How to Maximize Your Savings Gap

Mind The Gap - Income Matters
Cody Berman
Hit me up!

The only way to accumulate wealth is to create a gap between your income and your spending also known as the savings gap. The rate at which you accumulate wealth depends on the size of this gap. Much of traditional retirement guidance focuses on expense cutting and frugality. However, what happens when your expenses are cut to the bone and you still aren’t saving enough to retire? Today I want to focus on why income generation is so important and how the expense floor can inhibit traditional retirement advice.

This content may contain affiliate links. See the Privacy Policy for more information.

The Expense Floor

The Expense Floor - Rock Bottom

Cutting your expenses can be a great way to increase your wealth gap. However, there is one small problem. You can only cut your expenses down to $0. If your annual expenditure is already only $5,000, there’s not too much room to cut!

Picture This

You’re renting a home in the second-worst neighborhood for $200 per month, paying for the cheapest health insurance policy, eating rice and beans for every meal, riding your bike everywhere, and rarely spending a discretionary dollar. Your annual expenses are approximately $5,000. However, you only earn $5,000 from your low-paying job as a worm catcher. Therefore, your savings rate is 0%.

“Oh, cmon you can surely lower your expenses to increase your savings rate!” yells a financially savvy bystander.

So you cut down to one meal per day and downgrade to a $100-per-month rental in the worst neighborhood. Over the next six months, you lose 50 pounds and your house gets robbed every other week. You are miserable. Don’t worry though, your savings rate has increased to 40% from cutting back on food and rental costs!

“A 40% savings rate? What are you a loser or something?” mocks a retirement guru.

You move into a cardboard box, drop your health insurance, cut down to half a can of beans per day, and NEVER spend a discretionary dollar.  Your expenses are now $100 per year (the cost of your beans) and your savings rate is 98% ($4,900 / $5,000)! You’ve finally stuck it to all those financial experts. Then one day, you die from malnourishment.

Moral of The Story

Of course, this is a ridiculous and extreme example, but my point is that “Cut your expenses.” is not always the best answer to “How do I increase my wealth gap?” Sometimes, there are just no expenses to cut. Of course, you “can” cut your expenses all the way down nearly $0, but at this point, you are dumpster diving for every meal and I highly doubt that any reader of this blog would resort to such extremes.

From personal experience, for someone to live a reasonably “normal” life, the annual cost is approximately $10,000+. With that being said, if you’re only earning $10,000 in annual income, cutting your expenses may be extremely difficult without drastically sacrificing quality of life. (Note: This $10,000 figure is just from personal experience. I’m sure someone has lived well on 9k, 8k, etc. but $10,000 is a good number for the average person)

There are only two variables that determine the wealth gap: Income and Expenses. If expenses cannot decrease, there’s only one solution to widen the wealth gap… Increase your income!

Income Matters!

Climbing up the Income Ladder

In this age of technology, there are SO many ways to earn additional income. In my opinion, the best way to earn extra income is to monetize one of your hobbies or passions. That way, you don’t even feel like you’re working! Read more about that in my Cracking The Nest Egg article.

Side Hustles

If you can’t figure out a way to monetize a hobby or passion, there are certainly plenty of other options for you to earn additional income. Here are some side hustles that come to mind:

  • Drive for Uber/Lyft/Another car-sharing service
  • Deliver for UberEats/DoorDash/Another delivery service (Check out my UberEats review and please use my referral link: codyb2495ue 🙂 )
  • Sell stuff on eBay/Amazon/Other online markets
  • Rent a spare room or house on Airbnb/Other home-sharing services
  • Rent your car on Turo/Other car-sharing services
  • Pick up odd jobs on TaskRabbit/Fiverr/Other job-matching platforms

These are all just off the top of my head, but there are hundreds of other ways to earn additional income! Earning an extra 5%, 10%, or maybe 50% (if you’re wildly successful) can supercharge your path to retirement.


Does your current job compensate you for your level of effort and success? Unfortunately, a majority of jobs are not tied to performance, and therefore disincentivize employees from going the extra mile. If a career change is possible, I would highly recommend moving toward performance-based pay. Anyone reading this blog is clearly trying to crush the game and outperform their peers. Why not get fairly compensated for your outstanding efforts in the workplace as well?

If a career change is just not in the cards, you will need to take steps in order to advance your position at your current occupation. As much as you may not like to hear it, networking is your best chance at rapid career growth. Grab lunch or coffee with your peers, bosses, and people from other departments. Nobody wants to promote the person they barely know! Meeting new people will uncover opportunities and increase your chances of long-term success. It’s not what you know, it’s who you know.

Moving Forward

Moving Forward

Understanding how to maximize the gap between your income and your expenses is paramount to achieving your retirement goals. If expenses cannot be cut, the only way to increase your wealth gap is to increase your income. Even a measly $100 in additional income per month equates to $1,200 per year and using our $10,000 lifestyle from earlier, this implies a 12% savings rate increase. This type of income-boost can shave years off of your retirement plan!

It’s truly remarkable to see the speed at which you can retire if you are able to maintain a high savings rate. Using Mr. Money Mustache’s Retirement Calculator, a 50% savings rate equates to a 17-year career. A 60% = a 12.5-year career. A 70% = an 8.5-year career. Well, you get the point. Even a seemingly small change in your savings rate can have astronomical effects on your retirement date. Make the right choices today to set yourself up for a better future and to achieve financial independence.

Keep Track

Keeping track of your investments is important. Personal Capital is a FREE website that aggregates all of your financial information to help you track your net worth. I highly recommend using Personal Capital. Their website is easy to use, there is a mobile app, and it’s completely free! If you’d like to sign up, please use THIS LINK (You’ll get $20, FREE!).

Feel free to share your stories about how you increased the gap between your income and expenses. Did you slash expenses to the bone? Start a six-figure side business? The Fly to FI community and I would love to know! Spill your secrets in the comments below. Thanks for reading!

If this content helped you, please share! Website traffic helps to keep the lights on and allows me to keep producing helpful content.

Note: I am not a financial advisor or fiduciary. All of the information presented in this article reflects my opinion. I am not liable for any financial losses incurred related to this content. My content is always written with the readers’ best interests in mind. I believe that my content is helpful and well-researched, but it is not professional financial advice. For more information, read our Privacy Policy.

Leave a Reply

Your email address will not be published. Required fields are marked *

Grab the Free Ebook

Learn all about my top 3 passive income strategies and how to get started in this free 20-page ebook.

Your information is 100% secure and will never be shared.

Here's your free ebook!

Just click the button below to download The Passive Income Guide. You’ll receive a copy via email as well. Can’t wait for you to dive in!