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Software Engineer and Lawyer Share Opinions : Bottom Line vs Top Line

Two Personal Finance Bloggers are talking about making more money vs controlling more spending, which one is better in terms of achieving financial freedom?

It’s very interesting to read the differences from their opinions while comparing their backgrounds.

Blogger A is a 37 year old lawyer. Based on the comments he left on other blogs, this guys’s networth is too large to be disclosed. And I assume he owns or jointly owns a law firm (just my guess).

Blogger B is a young software engineer who works for a company, just like majority of us out there.

Blogger A says:

What is your most valuable asset? You may be surprised. It isn’t your house, or your 401k, or even your 6-figure balance at Ameritrade (if you’re lucky enough to have one). It is your ability to earn an income. Over the course of your working life, your ability to generate income that can be saved and invested, will determine when you are able to retire, and what the financial quality of your life will be in retirement. No other factor even comes close.

If you want to get rich, focus on increasing your top-line.

Living Within Your Means is Important, but Won’t Make You Rich. Don’t get me wrong: keeping your spending under control is important. I have a number of friends who make several hundred thousand dollars per year, but who somehow manage to go through all of their income, and consequently have no net worth. However by and large, picking up nickels here and there by squeezing your cost structure it isn’t going to make you rich. Instead, controlling your spending is just what keeps you out of the poorhouse.

Even though compound interest is a powerful thing, if you only have a small asset base to begin with, it will only grow into a small number by retirement. The juice that really drives asset appreciation is the ability to invest a large sum of money. And the way you get a large sum of money, is by having a strong income (while controlling your expenses).

Here is the link to the entire article.

Blogger B says:

These posts state that many of us are concentrating too much on finding ways to save more money instead of finding ways to make more money. While I agree that increasing your in flow will impact your bottom line more than decreasing your out flow, I think they’ve tried to oversimplify things.

Sure, getting a 5% raise is much better than most every way to save more money in our daily lives. But the reality of it is, how often do you get a chance to get a raise or a boost in your income. My company gives raises once a year, so I have one opportunity to increase my income. Yes, I know, each work day is a chance to increase my income, but I strive to produce my best work every day anyway. That’s a given.

Just the other day, several people told me how excited one of our customers was after the demo of the new feature I put in our software. One person told me I needed to ask my boss for a raise. Is it that simple? I just consider it doing my job. It really ticked me off at my last company when employees would get recognized for doing something that they should be doing anyway.

[back on topic, please]
My wife is a teacher. Her salary is set by the county. She could be the best teacher in the county or the worst teacher in the county; her salary would still be the same. She doesn’t get merit raises either. They just don’t do that for teachers. So how can she increase her income?

It seems to me there are many more ways to decrease spending than there are to increase income. That’s why we all focus on decreasing spending. So, keep on saving money. And when your chance to increase your income comes around, be sure to get it for all it’s worth.

Here is the link to the original post.

Cow says (well, that will be me if you are not familiar with this blog):
I am not going to comment on both bloggers’ opinions. I just want to get back to the original topic about top line vs bottom line in a mathematical way:

Let’s say you make $50,000 a year. What is the max of the bottom line? Yep, $50,000 assuming you will eat snow, sleep on the streets and hide income from Uncle Sam. Bottom line must be less than your income. It’s common sense. What is the max of topline? Hmm, I don’t think there is a limit. It can be $80 above your income right now, like what I made so far from eBay and online Ads. Or it can be $5 million if I create a successful business.

I agree with both Bloggers, increasing topline is way harder than controlling the bottom line. And that’s probably why majority of the people are struggling with the bottom line while only those who dare to challenge the top line let the bottom line to take care of itself.

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    April 30, 2006 @ 7:17 pm

    I guess it’s all about choices, right? If you decide that the work you love doing isn’t doing much for your top line, you can either decrease your bottom line or switch to something that pays more. (It’s easier said than done, but for example, doing corporate law instead of nonprofit, etc)

  2. Yuna said,

    May 2, 2006 @ 9:57 pm

    Yep. I agree that it is a personal choice. Some people find making 30K a year for a nonprofit is very fulfilling. They rather ditch the high paying job to seek for personal satisfaction. And most of the time, the reward for working on a happy job is greater than a high paying job… So for those lucky ones who have found their true passion by doing the jobs they will do for free, then caring the bottom line is really the only choice.

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    My usual answer to all these dilemnas is - why can’t you do both? :)

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