Basics     Money Myths

"You should spend less than you earn."


The myth

Living within your means helps ensure that you spend at most as much as you earn. This helps you lead a modest lifestyle and avoid getting into debt - which can be troublesome to deal with especially if you aren’t earning a huge amount at the moment.


If you manage to spend less than that, you’ll have money left over for saving and investing, both of which are crucial for your future. That’s why many people believe that you should spend less than you earn.


The reality

It’s a fact that spending more than you earn isn’t always avoidable. However, if your income can cover your monthly essentials with some money left over, you should absolutely spend less than you earn.


There are so many ways in which you can put the extra cash to good use. For example, you could use it to build up your emergency fund so you’re covered in case something bad unexpectedly happens. If you already have one, you could invest the money to help you reach your future goals faster.


Of course, this means you’ll need to be disciplined with your spending. While you can occasionally satisfy a “want,” for the most part you’ll be giving up on impulse purchases, especially if they’re of medium- and big-ticket items (like a new phone or a trip out of the country).


 Creating a budget can help a lot with this. While it might be a little difficult to stick to it at the start, following your spending and saving plan gets easier the more frequent you do it.


Spending more than you earn can be tempting to do, especially if you tell yourself that it’ll only happen once, and you’ll be paying off the debt as soon as you can. However, this should only happen when you have no other choice, and the expense is essential (for example, treatment for an illness that is more expensive than the content of your emergency fund).


The verdict: True.

Spending less than you earn is a good money habit that should be part of your lifestyle. It lets you have extra cash for purposes like saving and investing, while also helping you avoid unnecessarily getting into debt.


If you can’t do this yet because of your situation, you can always start as soon as you’re capable. Make sure that you prioritize paying off any amounts that you owe so that you can focus on putting money aside later on.


One thing to watch out is lifestyle inflation, which is when your spending increases as your income rises. If you’re following your budget and have no new essential expenses, you should be getting a bigger amount of extra money.

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