Quora Answer: Should Reducing Expenses or Increasing Income be the Priority?

The following is my answer to a Quora question: “What should be your first priority when trying to improve your finances, reducing expenses or increasing income?”

This is not an either, or question.  Both reducing unnecessary expenses, and increasing income, have to be done concurrently, and gradually, so that it is sustainable.

If you are serious about improving your finances, conduct your own financial health review.  This means taking account of all your income, and your assets.  Then, consider your financial encumbrances, meaning your debts, and then your expenses.

The next step is to examine your expenses, to see where you can minimise them.  This means understanding why they are incurred, and setting a budget.  Setting the budget is the easy part.  Adhering to it takes discipline, and is not as easy.

The next step after is to look at your excess.  This is divided into the amount you save so that you have funds on hand, and the amount you set aside for investment, so that you can eventually increase your income.  The latter should be monies you do not need in the short term, and sudden fluctuations in investments will not impede your ability to pay bills.