Income Growth vs. Savings: Where Should Your Efforts Go?

Many of us are big proponents of living within one’s means, and saving for retirement and other life needs. In order to do that, we often try to save as much as feasible based on our current income level.  This makes sense, and is a cornerstone of growing one’s wealth.

To this end, saving money almost becomes a sport to some people. Check that – it IS a sport to many, who spend big chunks of time looking for deals, cutting coupons, reading about ways to save money, and so on. Some people, like me, even write about ways to save money! As any regular reader knows from the Squirreling Gone Wild series, I personally enjoy observing and hearing about people who go to extremes to save a few bucks. And yes, sometimes I take part in the fun too.  I truly enjoy saving, both in terms of finding ways to cut costs and in getting deals. Some people get so caught up in squirreling away money any which way they can, that they cross lines of fairness, which clearly isn’t cool.

When saving becomes an obsession, it’s easy to forget about making money. I shared my thoughts about this in the post Saving is Great, but Don’t Forget to Make Money Too.  When consumed by saving, income growth – or worse, income preservation – is often forgotten.

I thought about his some more, and am considering the ROI of time invested in both saving and income growth. Here’s my question:

Is it more productive in the long run to increase time on income preservation and growth, while reducing time spent on saving?

To some degree, we’ve explored part of this topic in a few prior posts.  Clearly, spending time on saving is important. It’s just that when we take it a step further and analyze it, there are diminishing returns to our time.

Meet Jane

Let’s take an example of a random person – let’s call her Jane – who makes $4,000 per month after taxes. Jane’s expenses are $3,600 per month, netting her $400 in savings per month.  Jane is saving 10% of her income. Let’s also assume that she does so without giving it much thought.

Next, let’s say Jane decides that she wants to look for ways to save more. Let’s say she starts looking for coupons, spending an hour a week searching and cutting/printing. Let’s say she goes an hour out of her way each week to go to different places that can save her money on regular purchases – groceries, gas, cleaners, etc.  How about we also assume that Jane spends another 2 hours per week online reading about ways to save money, talking about shopping, or thinking about saving on good deals. Maybe another hour tracking her spending in great detail, recording all transactions and filing away all receipts. Total weekly time spent focusing on saving is maybe 5 hours, and let’s say that projects to 20 hours per month.

How much can she save? Well, it depends on her situation, but let’s say that she can cut her expenses from $3,600 per month to $3200. That’s $400 in savings for 20 hours of her time. $20 per hour isn’t bad!

After a while, however, Jane can only cut so far.  The next month, if she spends 20 hours of time focused on savings-related activities, how much could she save? She already took care of the low-hanging fruit, so now it takes more work. Maybe now she’s identified the opportunity to save another $200. So, based on 20 hours, that comes out to $10 per hour. The third month maybe she’ll cut another $100 from her expenses, making her payoff $5 per hour.

Eventually, there’s only she could save, and her ROI in terms of time starts to diminish.

What about time spent on income?

First off, if Jane is working, she’s already spending the better part of the day generating income. Hopefully, she’s positioning herself to continue earning income and maybe make more. But what if she invested some of that time on income – let’s say 12 out of those 20 hours?

She could spend those 12 hours researching different side businesses. Or, she could spend time pursuing an advanced degree part-time. Perhaps she could learn about investments. Maybe should devote that extra time to her current job, and really make herself invaluable or even promotable.  Or she could spend some of the time working, and the rest networking, meeting other professionals and learning about opportunities.

What would her ROI on that time be?

It might be low. It might be wasted time. Or, it might be well worth it and pay massive dividends down the road. If she really invests her time right, she could work toward growing that income much higher. Who knows, maybe she could double her income, increasing it $50,000 to $100,000? Or more?

If she spent all her time obsessed with saving, she couldn’t gain $50,000 back in reduced expenses. There’s a limit to what can be gained that way.

By investing some time in income growth, there ROI could range from zero on the low end, to an upside that could be quite high.

If in the end, saving or growing income is all about having more money. Thus, it pays to think about ROI on time, and consider balancing time between saving and income growth. There’s a combination there that’s right for each of us, based on our own individual needs.

And the portion of wealth creation that’s spent on saving…if it’s an exhilarating sport to you, enjoy it! I know I do:)


  1. says

    I look at saving as a passive effort and earning as an active effort and as with anything, a good balance between the two keeps one wealthy and sane! :)

  2. says

    Great article! I agree with Moneycone, while I look for deals when I need something I like to have a balance between the two. I feel that right now my frugality is quite high and doesn’t require much effort to continue, therefor it is now worth my time to seek out other ways to make money.

    -Ravi Gupta

    • Squirrelers says

      Ravi – Thanks, glad you liked the article! Interesting comment on how frugality doesn’t require much effort for you to continue. That shows how things become easier once they become habit. Once behaviors and decision-making is automatic, it opens up time and energy for other pursuits….such as making more money!

