Updated on 11.01.11

The Real Meaning of Spending Less Than You Earn

Trent Hamm

Let’s just cut right to the chase here. It means being in control of yourself.

Every so often, a reporter will call me and ask me for my best financial advice and I always tell them “spend less than you earn.” It really does summarize the best way for someone to get their financial house in order. As long as you do that over and over again over a long period of time, you will be able to overcome any financial situation.

The challenge, of course, isn’t in following such a simple rule. Spending less than you earn is pretty clear.

The challenge is being able to exert that much control over your behavior. It’s being able to step up to the plate over and over again when it comes to not giving in to your impulsive wants. It’s being willing to do what it takes to improve your earnings before spending more money.

In short, it’s harder than that simple rule sounds.

The biggest difference between someone who is buried in credit card debt and someone who is debt free isn’t luck or income level. The biggest difference is self-control and the willingness to say no to most of one’s impulses.

I can tell you right now, from personal experience, that the single biggest change in my life in terms of finances over the past several years is simply gaining much more control over my impulse spending.

Six years ago, I thought nothing of stopping at a bookstore and dropping $50 on my way home from work. A trip to London? Well, I had a big credit limit. Need a vehicle? I don’t have any sort of down payment, but hey, let’s go! New video games? New DVDs? Let’s stroll through the checkout aisle without a second thought. Cable subscription with every premium channel known to man? Great!

This credit card’s reached its limit? Time to open a new one.

The number one reason I got into my desperate financial situation several years back is because I didn’t have any self control about how I spent my money. If I wanted something, I got it, even if it meant more debt.

The number one reason I got out of that situation was because I started adopting some self control when it came to my purchases. If I wanted something, I didn’t buy it unless I was already sure I could afford it while still making progress on paying off our debts.

How did I get that self control?

I started working for something other than the desires of the moment. I spent some time re-evaluating my life and I came to realize that there were an awful lot of things that I cared deeply about that I just wasn’t taking care of. I wanted a great life for my children, largely free from want when they were young at least. I wanted to be able to be at home with my kids when they were young as much as humanly possible. I wanted to someday be able to make a career leap into being a writer. I eventually wanted the ability to not work at all if I didn’t want to.

These were big dreams, and I was exchanging them all for the “freedom” to go buy a new DVD or video game when it would hit stores. I was swapping those big dreams for the ability to watch The Sopranos every week. I was giving up those big life goals so that I could splurge on more books than I could ever read – and I’d buy them less than a mile from a wonderfully stocked library.

The “freedom” to buy whatever you want whenever you want isn’t really a freedom at all. It’s another trap, one that keeps you from having the big things in life that you dream of, one that keeps you working in a career path that you might want to change, one that keeps you from wanting to open the mail.

It’s one that leaves you up at night, searching Google and hoping that someone out there has the answer to your financial situation.

I have the answer. Figure out the big things you want in life and put them first. Stop buying stuff that you don’t really need. Live lean for a while and focus on getting rid of your debts. Set aside just a little bit of “mad money” each week or month that you can splurge with, but keep your splurging within those narrow bounds.

In short, spend less than you earn.

The magic ingredient is self-control. Do you have it?

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  1. Adam P says:

    There are a lot of emotional/psychological reaons for overspending, which I think is downplayed too much by personal finance blogs and isn’t captured in the “Spend less than you earn” mantra–as true as it is.

    Suze Orman does a decent job of wanting people ot delve into why they overspend and getting control of your life/emotions along with your finances.

    For me, I’ve realized that I have what I need and it’s almost a challenge for me to spend money. Especially on big ticket items. My car and computer are very old, and I probably should buy new ones. But I think, will this really make me happier? And I think, I’m plenty happy! So I don’t spend.

    Small ticket items I really struggle to spend as much as I budget to spend. Clothes, games, books, etc. I have been coming in way under what I’m alloted lately and don’t want to accumulate more “junk”.

    Vacations are about the only place I can blow my budget in the last few years. And “travel” is starting to bring diminishing returns due to the hassle of airports/flying these days. Ruins the whole trip, nearly.

    Since I can’t get into spending money, I save. Lots. And what I’m saving for, I don’t know. I think I need to spend more time with Trent’s action item here:

    “Figure out the big things you want in life”

    Not an easy thing to figure out sometimes!

  2. sjw says:

    The problem with posts like this is that it is targeted at a certain demographic, and doesn’t realize it. It leads to a “blame the poor” mentality that I’ve been seeing a lot and really dislike.

    Spend less than you earn can be really tough in the when you’re old, sick, under-educated (to the point at which pulling up with bootstraps doesn’t work because you’re missing the boots and the straps in the first place), tied by family commitments, etc.

    Disclaimer – I’m white, educated, in good health, strong relationship, employed, hh income in the six figures. So yes, I’m the target demo. But I know I’m privileged.

    Plus, there has been some really interesting research on self-control lately and its relationship to being stressed and tired and hungry.

