“Spend Less Than You Earn” Is Useless, Unhelpful Financial Advice

December 06, 2016

A Frugal Star Mashable tells the story of a frugal star, Daniel Radcliffe of Harry Potter fame. It starts with a guess of how much he's worth (somewhere around £60 million) and then transitions to the fact that he doesn't spend any of it. The highlights: "I don't really do anything with my money," Radcliffe told the Belfast Telegraph. "I'm very grateful for it, because having money basically means you don't have to worry about it, which is a very lovely freedom to have." "It also gives me immense freedom, career-wise." From the sounds of it, Radcliffe is essentially keeping his money as a buffer-zone in order to give himself as much creative freedom as possible when it comes to choosing acting projects. A few comments here: Good for him! We seem to find stories quite often of celebrities who make a ton of money and spend it all. Finally one of them has some financial sense — and someone so young too. Bravo! Of course he isn't hurting even if he spends none of it. As of this writing one pound is equal to $1.22. This means he has roughly $73 million. At a 3% return, his annual income is $2.2 million. Not bad. He hit the nail on the head — having enough money to do whatever you please is a great sense of freedom. It allows you to choose what you want to do with your life versus being dictated to (or at least highly influenced) by others. There's a reason they call it financial FREEDOM! Ok, so he may not be "frugal". But he's certainly living within his means and I for one applaud him! Posted in Spend Less than You Earn | Permalink | Comments (0)


Create an Emergency Fund

It’s inevitable. Emergencies will happen, and we should prepare, said Leo Young, founder of Optimized Family.

“My parents advised me to save money aside in a separate bank account when I first started working and earning a wage. This wasn’t about putting money aside for the future; it was about putting money aside in case of an emergency,” he said. “This is the best advice I’ve ever received. When I had plumbing problems and a costly leak in the house, I could use the money I had saved to pay the plumbing bill without having to dig a hole for myself.”

Find Out: The Standard Emergency Savings Advice Was Wrong — How Much Do You Really Need?Learn: How To Be ‘Financially Resilient’ — Even in Times of Crisis

# 10 – Use a Deal Site to Save Money

Using a deal site to save money is pretty much a no-brainer. If you’ve never used a deal site – I promise they will save you money as long as you’re only purchasing with intention.

If you’re a Discover Card customer you can use Discover Deals to earn cash back. If you’re responsible with your credit cards this is an extremely easy way to save money.

Just log into the Discover Deals portal and find a deal for where you’re shopping. Easy and so much quicker and more convenient than clipping coupons.

Also, new cardmembers who sign up for a Discover it card before the end of the year will earn double Cashback Bonus® for the first year!

Step 2: Live on 60% of Your Income

Can You Do It?

You’ll need to do a bit of research to find out whether you can spend less than you earn. Basically, look at your outgoings. Look at your rent or your mortgage payments. Find out the cost of your utility, phone, and internet bills. Pay attention to your car, house, health, or life insurance. Calculate how much you spend on food each month and look at any loan repayments that you have. Ideally, they should all add up to only being 60% of your income.

What If You Can’t?

If you find that your living costs add up to more than 60% of your income, what can you do? There are only two things – earn more or spend less.

Earn more – You could find a second job for a while, or try to get a promotion at your current work. You could rent out a room, or start some part-time business.

Spend less – You could also try to save some money. Review your monthly expenses. See if there’s something that you could reduce or lose altogether. Maybe move to a smaller place and save on rent. You could also review your insurance premiums and your cover. Quite often, you can increase the excess and get a lower monthly premium.

Here in Australia, we have health insurance that comes with what’s called extras. These extras cover things like dentists, chiropractors, therapists, personal trainers, massages, or acupuncture. Typically, you can get 20 to 25% of the cost of those back.

It would be good to check how much you claimed back for those services in a year. Then look at how much you’re paying for the extras cover. I found I was paying more for the extras cover then I was claiming back. It just didn’t make sense to continue paying that, so I saved some money there.

My Experience

I’m going to give you some personal experience here. I found it reasonably easy to live on 60% of my income. My income does fluctuate from month to month because my business as a hypnotherapist means that I have good months and bad months.

So I did some things to reduce my costs. I reviewed my health insurance and changed my insurance company. I reviewed the internet service to see if we could make some savings there.

And for the last three months, I’ve been able to live on 60% of my income comfortably. The fact is, you can spend less than you earn more easily than you think.

