Man oh man! It’s time to jump into a topic that’s always a little controversial in the money world.
The question is: is it more important to spend less money or make more money?
Now I gotta preface this post by saying that I completely get the extreme examples on both sides of the spectrum.
I mean telling someone who makes $1,500/month to spend less is pretty blah.
And telling someone who blows $300k every year to just earn more is kinda ridiculous too.
With that said, I’m forcing myself to pick a side by not using the word “both” as an answer to this question and not focusing on the extremes.
Instead, we’re gonna focus on the average person with an average income living in an average cost of living area. The ole Average Joe.
Usually people who fall on the side of earn more are looking at it purely from a wealth-building perspective.
I mean if your salary doubled today you could pay off more debt and make your money work for you by investing more.
Sounds good, right?
On the other hand, spending less money is important because you learn the good habits need to sustain wealth as it comes to you.
I mean, let’s be honest, making 150k per year and blowing it all gets you the same result as making 40k per year and blowing it all- broke.
So which one is better?
Well to answer that question, I have to give you a little history on my life.
As a kid, my mother (who was single) worked 40+ hours per week just to literally be able to keep food on the table for us.
My first job out of high school was at a local hardware store making $6/hour.
At age 20, I was working at a warehouse making an hourly wage that put me right at about $25k per year.
My salary remained pretty consistent until I turned 23. It was then that I got a job in sales with a salary of just under $50k.
As I’m about to hit the big 3-0, I’m now pulling in over $100k per year from just my day job.
All that to say, I’ve personally lived this debate from every single side imaginable.
So after all that, here’s what I think:
More often than not, developing the discipline to spend less than you earn is more important than making more money.
Now again, I completely understand where we are in America with wage stagnation.
And I totally get how the student loan crisis is literally smothering multiple generations.
But hear me out.
Based on my own personal experiences and the experiences of many others I’ve coached in the Winning To Wealth Program, I can say making more money does not always help.
In fact, more money without knowing how to handle it can lead you to financial ruin.
Take my story for example.
I should have been crushing it once I landed that $50k/year job after making only $25k the years past right?
Within a year of me landing that $50k job, I was over $61,000 in debt!
Why? Because I was used to spending everything I had.
It can be argued that with my previously low salary I didn’t have much of a choice in the matter.
But the fact is I lived with 5 roommates in a 4 bedroom house at the time.
I ALWAYS had new clothes. We NEVER cooked at home. I ALWAYS had the latest technology. And I NEVER contributed to any type of savings at all.
So when more money rolled in, it quickly rolled itself right back out. Or..well… I rolled it back out.
Once I accepted my $50k job, I immediately went car shopping.
There were a few minor things wrong with the car I already, but nothing outrageous.
Still, it wasn’t good enough for my new career and I financed a brand-new $25k car before I had even been on the job for 30 days.
After that came the new clothes, the television, a better apartment, upgrades to the car, exciting vacations, and, finally, my wife’s wedding and engagement rings.
If I hadn’t had that wake-up call on that balcony in the Florida Keys during our honeymoon, who knows where we would be now. Especially considering the fact we’re clearing six figures every year.
So what does that mean?
I can say that without learning how to budget and save money, we would have definitely bought a house that was entirely too much for us and ended up in a horrible spot financially.
How do I know? Because we did just that right before we got married.
Thankfully we were renting, but the fact remains: poor financial habits would have ruined us with our current salaries.
As a result of developing that discipline, we’re now able to save and invest pretty close to half of our annual salary every year.
And if i’m being honest there’s nothing really “fun” or “sexy” about it.
I would much rather take my wife and kid on a flight somewhere fun every single month just because.
I could have bought my dream car last year with cash.
We were approved for double the amount we bought our house for.
But see, doing either of those things would make us look good to you– but we would know the truth.
Which is that we would be spending all of our money instead of building wealth so we can take control of our lives and leave a legacy for our daughter.
So we keep on driving our paid for cars.
I don’t think we’ve spent more than $60 on a pair of shoes in years.
And before this year we hadn’t taken a flight together in over 2.5 years.
But we also keep investing heavily in assets that grow our net worth over time.
And that’s the key to creating the life we actually want instead of one that just looks good to the world.
So again, I believe that developing the skills and discipline to spend less than you make is more important than earning more.
And that’s not to say you shouldn’t look to increase your income when you can, but without those basic financial skills, you may continue to struggle even if you quadruple your salary.
What do you think?
Let me know which side of the debate you land on in the comments below.
Do you think it’s more important to spend less money or focus on making more money and why?