Saving Vs Earning More & Their Roles In Wealth Building

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Many people like to quote the old saying “A penny saved is a penny earned”.  Me?  I disagree with that quote (you will see why later).  There are obviously going to be differing viewpoints on the subject: some people think that earning more money is better than frugality and others say that you don’t need to earn more to get rich. While both camps make decent arguments, and I believe both saving money and earning money are vitally important activities, I find there is a huge distinction between the two.  And, if anyone is interested in the ultimate goal of wealth creation, you need to be doing both.  Besides, isn’t creating wealth a goal for many of us?


Let’s start by breaking down the quote.  “A penny saved is a penny earned” is essentially saying that if you decide not to spend a penny, or if you spend a penny less, the effect is the same as earning one.  The reason I disagree with this logic is simple: when you save money you are preserving your wealth, but when you earn money you are adding to what you already have accumulated.  This is where the idea of doing both earning more and saving begins…


There are two steps to becoming wealthy–creation and preservation:


  1. When you earn more money, you are creating more wealth for yourself. New sources of cash inflows can be investment real estate, new businesses, dividends on investments, or any other side project that bring in money separate from your ordinary job income.  This is where the accumulation occurs.  Job income is what pays your living expenses, while the added cash flows are what add wealth. 

  2. Saving more of your money doesn’t specifically increase the wealth you had already created.  Rather, when you save money, you are only preserving what you have already accumulated.  You are not better off for not spending the aforementioned penny because you already owned it in the first place.  What you actually did was preserve it’s place in your possession.


Think of it like this:

When you go to the grocery store, or anyplace where you would spend money, your checkbook has a certain balance in it.  When you go to pay, you have money taken out via a check, debit card, cash you removed from the ATM, whatever floats your boat in this instance to pay for your purchase. Now, regardless of whether nor not you used a coupon or got some sort of discount, your balance is still going to be less than when you started out, correct?  Even if you decided not to make a purchase at all, your balance at best will be the same.  

Now, let’s look at earning a side income.  Same scenario as before: when you go to collect payment from a renter, or a side project, your checkbook has a certain balance.  No matter how much or little you collect you are going to have a higher balance after the transaction.  Even if they don’t have a single dime to pay you, at worst your balance will remain the same.


So, taking that into consideration, saving money and earning it is not the same. Saving money aims to minimize the loss of wealth while earning money aims to increase the amount of wealth.  But, one really cannot provide you as much benefit without the other.  In terms of building wealth:


  • Earning money is pointless if you don’t have saving controls in place to make sure it stays in your possession, and
  • Saving money is equally pointless if you don’t have anything coming in to save.


Do you find a distinction between saving and increasing earnings?  What about in terms of building wealth–is it possible to really be wealthy by just doing one of the two?  Do you even care?  :-P

  • Andrea @ SoOverDebt

    I think it’s important to save money AND earn more if a person wants to build wealth. Obviously no matter how much you earn, you won’t build wealth if you don’t save some of it. And it doesn’t exactly scream wealth to save $1 a month because you don’t make enough to save more than that.

    I try to achieve a balance. I’m not necessarily trying to become wealthy – I will be happy if I can make it until I die without (1) taking on more debt, (2) running out of money, and/or (3) eating cat food. To reach those goals, I need to increase my income enough to save more money. 

    So basically I’m talking in circles to say exactly what I said in my first sentence. But mainly I just wanted to post a multi-paragraph comment to make up for my lack of recent comments on your excellent posts. :) 

    • Eric J. Nisall – DollarVersity

      Oh. My. GAWD! She returns :-D  No make up needed Andrea, I’ve been a little behind too.

      Your points are exactly what I was aiming to relay.  I think a conscious effort has to be made on both ends to really make a difference.  And, if you unintentionally become wealthy in the process, then you can always toss some of that extra $ my way, I won’t object.

    • thefrugaltoad

      I just wanted to add some words of my own so that your impressive comment looks even more impressive! ;)

  • Anonymous

    I like your breakdown of the quote better than mine. As you know, I completely agree.