  3. says

    I agree with the other two comments. If she spends too much time trying to earn extra money, say working 60 hours instead of 40 at her job, she may be too tired to cook, for instance, and instead rely on take out or convenience foods. There has to be a balance between making extra money and saving.

    • Squirrelers says

      Melissa – I totally agree that there needs to be a balance. The thing is, it appears to me that many people focus so much on saving money that they reach diminishing returns. There’s only so much to squeeze out of a budget. The first 3 hours a week might get us somewhere, but the next 3 hours might provide less benefit. I think this is where the balance comes in, by dedicating some time growing income. After all, we can only save as much as we earn, theoretically, while our earnings aren’t capped.

    • says

      I also agree. Everything in life requires balance. If we spend too much effort in one area others will suffer. I think she needs to work harder at being balanced and more patient. If she approaches things that way then everything will fall into place.

  4. says

    I’m going to throw in a Millionaire Next Door/sports reference.
    good at saving = good defense
    good at earning = good offense

    As we all know, good defense wins the championship. IMO, Jane needs to work on having good defense first. This will serve her well into the future. Once she has good defense, then she can work on improving the offense.
    Of course there need to be balance, but Jane will have to figure that out.

    • Squirrelers says

      retirebyforty – yes, very good and applicable references from a classic! Totally true, you need both. If a person makes a lot of money but spends a lot, he or she is going nowhere. If you do both, you can get someplace. Good defense can go a long way, but it’s a bit different with money in that you need offense first! In other words, if you make no money, you have nothing to save:) But yes, you certainly need both. I’m a saver, as I’m sure you can tell!

  5. says

    I think it totally depends on Jane’s upbringing and life skills. I think all of us could benefit from some lessons in frugal living because eventually when we retire someday, we’re going to need to live on a reduced income.

    I think some of the time Jane spends learning how to live on less will greatly benefit her future self because she will need less money to live comfortably in retirement. I think that’s worth more than the $20/hr you state, at least long term, it is.

    That being said, you shouldn’t spend so much time on frugal living that it affects your performance at your day job. If you’re pulling an all nighter to bake bread from scratch and are falling asleep at work and it’s affecting your day job productivity, then that’s a line that shouldn’t be crossed because you may just end up losing that $4000/month.

    Working longer hours…that’s a tricky one. I spent years in college working very long hours so that’s something that I don’t do out of choice anymore. I suppose a part time job could be nice if it was totally unrelated to my day job, but I don’t want to ever have to go back to working 80-90 hour weeks. It was just too easy to burn out.

    • Squirrelers says

      First Gen – Intersting points. Have to say, your first paragraph really jumps out at me. We all should consider learning lessons in frugal living. When older, most people simply don’t have the income to support the same lifestyle as before, though with high income, diligent savings, and strict discipline, some people can do pretty well in retirement. But your point is well taken, and I agree with you.

  6. says

    Like Retire by 40, I’m all for having both a good defense and a good offense. I don’t think it’s easier with a complete team.

    Defense (savings or frugality) is quick and easy… just don’t spend and use common sense. You can alway play a great defense quickly!

    Offense (income building) takes years and can be much more difficult to accomplish!

    Great point though! If I did have to choose, I would choose a great income! If you make enough and it’s substainable, then life is good :)

    • Squirrelers says

      Money Reasons – Yes, income building takes time. It’s important though, at least income maintenance. Without that income, saving is hard. To your point in the last paragraph, wouldn’t it be great to have sustainable income like that?

  7. says

    I had a recent experience of going a bit overboard.

    In an effort to save $4 on ziplock bags (i had a coupon which made them essentially FREE!), I parked accidentally at the trucking bay/loading zone of the new local grocery shop today (no signs, of course) and almost got my car towed!

    They had called the tow trucks and I had gotten to my car in the nick of time.


    • Squirrelers says

      Young and Thrifty – wow, that’s some dedication to get free stuff! Well, you got the bags I take it – and avoided the car towing – so job well done, and a good story.

    • Squirrelers says

      101 Centavos – That’s my sentiment with excessive or inefficient couponing. there are diminishing returns to the point where one can get better ROI with alternative uses of time. I agree with you.

  8. says

    I seem to agree with the majority – it’s about balance…and I seem to lean the savings way. It’s usually easier to simply spend less than to earn more. Of course, it’s even more awesome to do both. This month I made more blogging than I did at my day job GROSS, and it did feel really cool to squirrel that away into a Roth IRA…yep, I like the combo approach. :-)

  9. says

    Welll put. This is a really personal decision, but very useful to ponder. Personally, I rarely use coupons as the management time versus the savings aren’t a good payoff for me.

    • Squirrelers says

      Barb – seems like you see it the way I do, that one must measure the gains of coupons/saving efforts vs. the the alternative uses of time.

  10. Squirrelers says

    Jeff – interesting perspective, I like it. Planning can only go so far, taking action is vital. Managing one’s time to make this happen – whether studying, saving, etc – is important.

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