Spend Less Than You Earn is the Most Important Money Habit

As late starters, we long for a strategy or any tips that will catapult us into financial independence territory in a hurry.

After all, we are already so behind, with traditional retirement looming ahead, let alone daring to dream about retiring early.

We struggle to understand why we are not further along the path to financial independence despite working hard over many years.

The truth is, without practising the most important money habit of all – spend less than you earn – we will never get far ahead.

If I can summarise all the teachings on how to achieve financial independence, it is this – increase the difference between your income and expenses and invest this gap wisely – appropriated from Paula Pant of Afford Anything podcast.

The wider this gap is between income and expenses, the more options we have. We can use this gap to save for an emergency fund, eliminate debt, invest in index funds, purchase rental properties, start a side hustle etc – anything to move us further along our path to FI.

Why is it so difficult for us to live below our means? I know we all struggle with this, based on the many stories fellow late starters have shared in the Late Starter to FI series.

I don’t think it is entirely our fault.


Disclosure: Please note that I may benefit from purchases made through my affiliate links below, at no cost to you

hand holding bank notes on fire |spend less than you earn |
Photo by Jp Valery on Unsplash

Temptation is Everywhere

Our every day lives are bombarded by advertisements – on TV, radio, at the bus stop, on billboards along the freeway, in newspapers, magazines. And now they are more personal by getting into our social media feeds. And targeting us specifically with advertisements about stuff we googled while bored.

They promise us we’ll be happy if we just buy this gadget, wear these cool clothes with the to-die-for accessories; we’ll be relaxed and rested if only we purchased the spa experience, the luxurious resort holiday; the wonderful tools we must have to make our lives more organised & productive.

Our lives are messy and complicated even without a pandemic. Who doesn’t need help with making life a bit more bearable? A bit easier to cope with?

One of my favourite TV shows is Gruen on ABC – a panel of ad executives share their insights into various advertising campaigns, hosted by comedian, Wil Anderson. Once we are aware of how we are marketed to, we are more able to resist their messages.

Credit is Widely Available

Credit cards, interest free purchase, buy now pay later schemes, store credit … there are a myriad of ways to purchase something without paying up front these days. Plus there are redraw facilities or off set accounts on home loans where you can withdraw some of the money if you are ahead in your loan repayments.

I’m not going to bash credit cards. They have a place in managing my money as long as I pay the balance in full when they fall due. They are a convenient form of record keeping. I also love the flight reward points I earn. These days I no longer pay for flights on overseas trips.

It is so easy though to use these forms of credit to get what we want right now and worry about how to pay for them later. If we do not pay our credit card balance in full, we will pay an inflated interest rate on the balance. If we only pay the minimum amount due, we will fall further and further behind in our payments. And it becomes a vicious cycle.

Having a redraw facility on my mortgage was very convenient and dangerous – sometimes I forgot the money wasn’t mine to begin with. Because if I am ahead with my repayments, I can spend it, right?

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Then there is Lifestyle Creep

Over the years, as our incomes improve, so do our tastes – we desire better quality goods and a more luxurious lifestyle. I know I desire expensive French cheeses on a regular basis 🙂

We want bigger houses, prestige cars, exotic holidays … always wanting the upgrade, the best of everything.

Our friends tell us we can afford it, that we should reward ourselves for working so hard. We deserve it.

And before long, we are working all hours in the day and night just to fund this lifestyle.


But we have a Choice

While I do think there are many external influences as to why we are unable to live below our means, I also believe we have a choice.

No one can dictate to us how we should be spending our money.

That includes the advertisers, whose sole job is to make us want what they are selling, whose job is to sell us stuff.

It includes our friends and colleagues – who may not be telling us the truth about their finances. Their luxurious lifestyle may be funded by debt. Beautiful instagram feeds don’t show us how stressed they may be, trying to make ends meet.

We don’t have to buy the latest gadgets or cars or clothes or kitchen accessories just because we’ve been exposed to the ads or because our friends have them. There is no need to upgrade to a bigger house if we can’t afford it.

We get to decide how we want to spend our money.

Assess our Priorities

It is time to assess our priorities.

Do we want to achieve financial independence? And live a reasonable lifestyle in retirement, whenever that is?

If the answer is yes, then we have no choice but to spend less than we earn, to create that gap between income and expenses. So we can invest that gap.

Why do you want to achieve financial independence?

For me, it is to gain freedom and time. I want to be free to pursue whatever I want – to slow travel around the world, care for my parents, spend time with family overseas, commit time to some charities, indulge in new hobbies … to just live a fuller life than I have up to this point. And hopefully before dementia claims me as it has my mother.

When things are tough, when we resent cutting our expenses and modifying our lifestyle, it helps when we know why we are doing it.

