Ultimately, You Must Spend Less Than You Earn

Here's a piece from Money Central that I found particularly interesting. It talks about how each of us is responsible for our money decisions -- and where they lead us financially. In particular, the article says we need to quit blaming others for our financial problems and start realizing that we need to step up, make the right financial decisions, and control our own financial destinies. A summary:

Part of maturity is taking responsibility for ourselves. We need to see and acknowledge our role in the problems that befall us. Even if we're entirely blameless, which is rare, we still need to figure out how to play the cards we've been dealt -- to find solutions instead of just complaining. That's what maturity is all about.

When it comes to money, though, a lot of people want to remain financial adolescents. How much easier it is to point fingers at other people, the government, the economy or lenders for our money woes than to acknowledge we're at least somewhat -- and sometimes a lot more than somewhat -- responsible for the fixes we're in.

Ooooooooooo -- she's getting tough now!

But that's what I think people need to hear in many cases -- some tough love when it comes to money. I've coached enough people who insist a weekly manicure, full package cable TV, three news cars (with only two people in the house!) and on and on are necessities to know that most people don't get enough tough love when it comes to money.

Later on in the article, she gives some examples of a couple complainers:

One reader who made $75,000 a year and who lived in an expensive area huffed that his family "shouldn't have to live like we're on welfare" in order to make ends meet.

Another, a single woman who made $50,000, complained that her fixed expenses -- taxes, insurance, mortgage, etc. -- ate up more than half of her salary, leaving her "only" $22,000 a year for her other living costs. She was oblivious to the fact that 20% of American households live on less than $20,000, or that a total income of $22,000 would put her in the top 10% of wealth globally.

Both of these readers, and others like them, want to shift the blame for their financial problems to outside forces.

And here's the bottom line:

You can grouse all you want about "the high cost of living," but it's still your responsibility to figure out how to live on what you make. Trust me: There are almost certainly families bigger than yours living on less in your community, and doing it without going into debt.

To me, this all ultimately points to spending less than you earn. This is one of the simplest financial principles to understand, one of the most vital financial principles to grow your net worth, and one of the hardest financial principles for many people to understand. For some reason, they just don't get it -- or at least want to get it.

Even highly paid individuals often have problems with this issue. I once counseled a guy who made $150,000 a year and was spending $180,000 a year or so and just didn't know where he could cut any spending. I found several places he could save money, but he always had excuses for why he couldn't make any changes in that area. In the end, I couldn't help him because he wanted to spend what he was currently spending and have me make it work out financially somehow. It just wouldn't add up -- all because he didn't spend less than he earned.

For more on this issue, see these links:

• How to Go Broke on $200,000 a Year

• Look After the Pennies and the Dollars Will Look After Themselves

• How You Can Own Two Homes with No Debt on $33,000 a Year

Comments

[plonkee]

On the BBC, there is a really great series called Spendaholics where they take someone massively in debt due to excessive spending and try to help them get under control with a lifestyle expert and psychologist.

Anyway, quite often people go on the show with the firm but unstated belief that somehow, the debts will magically get paid off without any change in their level of spending and lifestyle. It always makes me wonder where these people think the money is coming from.

[Suze]

Most of my financial problems I have pulled down on my own head.

[Suze]

Most of my financial problems I have pulled down on my own head.

[Minimum Wage]

I think one of the biggest problems low-income Americans face is the inability to buy their home and thereby lock in or stabilize their housing costs. And I lay the blame for that inability on government. The only thing stopping me from owning the roof over my head is government.

[Minimum Wage]

Didn't the Beatles say something like that?

"And in the end, the dough you spend, must be less than the dough you make..."

[Dr. Artfredo C. Abella Ph.D]

Ultimately, we must spend less than we earn, sounds basic but indispensable if we want to become affluent in life. The are other things to remember just like what Georgia is advocating -if one wants to become rich, he must must earn more but want less. This reminds me also on the concept of Gautama Budha in his revelations in the awakenings that is to detach ourselves from the material things in this earth. The other way is to use the western idealogy on how to get rich that is - either to earn more or spend less. A layman might be puzzled why this concept when applied will make him rich. Well, this is really simple but at the same time complex. Simple because if you spend less than you earn then it will afford you some savings which can be used for investments. Complex because it will take a herculean discipline for this habit to do so. In this modern era, our clamoring desire to spend equal or more than our income could be too tempting to resists. Hence, breaking that old habit and creating a new one which is spending less than we earn could be back breaking. Enticers are everywhere and it will take a spartan discipline to resists spending. One of the best way to inculcate and entice in ourselves the habit of spending less than we earn is to realize the advantages of delaying instant gratification for a worthy cause. This means, saving today so that in a year or two you can pursue your dream vacation tour in Asia, U.S. or Europe. In a grand scale, we can also say that this concept could be related to - produce more than you consume, earn more than you spend, live within your means or live below your means. As what the Richest Man in Babylon would advocate - part of what you earn is yours to keep. Spending is more of consummation
of your resources while earning is more of sourcing the demands of the people. A man could simply become rich by simply meeting or providing the needs and demands of the consumers by supplying them with goods or commodities. In the end, we can spend less than we earn by simply meeting or procuring the basic necessities in life and not indulge in the expenses that pertain to meeting our wants.

[Dr. Artfredo C. Abella Ph.D]

Ultimately, we must spend less than we earn, sounds basic but indispensable if we want to become affluent in life. There are other things to remember just like what Georgia is advocating -if one wants to become rich, he must must earn more but want less. This reminds me also on the concept of Gautama Budha in his revelations in the awakenings that is to detach ourselves from the material things in this earth. The other way is to use the western idealogy on how to get rich that is - either to earn more or spend less. A layman might be puzzled why this concept when applied will make him rich. Well, this is really simple but at the same time complex. Simple because if you spend less than you earn then it will afford you some savings which can be used for investments. Complex because it will take a herculean discipline for this habit to do so. In this modern era, our clamoring desire to spend equal or more than our income could be too tempting to resists. Hence, breaking that old habit and creating a new one which is spending less than we earn could be back breaking. Enticers are everywhere and it will take a spartan discipline to resists spending. One of the best way to inculcate and entice in ourselves the habit of spending less than we earn is to realize the advantages of delaying instant gratification for a worthy cause. This means, saving today so that in a year or two you can pursue your dream vacation tour in Asia, U.S. or Europe. In a grand scale, we can also say that this concept could be related to - produce more than you consume, earn more than you spend, live within your means or live below your means. As what the Richest Man in Babylon would advocate - part of what you earn is yours to keep. Spending is more of consummation
of your resources while earning is more of sourcing the demands of the people. A man could simply become rich by simply meeting or providing the needs and demands of the consumers by supplying them with goods or commodities. In the end, we can spend less than we earn by simply meeting or procuring the basic necessities in life and not indulge in the expenses that pertain to meeting our wants.