  3. @sjw — yes, this mentality is assuming you are not “old, sick, under-educated,” etc — but the fact of the matter remains a whole host of people who make decent money are in debt, and these are the people the article is targeting. Clearly if you are living on wellfare, you need another strategy. But some people who are in the middle class should for instance rent for much longer instead of buying a home, because they can’t afford a home, and shouldn’t spend more than they earn. That is, indeed, the best strategy for those of us who earn a living and have a reasonable amount of excess liquid cash at the end of each month to either spend, overspend, or save.

  4. Johanna says:

    A recurring theme in the posts here is the assumption that since Trent got into financial trouble by spending far too much money on “wants” and impulse purchases, everyone who’s in financial trouble must be doing the same thing, even if they say they’re not.

    With the post “A Dose of Financial Reality” from a few weeks ago, I thought we might be turning a corner toward more research and less navel gazing. I guess not.

  5. Gretchen says:

    sjw, those people should just work harder.


  6. getagrip says:

    Spending less than you earn is a component and a beginning. But it also takes more than just that since you could be spending just slightly less than you earn and still living paycheck to paycheck yet never really get ahead. However, regardless of income, if you never reign in your spending it’s much less likely you’ll ever be debt free or financially independent.

  7. Priswell says:

    I think a key component to spending less than you earn is to use not only self control to say “no” to yourself when necessary, but also finding creative (legal) ways to get what you need. Buying second hand clothing, doing things yourself when you can, buying in bulk to maximize unit prices, using coupons, etc. Not every creative idea can be followed, but realizing the need to spend less than you earn is a cornerstone place to start.

  8. krantcents says:

    I have a lot of self discipline, I think that is why I am in charge of the money. I also spent a career as a CFO which helps too.

  9. Diane says:

    #2 SJW-Becoming stressed, tired or hungry are all aspects of self- control. If I were handing out gold stars for great comments, I’d give the first one to #7 Priswell, who nailed it. Being creative is the key.
    You’d never know by my car, home(s), clothes, gifts or charitable contributions that I’m frugal, but you wouldn’t have to spend much quality time with me to figure it out, especially if you were a kindred spirit!

  10. sjw says:

    #9 Diane – “Becoming stressed, tired or hungry are all aspects of self- control.” I guess you don’t get sick. Or have others around you get sick. The social safety net is always there for you.

    #7 – “Buying second hand clothing, doing things yourself when you can, buying in bulk to maximize unit prices, using coupons, etc.” requires me to have the time and the know-how to learn and do those things myself. Buying in bulk (or good quality that lasts) requires you to have cash on hand and a place to store it (though I did like the idea of having a group of people who will share the bulk items, that requires time to set up). Where I live, coupons require you to have a computer/internet connection/printer or a newspaper subscription. I can’t speak to 2nd hand clothing, as I have enough trouble finding clothing first hand and can’t imagine what level of time investment would be required to get it elsewhere.

    #3 – I agree, it is a great post for some people. But it claims to be for all. Which really pushed my button this time. Not sure why.

    There are systemic issues in our society, and it can’t all be fixed by individual efforts.

  11. AnnJo says:

    @10 sjw, you say there are systemic issues in our society that can’t all be fixed by individual efforts. Isn’t that just another way of saying life’s unfair?

    It is a systemic issue that energetic, intelligent, attractive, healthy and/or lucky people have a better chance at advancing in life, regardless of their beginnings, and people whose parents or grandparents gave them advantages of education, inheritance, connections, etc., also have a better chance. Even if you could succeed in trading all that in for a system that strictly enforced “equality,” some people, the enforcers and their connections, would soon be more equal than everyone else.

    These systemic issues can’t be solved by individual efforts, or by collective efforts either, for that matter. But as individuals, we have more control over our own efforts than anything else, so that’s the obvious place to start if you have a goal of improving your life. Every time Trent brings that up, it seems to push some people’s buttons. Not sure why.

    Trent, like everyone else in the world, is limited to some degree in the scope of his understanding by his culture, age and personal experiences, but the points he makes, even if limited, are useful to the vast majority of his potential readers even if some will find it harder to apply them than others.

  12. Rick Francis says:


    I’m sure that there are poor souls that really can’t do ANYTHING to improve their situation at all. It takes all their available, time, energy, creativity, income, etc. just to survive. None of their resources ever goes to anything other than survival needs, and any additional stresses will mean their end.

    Trent should NOT write articles for these people because they will never be able to read his articles. They could never spare the time, and they certainly wouldn’t have the luxury of a computer or internet access.

    However, for everyone else- and I think that encompases ALL of Trent’s readers: We aren’t on the razor’s edge of survival and we have at least some options.

    You may not like some of those options, like buying 2nd hand clothes or cutting cupons, or buying in bulk. You don’t have to use these option and you can still follow the spend less than you earn rule… However you will have to earn a bit more or be satisfied with less material goods.

    Priswell makes a good point- for many people using these options are good trade offs. Why not try some out before declaring them useless?

    -Rick Francis

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