It’s often thought that if you want to be rich you’ve got to earn more.
Which makes sense right?
You earn more and so have more money to save?
Not quite, because for every extra £1,000 you earn between £12,000 and £46,000 you only get to take home £680 of it, because you pay 20% income tax and 12% national insurance.
32% of your wage goes to tax.
If you spend as much as you earn and aren’t prepared to embrace frugality you need to earn an extra £1,470 to have an extra £1000 in your pocket after tax.
Now, if you instead £1000 out of your current spending you get to keep all of it. You don’t just get to keep 68% of it.
Start by lowering expenses, then work on increasing income; the return just makes sense.
Now, if you want to become a full-time entrepreneur lowering your spending makes even more sense, if you spend £20,000 a year you need to earn about £25,000 to support yourself and no more. But if you spend £15,000 a year you only need to earn a little over £17,000; a saving of £3,000 a year on your total earnings.
P.S it gets even worse over £46,000 because your total tax is 42%.