And sometimes, we need to be brutally honest with ourselves. If we can’t pay our credit card balance in full each month, we can’t afford our lifestyle. Full stop.

Mindful Spending

Now it’s time to assess our expenses – what do we spend our money on?

I started tracking my expenses at the beginning of my FI journey. Then  I looked at what is really important to me, what I value. Can I have the same experience by spending less?

For example, drinking good quality coffee is important to me. Is buying a takeaway coffee every day, at an average of $4 a day the only way to achieve this? Probably not.

I now buy beans from my favourite roaster and make it at home with my moka coffee pot (affiliate link) for $1 a day. The experience is much more enjoyable and I begin my work day with less stress. I still indulge in a cappuccino when I’m out with friends because I value the social interaction and experience. But the bulk of my coffee expenses is dramatically reduced.

Eating good food gives me a lot pf pleasure. So I am happy to spend more on tea leaves instead of tea bags, organic free range eggs instead of cage eggs and so on.

But I also make sure I don’t waste any food, that I clear out my pantry, fridge and freezer regularly. And I am mindful of the prices I pay. I stock up on regular every day items when they are on sale. I cook a lot of my own meals at home instead of eating out or ordering takeaway. It doesn’t mean I don’t splurge every now and ten – I do but I just don’t do it automatically.

These are small examples of every day living expenses that can be reduced and were the easiest for me to tackle at the start of my FI journey.

Through discovering FIRE concepts, I’ve come to understand that mindful spending is not about deprivation. It is about spending that is aligned with my priorities and values.

Other Recurring Expenses

I looked at other recurring expenses next – the monthly or quarterly utility bills, the annual home and contents insurance, health insurance. These expenses often creep up without us noticing.

Where can I achieve some savings? How can I reduce these necessary expenses without sacrificing my comfort and peace of mind?

By installing solar panels, changing my shower head, changing insurance company etc – some are once off changes while others will be reviewed once a year to ensure I am on track.

Know Thyself

Discretionary spending is the hardest. What are your spending weaknesses?

Is it self care, kitchen gadgets, latest technology, comfort, conveniene, clothes, travel?

When do we spend? Why do we spend?

We know ourselves best.

I never thought about my spending habits before embarking on my FI journey. But I now realise a few home truths after analysing my spending patterns and habits.

Truth #1 - I LOVE spending money

I love that hit of endorphins when I spend my money – it makes me happy.

Truth #2 - I have many, many spending weaknesses

One is food – be it an exotic ingredient in a recipe I want to try or expensive indulgences such as French cheeses or fine dining experiences. I view these as luxuries now and I will indulge in them, just not regularly.

My other spending weakness is kitchen accessories or gadgets. I used to love wandering in kitchenware shops and will inevitably buy something which I will use once or twice. I no longer do this. I’ve also unsubscribed from online kitchenware, homeware retailers’ email list. The less ads I see, the less I am tempted by the latest gizmo.

I also love travel experiences. So I have a travel fund and a weekly amount is automatically deducted from my pay and deposited here. This gives me peace of mind that when the urge to travel is upon me, I already have funds available.

Truth #3 - I spend more when I am stressed, tired or bored

I cannot be bothered to cook so I order takeaway or I don’t have time to do a weekly grocery shop so I end up buying things on the run. I now freeze extra portions when I meal prep so I always have a ready to eat meal for the times I don’t feel like cooking.

However, I am at my most dangerous when I’m bored. I have been known to buy a plane ticket to Japan because I was bored at my work one day.

Truth #4 - I am IMPATIENT

I want it and I want it NOW.

These days, I leave my items in the online shopping cart then decide if I really want the items a week later. Most of the time, I don’t.

If I do, I use Cashrewards, a cash back site to earn a little money back from my purchases.

The point here is that once I understand why I spend money the way I do, I can put in strategies to limit that discretionary spending.

In addition, my spending behaviour has changed because my priorities have changed – I know I need every cent to invest, to get me to financial independence. I have to weigh it up – spend on this item, experience or invest that money instead?

So … now, I just direct that love of spending towards investing – I get that hit of endorphins when I purchase another parcel of shares. Win, win?

Why don't we just Increase our Income?

Good question.

Of course we can.

But if we don’t learn to spend mindfully or understand why we are spending in the first place, then the more income we earn, the more we will spend it.

And we are back to square one. To the vicious cycle of needing to earn more and more to pay for our lifestyle.

Combining the two strategies ie decreasing spending while increasing income is incredibly powerful. And undeniably the best way to increase the money we need to invest and thus get us to financial independence quicker.

In my case, I do want to increase my income – but I also don’t want to be burned out again or live a stressful life. I’ve regained my weekends and week nights since transitioning to my new role. And I value that time I’ve gained for myself.

