It would be great if we could all start on an even financial playing field, but for so many people, their money journey is already inhibited by debt. It can be hard to think about generating income when you’re trying to balance reducing your debt, but the two concepts do not have to be separate ideas. Debt reduction and income generation go hand-in-hand: if money is leaving your pocket, more money should be coming in to offset the difference. To help you better understand how one can affect the other, we have broken down each concept so that you can better understand just what each means and how they can play off one another to build a better financial future. Take a look at debt reduction vs. Income generation:
The concept of debt reduction is simple: you want to pay off existing debts to help yourself gain a better financial foothold. If you have money coming in, it can be frustrated to see a good chunk of that go towards paying off existing debts. Debt reduction is an unfortunate practice that many of us have to take part in and can arise from a variety of causes: student loans, car payments, etc. The process of debt reduction aims to pay off and eventually reduce the amount of total debt until there are no debts left. Debt reduction can seem like a vicious and unending circle, but with time and proper money management, you can conquer the beast to better secure your financial future.
On the opposite side of debt reduction, income generation is the process of generating (or creating) income. Many of us have jobs to aid in income generation, but aside from day jobs, there are many ways an individual can generate more income. Income generation is putting money into our pockets instead of taking it away. If you are looking to increase your own income generation, consider the following: changing to a more lucrative career, working as a freelancer, starting a small business, etc. It is vital to maintain a steady stream of income to help pay off day-to-day and future expenses.
Many people believe that in order to make any strides towards financial gain, they have to pay off all debts first before beginning to focus on income generation. This concept is simply untrue; yes, debt reduction and income generation are two different sides of the coin, but their differences are exactly why we need to consider both practices when thinking about personal finance. Debt reduction takes money away, money that could be replaced quickly if we generated more income (either through a stronger single income or through various incomes). Likewise, generating more income can lead to a shorter time reducing debt and securing financial freedom. When thinking about money, don’t think of debt reduction and income generation as individual concepts: tackle them at the same time so that you can better secure your financial future and become successful today.