Money Management

Spending Less Than You Earn Is Nowhere Near as Simple as It Sounds

By  Karen Banes

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We’re often told that budgeting is as simple as spending less than we earn, as if we have perfect control over our outgoings. Spending less than you earn isn’t as simple as it sounds. In fact, earning more than you spend can actually be simpler, in some ways. Getting a raise or a second job is a more straightforward solution than trying to constantly tighten up an already tight budget, that will almost always be impacted by some surprise elements that you weren’t expecting. The perfect solution to many people’s financial struggles is probably a mix of both spending less and earning more.

There are a few problems that people encounter when trying to spend less than they earn. They include:

  • Sudden unexpected expenses
  • Constant inflation
  • A feeling of being deprived because they’re being overly frugal

There are ways to spend less than you earn, and earn more than you’re currently spending, but they may not be the ones you’re focusing on. Here are a few things to keep in mind as you try to follow this seemingly simple common money advice.

The big things matter

Sure you can save money by not buying those designer coffees, but you can save a lot more if you cut your rent payments significantly. If you’re really determined to spend less than you earn, it might genuinely be worth considering moving to a more modestly priced neighbourhood. A surprising number of wealthy people live in reasonably priced areas.

Trying to earn more than you spend? Again, think big. Sure you can do one of those odd online ‘make extra cash’ things like filling in surveys for a dollar a time. Or you could spend your spare time retraining for a job in a higher paid field, or developing a skill that will enable you to chase a big promotion at work.

Earning more should be a priority

Too much frugality advice assumes you can get rich on a very modest salary, or be financially comfortable in a minimum wage job if you just learn to manage your money. This simply isn’t true for twenty-first century American citizens. Learning to manage the money you have is always desirable, but there’s only so far that money will stretch. Earning more, whether through your regular job, a side hustle, or investing wisely, should always be the priority.

Asking for a pay raise is rarely easy, especially if you know your company isn’t doing well and you don’t think you’ll get one, but remember if you haven’t had a raise in over a year you are technically earning less than you once were, accounting for inflation. It is completely reasonable to ask for a raise that’s at least in line with current inflation rates, otherwise you’re actually taking a pay cut each year.

Frugality should be manageable

There are some people who love being frugal. They literally turn it into a hobby. For others a period of forced or extreme frugality is one of the things most likely to make them eventually break, and blow their budget. We all need a little fun, and most (though not all) fun costs a little money. No matter how hard you’re budgeting, include a little fun money each month. When spending less than you earn becomes forced frugality that you find depressing, it’s always possible you’ll rebel and start spending money you don’t have.

Guard against sudden unexpected expenses

The easiest way to guard against these types of expenses can be good insurance. A sudden expense related to your home, car, or health can be either an inconvenience or a disaster, depending on your insurance policy (or lack of it). Even a cancelled trip or a lost or stolen item can be a very different kind of expense, depending on your insurance, so take a close look at all your policies to make sure you’re not underinsured. A well-stocked emergency fund can also provide a buffer, but shouldn’t replace adequate insurance.

When you’re struggling financially and someone tells you to ‘spend less than you earn’ it can be pretty frustrating. Especially if you feel like you’re earning what you can and spending what you need to. Thinking it through like this, though, might just help you adjust things so you’re earning a little more and spending a little less.

Karen Banes

About the Author

Karen Banes

I’m a freelance writer specializing in online business, personal finance, travel and lifestyle. I also work as a content creator for hire, helping brands and businesses tell their stories, grow their audiences, and reach their ideal customers. I’ve lived, worked and studied in six countries, across three continents. Stop by my blog TheSavvySolopreneur.net to learn how to run your own (very) small business on your own terms. You can also connect with me at my website KarenBanes.com or follow me on Medium.com

Disclaimer: The information in this article is not intended to encourage any lifestyle changes without careful consideration and consultation with a qualified professional. This article is for reference purposes only, is generic in nature, is not intended as individual advice and is not financial or legal advice.

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