Octobank has initiated a series of educational events, with the first being a free online webinar titled "Introduction to Financial Literacy", held on January 23, 2025. Participants had the opportunity to delve into key principles of financial management.
The main topic of discussion after the webinar was: what comes first—income or expenses?
The debate over which factor drives the economy—income or expenses—is similar to the classic chicken-and-egg dilemma. This question concerns not only personal finance enthusiasts but also top analysts shaping macro-economic strategies. Let's explore the connection between these two key concepts and why balance is so important.
Income as the Foundation of Economic Behavior
Classical economic theory suggests that income determines expenses. The logic is simple—we can only spend what we earn. This approach, based on common sense, allows us to plan spending, avoid debt, and build financial security.
Example: A person with a monthly income of 10,000,000 UZS may structure their budget as follows:
50% (5,000,000 UZS) – essential expenses (rent, food, transport).
30% (3,000,000 UZS) – discretionary spending (travel, entertainment, hobbies).
20% (2,000,000 UZS) – savings or investments.
This strategy helps maintain a balance between essential spending, comfort, and future financial goals.
However, limited income can restrict financial growth. For example, a family earning 5,000,000 UZS per month may need to allocate almost all of its budget to basic needs, making it difficult to invest in education, health, or personal development. In the long run, this slows economic growth both at the household and national levels.
Expenses as a Catalyst for Income Growth
On the other hand, there are situations where expenses drive income growth. This approach is typical for businesses, entrepreneurs, and ambitious individuals willing to take risks for future success.
Example: A business owner takes a 100,000,000 UZS loan to open a new café. These expenses—covering rent, equipment, and marketing—help attract customers, leading to an increase in revenue to 150,000,000 UZS per month. In this case, spending acts as an investment in development.
The same principle applies at the government level. Investments in infrastructure, such as roads and bridges, create jobs, stimulate the economy, and increase tax revenues.
However, this approach carries risks. If spending exceeds income without a well-planned strategy, it can lead to debt accumulation and financial instability.
Economic Balance: Income vs. Expenses
In practice, income and expenses are deeply interconnected. Income sets financial limits, while expenses can drive development and income growth in the future.
An economic balance is achieved when:
✔ Income exceeds expenses, allowing for savings and investments.
✔ Expenses are controlled, preventing debt accumulation and financial risks.
Example of household budgeting:
A family with a monthly income of 20,000,000 UZS structures their budget as follows:
12,000,000 UZS – essential expenses (housing, food, utilities).
5,000,000 UZS – discretionary spending (education, entertainment, travel).
3,000,000 UZS – savings or investments for unexpected situations.
This balance prevents financial problems and gradually increases well-being.
Expert Opinion
"There is always the question: which comes first, income or expenses? Honestly, from an economic perspective, there is no single correct answer. Some financial experts argue that spending generates income. However, I hold a different view: we determine our expenses based on our income. We assess how much we have earned and understand what we can afford. The opposite approach—spending first and then seeking income to cover it—seems less logical to me, though it also has its place. Ultimately, it’s up to you to decide," – says financial expert Andrey Tuchkov.
Conclusion
Income and expenses exist in constant dynamics. Income provides the foundation, but strategic spending becomes a tool for future growth.
The key takeaway: The right financial approach is about balance. Income should cover immediate needs, while smart expenses should contribute to building a better future.
In Uzbekistan's economic environment, maintaining this balance is especially crucial for the long-term stability of both households and the national economy.
Octobank is hosting a series of free online financial literacy webinars every Thursday at 19:00.
Register now: https://us02web.zoom.us/webinar/register/WN_dIVI6DXqRhK91nlxYn7HjA
