial health.
But for every finance blog that focuses on cutting back, there is a counterpart that advocates earning more.
For one thing, having a higher income means having more leeway to indulge (for instance, in avocado toast, if one so chooses).
It is also a more effective strategy for building wealth in the long run than merely spending less.
Perhaps most importantly, there is, in theory, no limit to the amount someone can earn.
There is always more money to be made, more opportunities to find, and more creative ways to hustle.
Of course, this is all easier said than done.
Unlike spending less - which can happen immediately - earning more requires significant effort and takes time, as I have realised since entering the workforce.
Still, I've decided to fixate less on cutting back and focus on earning more.
Growing my income is becoming an increasingly important goal for me, now that I'm in a position to comfortably cover my basic needs and I'm not spending every single cent I earn.
For now, this means investing in my career, by trying to do better at work, expanding my network and looking for opportunities to earn extra money.
It also includes short-term fixes, like selling clothes I no longer wear on Carousell.
Of course, to have an impact on my long-term wealth, this still has to be coupled with efforts to spend modestly.
The most effective strategy for most people probably involves some combination of both approaches - moderating spending while also working to earn more.
A version of this article appeared in the print edition of The Sunday Times on November 05, 2017, with the headline 'Spend less or earn more?'. Print Edition | Subscribe
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