spend less than you earn – the wrong way to think

The wrong way to think: “spend less than you earn.”

If you have been reading about personal finance for any length of time, I’m sure you’ve come across this advice before. It is the wrong way to think, and it will not make you rich.

Don’t get me wrong: it is not bad advice. If you are struggling to get out of debt, or prepare yourself for retirement at age 65 or later, it is fine advice. For most people this may be the best advice that they ever receive. However, it is the wrong way to think. The right way to think is this: earn more than you spend.

“Wait a minute,” you may say, “that’s the same thing.” No it is not. If you earn $1000 per month, and save $100 per month, you’re doing a great job. However, this is thinking that puts a limit on your future. If you continue to earn $1000 per month, you can never save more than $1000. Your pool of money for building wealth will never increase.

However, if your living expenses are $1000 per month and you can think of ways to earn more, there is no limit to your savings or investing or wealth building opportunities. If your living expenses stay at $1000 per month and you can earn $2000, you have $1000 to build wealth. That $1000 can itself generate more cash (dividends, a business, etc.) and soon you may be making $2500 per month. There is no top limit in this scenario, as long as you earn more than you spend.

“I can’t earn any more than I do now,” you say. “My salary review doesn’t come up until May!” You can always earn more money. It’s true; I am willing to bet that everyone has some way they can earn more. A quick list off the top of my head of a few ways:

  • Sell all of your old CDs and DVDs on eBay.
  • Sell all of your old books on amazon.com.
  • Start a blog (with ads).
  • Offer to give people in your neighborhood a ride to work for a monthly fee.
  • Look for money owed to you on www.missingmoney.com
  • Take an online survey.
  • Sell a funny t-shirt on cafepress.com. I plan to do this soon. Want a Brip Blap t-shirt?
  • Invest at Lending Club.
  • If you aren’t already putting money in your company 401(k) and your employer has a matching program, sign up today.
  • Get a cash back credit card and use it carefully.
  • Write an e-book. You’ve gotten this far in life doing stuff – there must be something you can offer tips on!
  • Prepare a price book for your local supermarkets and sell it to other people. Or create an email list and ask people to subscribe.
  • If you have a house with extra room in your garage, rent space for people to park their cars while they are on vacation.
  • Write a novel. If this woman can do it while caring for three little kids right after her husband left her, so can you.
  • Start a drop-ship business.
  • Learn to prepare taxes.
  • Make a cute calendar at kodakgallery.com, then resell it to the public.
  • Set up an amazon a-store. Tell all of your friends and relatives to stop there before buying anything at amazon.
  • Put a PayPal Donation button in your email signature. Ask for $1 for good karma. I have never tried this, but I am willing to bet it will yield more than nothing!
  • Open a high-yield savings account.
  • In Maine, Vermont, Connecticut, Massachusetts, New York, Delaware or Oregon, take your plastic bottles back to the store where you bought them for a $.05 refund.
  • Start doing stock photography and sell your work on iStockPhoto.
  • Print all of your favorite recipes on 3 X 5 index cards, with cute graphics and large, easy-to-read directions, and sell them. People like having something small on hand instead of needing to take up counter space with a book while cooking.
  • Teach at an online school.
  • Become a mystery shopper.
  • The next time you go out of town, look for clever souvenirs from that town. Resell them when you come home, or on the internet. A friend of mine made thousands doing this.
  • Become a resume writer.
  • Can you make arts and crafts? Sell your work online at etsy.
  • Create a line of greeting cards.
  • Marry someone rich 🙂

The simple fact is that if you are looking to retire at age 65, keeping your head down and slogging away at your main source of income while saving a little bit here and there will get you there. That’s not a bad thing! If you are happy with your job, keep your spare time free and do what you like.

However, if you want to get out of the “rat race” – if you want to be free to do what you want when you want – you have to build wealth faster, and the best way to do that is to earn more than you spend.

79 Replies to “spend less than you earn – the wrong way to think”

  1. BripBlap hit the nail on the head that every owner/operator of YOU Inc. needs to know: you can only CUT up to 100% of the money flowing out, but you can increase the money coming in by 100%, 500%, 5,000% … unlimited.

    YOU do the math …

    1. @7milllion7years: Thanks for reconfirming that – it’s something I know but need to hammer myself over the head with every day to remember – cutting is limited, earning is unlimited….

    2. These are all small little ways to add income, but you never know which one grows when, and suddenly you'll find yourself sitting on a cash cow!

      Good ways to get started, but the bottom line is simple… Provide value…
      i.e Create value, and deliver it = Money Money Money!

  2. You can also sell CDs here:


    I’ve used them and they pay promptly. No guarantees how much they’ll pay for your stuff, but I bet they’re a better deal than Half-Price Books.

  3. The slight difference in concept makes a big difference. It’s a balancing act between trying to constantly lower your expenses while increasing your income.

  4. This is one of the best articles I’ve ever read. Not only because you offer great ideas to make more money, but because of the message. I have always thought that to many of us put limits on ourselves. We determine what we can and cannot do, how much money we can and cannot make, how successful we can and cannot be. A lot people blame others, or their circumstances, or whatever. But the truth of the matter is, we live in America, and we are all free to do whatever we want. That means if I want to be successful, make money, become a famous pop star, or whatever, the only person stopping me is me.

  5. @LazyMan: You are correct. It is probably not legal, and I actually removed the burning suggestion. That having been said, I doubt the artist gets paid when you buy used CDs, anyway, so even reselling it hurts the artist.

    Think again. With used CD’s the artist got paid for every copy out there. With pirated CD’s, they got paid for no more than 1/2 of them. If I no longer want to listen to a group, but you do, the original royalty isn’t lost. It’s when two listen but only one paid that there is economic loss.

    Frankly, I think the artist got ‘messed over’ long before the pirates ever burned their first copies. But that’s a digression.

    Good blog. I don’t know that I am even oriented toward being wealthy so long as I have food on the table and a roof over head. But others are. Carry on.

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  7. Steve,

    This is a revolutionary way of looking at personal finance and passive income generation. You not only have to not spend all your money but also earn more and more

  8. Today I found this blog and are amazed by the quality of information posted here. Nowadays are very few blogs that offer quality of information ,we subscribed to your blog via RSS and we look forward the following articles

  9. I think it is a failing in some respects of the PF blogs that they don't focus more on ways to create income as opposed to spending less. I think a nice mixture of the two is the key – moderation in all things!

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  11. Great ideas for earning extra money. I try to not only earn more than I spend, but to constantly try to pare down my living expenses so more of my income can go to investments.

  12. I don't really agree. I think people should spend less than they EARN. But also think about how to increase their income.

    I believe, maintaining to be frugal and live a frugal lifestyle is what will make you richer.

  13. Wow, glad I found this post in the archives! I love how you said that people don't need to spend less than they make…they need to earn more than they spend. I just read an advance copy for Loral Langemeier's latest book, “Put More Cash in Your Pocket,” and that is the gist of her advice, as well. I love your suggestions…her book has a lot of great ones, too! Time to tap into that entrepreneurial spirit!

    1. LOL… I just pre-ordered Loral Langemeier's new book too, which put me on a quest to learn more and found your article and Ms. Frugalicious' comment and yours. Great minds think alike! Thanks Steve!

  14. LOL… I just pre-ordered Loral Langemeier's new book too, which put me on a quest to learn more and found your article and Ms. Frugalicious' comment and yours. Great minds think alike! Thanks Steve!

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