In the book 7 Money Rules for Life®: How to Take Control of Your Financial Future, author Mary Hunt talks about the reason she lists "spend less than you earn" as her first and most important rule. Her thoughts:
Until you spend less than you earn, you can forget the other six [rules]. Without rule #1 it will be impossible to master the rest.
As most of you know, I list spend less than you earn as my best piece of financial advice for the same reason. Or as I like to say:
Even if you earn $1 million, if you spend $1 million plus five dollars more, you're going backwards financially.
And believe me, you can spend it all and more no matter how much you make. I've made a hobby of collecting articles on athletes, movie stars, and other high income people who have lost it all and gone bankrupt. It's sad to say, but the bankrupt athlete/famous person story almost seems to be the rule rather than the exception.
That's why spending less than you earn is a vital, foundational money principle. If you don't spend less than you earn, all of your other money moves are worthless. That's why I list spending more than you earn as the worst money mistake anyone can make.
It's also worth noting that it's FAR easier to spend less than you earn (as well as become wealthy) when you make a good income. That's why I write so much about maximizing your lifetime earnings -- which for most people means growing your career.
And BTW, I realize that this issue is well below the financial level/ability of many of you. But there are some people reading this who are still working on controlling their spending. This post is for them.
Fmf, i think one of you links has a typo. Seems like the meaning may be reversed.
Posted by: Easychange | March 28, 2012 at 07:30 AM
I think you mean spending more than you earn as the worst money mistake you can make, otherwise good article. Thanks!
Posted by: Harry | March 28, 2012 at 08:03 AM
Ha! You are right! I changed it to read correctly now. Thanks!
Posted by: FMF | March 28, 2012 at 09:25 AM
Dennis Rodman is in the news today, one to add to your collection.
Posted by: Pop | March 28, 2012 at 09:52 AM
It's the fulcrum of personal finance for sure, can't be reiterated enough.
Posted by: Drew | March 28, 2012 at 01:19 PM
It sounds like such a simple concept, but it is amazing how many people inflate their spending to match their income. On top of that they are often financing one thing or another that puts them over the top.
Posted by: Modest Money | March 28, 2012 at 01:44 PM
This is so true, which is the main reason everyone needs a budget that works for them. It can seem daunting when you try a budget and then fail, but the key is not giving up after your first fall. A budget takes work and will allow you to live better while spending less than you make. Great Post.
Jeremiah Brown
Posted by: Financeyoga | March 28, 2012 at 02:32 PM
>> And BTW, I realize that this issue is well below the financial level/ability of many of you. But there are some people reading this who are still working on controlling their spending. This post is for them.
Folks like myself appreciate that. It's a bit of a struggle but my family and I are measurably maturing financially. Reinforcements/reminders not to fall back into old, bad habits are quite welcome. :)
-E
Posted by: Erisian | March 28, 2012 at 04:00 PM
Good advice. It can never be repeated enough because it seems most people cannot abide by it.
Posted by: Long | March 30, 2012 at 03:00 PM