Spend Less Than You Earn

Spend less than you earn. I repeat, spend less than you earn.

It’s the number one thing you can do to move your financial life forward, and it is both that simple and that hard. (If you’re already doing this, and just need some concrete ideas on how to track your spending, check out my companion article here.)

No financial coach, no financial planner is magic (I wish we were!). We are there to help you, to guide you, to point out opportunities you can take advantage of to move you financially forward. We are not there to judge you - we want you to succeed, we want you to be financially successful and are in this business for a reason - we love doing it. We however, can not do it for you. Moving forward financially is a journey, and it doesn’t end with just one meeting, one phone call, or one recommendation. Journeys require progress, individual steps, by you. That starts with - spending less than you earn.

Spend less than you earn. It sounds simple. It literally means spending less than you earn in income over some period of time. There is nothing better you can do to improve your finances than to make sure that this expression holds true:

Monthly $$ Spent < Monthly $$ Earned

This is critical. If you’re spending more than you earn, there is almost nothing anyone else can do to help you. It’s a hole that you are digging yourself into and forcing your Future Self to deal with pretty unsavory options. However, if you’re spending less than you earn, you’re building a foundation on which to build up your Future Self’s finances.

Credit card spending counts (yes, on the day you make the purchase - here’s why). “Unusual” spending counts too. Note that this equation doesn’t care how many other people are buying the latest iPhone, going to that cool concert, or taking advantage of some ‘just this once’ antique sale. It doesn’t care how “rare” this unusual spending is, it just knows that for that month you bought the concert tickets, your spending outpaced your income and you set yourself farther behind in your goals.

It’s a necessary truth.

There’s nothing wrong with going to that concert if you’ve been saving up specifically for those concert tickets; I have no problem with you seeing as many concerts as you like, as long as you’re not spending money you don’t have, or spending your future income to buy them. For example, the expression doesn’t care if you get paid soon on Friday, if you buy the tickets three days before on Tuesday using your credit card: that still counts.

No matter how much or how little you make, you need to maintain a gap between your income and your spending. Then you can think about increasing this gap. Maintaining the gap is how you can free yourself from that brutal paycheck-to-paycheck cycle and build your financial momentum.

Let me leave you with two encouraging thoughts.

Spending less than you earn is what the cool kids are doing. While the media might like to paint a dire picture of millennials’ financial situation, the evidence is growing that millennials are actually saving much more than earlier thought. While it might seem like everyone you know is spending money like crazy, take a moment to notice how that might not be true. The ones not spending money are there - they just aren’t the ones asking you to go out for dinner or to go to the concert.
Your spending is entirely within your control. Unless some aspects of personal finance that are out of your control, you control what you do with every single dollar that you earn. It’s fantastic. You can take charge and research some ways to start tracking your spending, and go from there.

Need help getting your spending under control, or increasing your income to match? Reach out to Sarah for a free 15-minute chat at momentumfinancialcoaching.com!

Sarah GerberApril 22, 2020