Comments: Spend Less than Your Earn

Back in May I ran a series called The Best Advice I Can Give that featured five top personal finance experts offering their single best piece of advice. In part 2 of that series, Ric Edelman suggested the following:

“Spend less than you earn. Successful financial planning really stems from that simple statement. If you retain a portion of your current income, you’ll soon ask yourself a question: what should you do with that money? And that question is the beginning of wealth creation. It is essential that you do not spend 100% (or more) of your current income on current expenses. One day, expenses – housing, education, medical, retirement – will exceed your affordability if you are relying solely on current income. That’s why you’ll be glad (and relieved) that you’ve got past income to rely on.  Spend less than you earn. That’s how rich people got rich.”

I received a couple interesting comments on this post. Here's the first:

"I agree completely. It is the most important facet of successful personal finance, and also the most difficult to convey. In my experience, getting most people to purposely spend less than they earn is often a herculean task. They've done the opposite (without negative incident) for so long, and seen their peers and models do the same, that any necessary change in lifestyle is practically unthinkable."

Here was my response to this comment:

"Michael -- Yep! And no matter what their income levels, people can (and do) certainly overspend. I've seen people making $140,000 per year and deep in debt because they spent $170,000 per year! FMF"

Here's another perspective on the issue:

"I agree that saving is important, but you also have to take care exactly how you invest your savings. Just saving is not enough, you have to know how to invest it properly."

Of course, this is correct. You don't want to save money just to waste it through inefficient or ineffective investing!! That's why I write posts like Investing for Beginners, Tips for a Great 401k, and 10 Biggest Mistakes of Novice Real Estate Investors. And you can count on the fact that there will be more investing articles to come in the future.