# 8 – Don’t Finance Your Life for a Car

One thing I hear people complain about often is their car payment. I totally get it. When I was pregnant with my first daughter I financed an $18,000 car when I was only making $18,000 per year.

After I paid that sucker off I decided to never get a car loan again, and I haven’t.

If you have to finance a car make sure that it’s a reasonable proportion to your income. I personally like Financial Samurai’s rule in regards to this –

Personally, I’m driving my car until it dies. (It’s a 2007 and I hope I can get another 7-8 years out of it.)

Earn More

Thrift has limits. You cannot spend less than zero. On the other hand, there is theoretically no limit to how much money you can earn. Frugality is important, but if you want to make real progress, increase your income.

In the 3-1/2 years I’ve been running this site, I feel like I’ve never been able to make this point emphatically enough. The people I know who have met with wild financial success have all done so by increasing their income in some way. They’ve all had to make sacrifices to do this, but once they’ve met their goals, they’re able to scale back to a normal way of life. If you want to destroy your debt — not just defeat it, but destroy it — do something to boost your income. How do you earn more money?

  • Work longer hours.
  • Get a second job.
  • Start a small business.
  • Sell the stuff you have.

All of these work, but they all require sacrifices — especially the sacrifice of time. Most people feel that these options aren’t right for them. If that’s the case — if you’ve already cut your spending to the bone and you’re unable to earn more — then there’s really no answer other than extreme frugality and patience.

October 05, 2012

Broke Athletes Has anyone seen this? It's the ESPN series 30 for 30 — with this show being about athletes who made a bundle of money and then lost it all (a topic we've covered here several times). I have it on DVR and will probably watch it this weekend, but I thought I'd highlight it for those of you who love personal finance and sports since it's being shown a few times over the next week. Posted in Spend Less than You Earn | Permalink | Comments (9)

Step 6: Automate!

Now set up regular automatic payments from Daily Expenses to all the other accounts. You can set these to go out the day after your salary comes in. That way, before you get a chance to spend this money, it will already have gone into other accounts.

Scott recommends setting 10% to be transferred to your Spurge account, 10% to your Smile account, and 20% to your Fire Extinguisher account. These percentages can be different for you, depending on your priorities. Now you can see what’s left in Daily Expenses and how much money you have for your living costs. You will realize it’s not that hard to spend less than you earn.

Spend less than you earn: maximise your earnings

There are two variables we can influence: how much we earn, and how much we spend. Most of us focus on reducing the amount we spend. Our expenses feel more in our control, we can make quicker changes to our budget by spending less, and it’s relatively easy.

However, it’s also important to look at how to maximise what your income is. Things you can do include:

  • Ask for a raise,
  • Pick up overtime,
  • Discuss opportunities for a promotion,
  • Look for a new job,
  • Change to a higher paying career,
  • Earn money on the side,
  • Claim all benefits that you can.

Now, there are many pressures that can affect our ability to earn. We may not have the physical or mental health needed to pick up more hours or find a different job. We may have huge pressures on our time because we are caring for dependents.

However, it’s important to focus on what you can do rather than on what you can’t do.

I was raised in a pretty entrepreneurial household. I remember my Dad bringing back gizmos from the factory he worked at which we would work on as a family, soldering the wires and screwing them together in a little family-orientated production line.

I’m not saying you need to put your children to work. I’m saying look for ways you can make earning more money work with your situation, and try and make it less stressful and more fun.

Session expired

Your session to The Christian Science Monitor has expired. We logged you out.

Log in again

Return to the free version of the site

If you have questions about your account, please contact customer service or call us at 1-617-450-2300.

Reader Interactions



    About the comments on this site: These responses are not provided or commissioned by the bank advertiser. Responses have not been reviewed, approved or otherwise endorsed by the bank advertiser. It is not the bank advertiser’s responsibility to ensure all posts and/or questions are answered.

  1. David says

    Can’t I just be lazy and wait to inherit it? Why do all that work? 😉

    Good stuff…


  2. Jarhead says

    Spending less than you earn sounds like a daunting task. It took me 30 years to learn that I don’t need the latest and greatest. While not out of debt yet I do have a definite plan to get there sooner or later. Also the fact that I have a grand in the bank makes life a little less stressful.



Leave a Reply

Your email address will not be published.