Earn More and Save More – You need to do both

Earn More and Save More – You need to do both

When it comes to improving our finances, we automatically think of just needing to make more money. If only we had more income, that would fix everything. And while making more money is certainly a crucial step in the right financial direction, it’s not always the only answer. Financially, if you can earn more AND save more, that is when you’ll make the largest positive strides. That’s why you need to do both.

To explain what I mean, here is a scenario that any household might encounter:

Joan has been working extremely hard at her job and the boss notices. Normally, she works 6 hours a day, so she’s able to see the kids off to school and be there when they get home. Because of her exemplary work, Joan’s boss is offering her 8 hours. It would mean a lot more money in her paycheck. And as a household, they could really use the money, so Joan is tempted to immediately say yes.

But Joan should hit the pause button.

She needs to calculate true financial gain. Will they actually have more money if she works those extra hours every day? She makes $12 an hour, so it would mean $120 more a week in her check – $480 more a month. It seems like a no-brainer. However, there is more to consider here. Financial considerations that may not be immediately obvious:

1. How much more would she really bring home after taxes? Joan needs to calculate this before immediately thinking it’s nearly $500 more a month. Because it isn’t.
2. Who will be there for the kids after school? Will Joan need to hire someone? Even if a friend or relative is willing, should she still compensate them somehow? Cover expenses like gas to come over every day? What if her kids go to their house? Will you need to cover after-school snack costs and other expenses her family would be adding to their budget?
3. What about dinners? Joan was used to being home by 3:00 p.m. and now won’t be home until 5:00 p.m. Will the family end up eating out more because there’s no time or energy to plan and cook a meal before evening activities?
4. When will Joan do her planning, shopping, and bargain-hunting? As part of her routine, Joan took time after work a couple of days a week to plan the upcoming week’s meals and lunches. She had time to search for bargains and make sure she had coupons to use. She also had time to search the internet for the best deals on items the family needs. Will rushing to fit that in later in the day or on the weekends result in spending more on groceries and family necessities?
5. Will leaving later in the day, when traffic is heavier and slower, cost Joan more in gasoline each week? Joan’s budget is used to light traffic and smooth commute home.
6. Are afternoon snacks going to become a potential additional expense? Joan usually saved money by waiting until she arrived home to have a snack with the kids. Now she’ll need to make sure she packs herself something to avoid spending extra money. But what if she forgets in the rush of the morning?

Questions like these and others that arise based on personal circumstances all need careful evaluation. More hours may not really offer a financial advantage. To complete my example, Joan might make an extra $120 a week but what if the above things heavily impact the family budget? First, taxes will take some, then childcare could potentially take up to half, followed closely by eating out more ($20-30 a time), not to mention missing the time to plan and bargain hunt. Joan might find she’s actually spending almost everything she’s making!

I think I’ve demonstrated that just getting more hours at work may not be the ideal answer to stronger finances.

So what should someone do who is in need of more money every month?

Consider combining earning more with saving more.

Bargain hunting, using coupons, using cashback sites like Swagbucks.com, cooking at home and planning can save a family far more money than someone could earn hourly. When you’re struggling financially, the first change you should make is to put more time into spending less. Secondly, consider ways to earn income that doesn’t add to the family expenses. I highly recommend making money doing things that you already enjoy either personally or as a family. There are dozens of suggestions online. I also have a handful of some great ones to help point you in the right direction, on SavingsAngel.com in our Podcast #239.

Get more savings help with: 10 Helpful Tips to Save More Money and Live Well