Making Money VS Saving Money (Which Is MORE IMPORTANT?) | How to Financial Independence Retire Early

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What's more important to achieving Financial Independence, a good offensive strategy (in other words finding ways to generate an income) or a good defensive strategy (in other words finding ways to lower your expenses)? There are certainly some good points on both sides of this debate so today we're going to look to find an answer to this often debated question.

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[TheLifeFormulaa]

You need both but making more money is definitely more fun

[jakeingram]

It’s like my old football coach used to tell us.


“You can have the best offense in the state. You can score 100 points in a game, but if they score 101, you still lose. However, if you have a great defense and manage to shut them out, worst-case scenario, you tie.”

The same thing applies to personal finance. It’s not about how much you make; It’s about how much you keep. We’ve all heard of people who earn 7 figure salaries who are dead broke. But figure out a way to live for free? You could retire tomorrow, if you wanted.

[biguubtorres]

Awesome both are equal like the book "The Millionaire Next Door" explains, people didn't become millionaires only based on how much wealth they created. They needed to maintain it and keep growing.

[Lea-dxnf]

Although both is important, a defensive strategy is more psychologically approachable AND attainable. 1) You already touched on this, but not everyone can raise their income and not everyone wants to. To gain money through starting a business is not applicable to every job, and requires a lot of management and leadership. In my country, there is a rather small income distribution. Most people with an average income can live more frugally without putting in more effort.
2) The hedonic treadmill/that we simply tend to spend more if we earn more. We tend to spend more money not on valuable things but buying la Mer skincream instead of Nivea when studies show that they basically contain the same ingredients.

[evilzzzability]

Both important, but there is an order in which things should be done. Getting your finances under control by reducing spending to below whatever your income level currently is at is the first step. I have never encountered someone who had a spending problem who was able to eventually earn enough to overcome that spending problem, because their spending was the problem, not their income. After you have that discipline in place, building wealth requires you to maximize your earnings over the course of your career. Just as I've never met a rich overspender, equally I've never met a rich janitor (although I suppose there may be a few, they're just extremely rare).

[SaveMoneyTricks]

Awesome information, Daniel! We need both because we have nothing to save if we don’t create and make money. We make money for living and learn to spend them wisely but most importantly, save some for security and future purposes.

[CharleeWayne]

A dollar saved is a lot easier than a dollar made.

[jeremyhershberger]

Great comparison between offensive and defensive strategies. Like Daniel said the best strategy involves both. It is cool that some people live on as little as $7-8K a year. I live on $10K and most people think I am minimalist. The key is the gap between the amount you make and the amount you spend. As long as you keep that gap positive you have a lot of flexibility.

[Ramxie]

My recipe. Make more, save, and invest. Repeat.

[OLISAxo]

This is exactly what I've been wondering lately, thank you so much. Your videos are always so helpful

[mattm]

I just wanted to thank you for all these videos. Your really helping turn my life around. I am so proud of where I've gotten in myself and i dont think i could've done without your help. I really appreciate your work. Thanks again.

[Billz]

Dan, you are one of the most genuine guys on youtube. Keep doing your thing!

[TatyanaEdgeworth]

I definitely need to film about budgeting and I’m glad I found your page! Great inspiration

[Sev]

Excellent content. Really impressed with your videos. Sharing your channel with my friends & family. Thank you!

[dominick]

You need both. A person can always outspend what they make but you also don't want to be a monk/hermit with nothing.

[DewTime]

You need both obviously, but making money is clearly more important and superior. Why?
1. It’s easier to save x percent of your income when you make more money. Saving 20% of your income when you make $30K a year can be a challenge where as saving 20% of your income when you make $300K a year is trivial. Because although your income is multiplied by ten, your expenses are not multiplied by ten. Even if you fall into lifestyle inflation and your expenses are five times as what they used to be, you still have plenty of money left over.
2. There’s a clear limit to saving. So even if you have the best discipline in the world, on $30K a year you can only save a max of $30K. For making money there is no clear limit. You can always grow.

[drunclecookie]

saving/investing is more important than what you make... I know people who made millions with a $60k/year salary and I know people who make over $100k/year and don't have a single dollar in the bank and live paycheck to paycheck with hundreds of thousands in debt

[andrewb]

Good video. For me it was cutting expenses to what I felt was comfortable (probably more than most), to boost my savings rate easily. Now I'm in phase 2 which is finding a way to earn more money. Of course one could do both simultaneously, but this worked for me. I definitely agree that BOTH are equally important.

[buntypayalmehra]

Hi Daniel, thanks for sharing the valuable information. Could you please cover, what is best method property or stock market for investing, thanks. Will await for the video on this.

[astro]

Take your money and make money from that money. Basically take the profits and reinvest into your business instead of taking the profits and spend on expensive vacations and luxury items.