Balancing Income and Expenses

Balancing Income and ExpensesMany people who struggle to make ends meet, are totally convinced that the cause of this is a lack of sufficient income. They think that by increasing their income, in any way possible, their financial situation will become easier. That sounds really logical, but is it really true? Is increasing your income the only and best way to gain more financial space?

Just make more money?

When people increase their income, this is usually the result of them working harder and/or smarter. You may get promoted into a new function, or grow in the current one, or your spouse may start working more hours, things like that. In most cases the rise in earnings is the direct result of something you do or have done. This makes your brain think that the additional income is a reward for what you have done, which in itself is OK. The trouble lies in the fact that you will only see that extra money as a true reward if you do something with it. A slowly growing number on a bank account is not exactly the world’s most motivating reward, right?

Why more income does not help

So what happens is that people who increase their income, usually also increase their spending, just to get that proper feel of reward. And this makes perfect sense: I work hard for my money, so why shouldn’t I buy that cool phone or expensive car. The effect of this, however, is that your financial situation will not improve at all: all that happens is that the numbers become bigger, but it is still just as hard to make ends meet.

It may get even worse than that, because after a little while the rewarding feeling of spending that extra money fades away, you simple get used to it. However, the fact that you have to put in more effort to make the extra income does not fade away! In the end you just have to put in more effort, get a little more stuff you don’t really need and still have trouble making it to the next payday.

Income and Expenses – It’s all about balance!

So unless you have enough austerity to not spend the extra money, simply making more money will not improve your financial situation automatically. Balancing income and expenses, that’s what it’s all about! This is called budget planning. There are only two ways to control this balance: increase your income or decrease your spending. Controlling only one side of your budget will most likely not help you improve your situation, you need to plan and control both sides to get a grip on things. You should try to increase your income and at the same time save money where it is possible.

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