Your net income and the law of diminishing returns

From my accounting classes, I have learned that:

Net income = Income - Expenses

Also, according to The Columbia Encyclopedia:

Law of diminishing returns: in economics, law stating that if one factor of production is increased while the others remain constant, the overall returns will relatively decrease after a certain point.

Applied to frugality, this means that past a certain point of effort and exertion, you will see less of a return on your frugal habits. Because frugality is, by definition, an expense-reduction strategy, it is limited by the dollar amount of the cost to be reduced. So, if you typically spend $300 on groceries each month, the most you can save by your frugality is $300.

On the plus side, any expense-reduction strategy will yield results that drop straight to the bottom line (your net income). So, if you save $150 on your monthly grocery bill, that's $150 that is now free for other uses. And it's the entire $150: no taxes, no withholding, nothing. My wife and I are apartment managers, and that gets us "free" rent in an apartment that would rent for $675. That $675 that we saved goes to fund our retirement plan. Trust me, if it weren't for free rent, that retirement account would have only 1/10th as much money in it, if that much.

On the same side of the net income equation is income. Unlike expense-reduction strategies, income-increasing strategies have unlimited upside. So, whereas you can only reduce your expenses to $0, you can (theoretically) increase your income to infinity. True, that increased income is subject to increasingly high tax rates, but even after taxes you still have more money, and more money is always better than less, right?

My whole point is that while frugality has its place in your personal finance strategies arsenal, its potential is limited. On the other hand, the upside potential from making more money is unlimited. If your goal is wealth, as mine is, recognize the point at which you're getting diminishing returns from your frugality, and divert all that extra energy towards making and saving more money.