    • Eric J. Nisall – DollarVersity

      Ha ha.  I’ve had this post half-done for a while now, and when I read yours and that one guys comment about saving a penny being better, it set off bells, whistles & fireworks in my head!

  • thefrugaltoad

    Couldn’t agree more Eric!  It is a balance between earnings and savings that creates wealth.  Everyone has to find the balance that works for them. Is the sacrifice worth it if you spend your weekends in the office trying to make more money while your life is passing you by?

    • Eric J. Nisall – DollarVersity

      That last part is so important Paul.  The trade-off between the time put in and the rewards derived from those efforts have to make sense to the individual.  There are certainly times when I feel it isn’t worth giving up my time with friends and family for a small amount of extra income, but there are also other times when I will gladly give up some “me time” when the rewards are significant.

  • Carrie Smith

    As always Eric you make excellent points, and I completely agree with you. Saving and Earning need to be balanced and work successfully together. Otherwise, they are pointless.

    Great advice!

    • Eric J. Nisall – DollarVersity

      Thanks Carrie!  Like anything, it will take a little time to find that balance, but when you do you just need to be diligent and stick with it.  Before long, the results will make all of the work very much worth the effort!

  • Miss T

    Excellent points Eric. You definitely know how to be devil’s advocate. I truly think you need to do both. You need to preserve what you make but you also need to work on expanding your opportunities and investing in the future. For me I seem to be constantly thinking of ways to make extra money. The issue I have is time and making them become a reality. 

    • Eric J. Nisall – DollarVersity

      You hit the nail on the head with the time issue.  It’s all well and good to come up with new income streams, but without finding the time to implement those ideas, it becomes pretty difficult.

  • Marie at

    Good points.  Some point out that by cutting expenses you are freeing up more money to do other things with (such as invest to get dividends or interest) but when you earn more money you typically don’t keep dollar for dollar what you earn due to taxes and other expenses related to earning it.  Yes you need both.

    • Eric J. Nisall – DollarVersity

      Thanks Marie.  You’re absolutely right about the taxes, but it’s still going to be more than you had started out with.  So, if you can combine the two and save most of that extra income, you are coming out way ahead!

  • Cash Flow Mantra

    I think that it is a lot easier (at least for me) to add $1000 to my monthly income as opposed to cutting out $1000 from my monthly spending.

    • Eric J. Nisall – DollarVersity

      I think that would be a sentiment echoed by a good number of others.  Once you have a budget and lifestyle in place, it’s pretty hard to cut out certain things if you aren’t absolutely forced to.  The easiest thing would be to add money and save a good portion of it rather than using it to increase your current lifestyle. 

  • Anonymous

    I believe one needs both earnings and savings in place to ultimately be wealthy.  You cannot be wealthy is your spending is out of control.  You need to save a large portion of your income for investing there is no way around it.  As Cash flow Mantra said.. there comes a point were you just can’t cut your expenses any further and you need to increase earnings.

  • Jackie

    I’m in the camp that says it’s best to both increase income AND decrease spending in order to build wealth (or get out of debt, or reach whatever monetary goal you’ve got in mind.)  I also think that a penny saved is not the same as a penny earned, but I think that a penny saved is actually worth MORE than a penny earned, because you’ve got to pay taxes on every penny you earn. If you’re saving a penny you’ve already got, you’ve already paid those taxes.

    • Eric J. Nisall – DollarVersity

      I’m all for anything that can speed up a process, especially when it comes to making money.

  • Terry Pratt

    I skipped all the way to the comment after reading the first two sentences (I’ll finish reading as soon as I finish posting this comment.

    I have long said “a penny saved is (a penny minus your marginal tax rate) earned.”

  • Terry Pratt

    Earning money has always been difficult for me, my highest hourly wage ever was $8.50 and $17K is the most I have earned in a single year.

    Currently I live on a poverty-level income and there’s not much potential left for reducing expenses.