Having a budget is great, but it's not the total package if your goal is to build your net worth. In the long run, there are three key areas that matter for improving your finances: maximising your income, minimising your expenses, and investing.
Photo by Jeff Belmonte
As personal finance blog Thoughts of an Anonymous Lawyer points out, many of us tend to focus on just one of these categories. Usually, it's minimising our expenses, because that's often the easiest one to do. You feel in control of your life when you can save money on your daily coffee. However, all three categories are necessary if you want to work towards financial independence:
For someone in the accumulation stage, the most important thing to do is balance the three prongs of growth: (1) maximising income, (2) minimising expenses, and (3) investing. Ignoring any one of these prongs will handicap your NW growth.
Of course, maximising your income can be roughly translated to "Find a better job" or, in some cases, "Get your employer to pay you more." Neither of which is easy. Not to mention, investing is something you can only do once you have money to invest. It's tempting to think you'll get to these once you have the time or the ability. Neglecting those areas, however, will make it a lot harder for you in the long run.