For most people, increasing income is not as simple as asking for a raise. And may not be possible if we are already earning at the peak of our incomes.

It is much easier for late starters to look at our spending habits first (all those opportunities to reverse lifestyle creep) and then tackle the income part.

Final Thoughts

Every strategy and tip to get to financial independence starts with the money habit of spending less than you earn.

Therefore learning to live below our means is the FIRST step towards financial independence. We have to start creating that gap between income and expenses and invest that gap.

And while in our ‘advanced’ age (haha), we may not want to sacrifice certain aspects of our lifestyle, it is not impossible to reverse some of our lifestyle creep. And discover new ways of having what we want at a lower cost.

After all, we need to start saving towards our retirement that is just around the corner.

What strategies or tips do you have for spending less than you earn?

Reforming a Spender – a Work in Progress

Disclosure: Please note that I may benefit from purchases made through my affiliate links below, at no cost to you

I bought a Roomba.

A robot vacuum cleaner.


I was on the floor trying to do stretching exercises with my personal trainer over Zoom and all I can see is dust, dust and more dust. And instead of stretching (in fact, I can’t quite see what my trainer is demonstrating because my phone screen is too small and I am too short sighted, but that is another story), I can’t stop thinking “I must vac, I must vac”

Plus I am sneezing uncontrollably due to the dust. Oops, forgot I was allergic to dust.

Roomba iRobot
Roomba resting

Recurring expenses

Just so you know, I hate vacuuming. Full stop.

Oh, and I HATE housework. BIG full stop.

About 3 years ago, while in my really stressful job and working long hours, I finally gave in and hired a cleaner. She would come fortnightly and work two hours – vacuuming, mopping, cleaning the whole downstairs area (where I live the majority of the time).

I did feel guilty about the expense. After all, I live alone. And I can’t even look after myself. So pathetic!  

I could afford it – it wasn’t as if I went into debt to pay her. And I love coming home after she’s been – everything tidied and the floor sparkling. A friend once remarked that I seem a lot less stressed on the weekends – I knew it was because I now no longer stress about the housework and cleaning chores.

Ever since embarking on the FIRE path, I have felt even more guilty about the expense. The recurring expense. As you know, one of the ways to arrive at the destination of Financial Independence in a timely manner is to increase the gap between your income and expenses and invest this gap wisely.

One of the easiest ways to reduce your expenses is to look at your recurring expenses – expenses that you pay every week, month, year. For example, your utility bills, subscriptions, gym membership etc. 

I cut out my daily takeaway coffee habit, Netflix subscription; stopped buying lunch and books; looked for ways to reduce my electricity and water bills, health and home insurance. I am currently working on my gas bill.

The one expense I cannot give up is my cleaner, a fortnightly expense. Even when I transitioned to my less stressed role with a lot less overtime hours – read pay cut – I chose to keep my cleaner. 

But of course, COVID 19 and shutdown occurred. My cleaner no longer comes every fortnight or at all. Once again, I am left to my own filth. My less stressed role becomes ultra stressful in an unprecedented (yes, that word again) way. For a few months, I was even more stressed than I ever was in my previous role. I slept a lot. Housework? You got to be kidding. 

Hence, my dusty floor. Do not worry – I continue to clean the kitchen, for as luck would have it, I cannot cook unless the kitchen is clean. And I continue to do the laundry – because I cannot possibly keep my job if I turn up in unwashed clothes. So I do do some housework, the very minimal to allow me to function as a human being.

Keeping up with the Joneses?

My friend sent me a video of her new Roomba doing its thing. And I thought – what a great idea. How wonderful if I too have one – my floor would always be clean (without me having to drag out the cumbersome hose? pipe? whatever you call it – the joy of central vacuuming)

I look it up online. And was crushed because of the cost. I cannot possibly justify spending more than a thousand dollars for this miraculous gadget. That is, the new me, the me that is pursuing FIRE. The old me would not have hesitated. After all, it’s not as if I cannot afford it – look at all the dollars sitting in the travel fund, that will certainly not be used in the foreseeable future.

So it’s back to central vacuuming.

Then a few weeks later, as I was eating dinner and morosely watching the nightly television news, a lightning bolt hit me. I wonder if Myer (a department store that sells lots of stuff) sells Roomba.

And lo and behold, it does! Oh, and they have a model that cost $649. Not as fancy pants as the other newer model I saw online earlier. I am a low tech kind of girl so really, the lower model is all I need. I text another friend to check what her model is. It’s the same and the good news is she loves it and it works very well.

I empty my purse of every Myer gift card I possess and guess what? The gift cards came to a grand total of $700!  I tell myself – this is your reward – for saving these cards over the last two years as you learn to eschew consumerism. No, really, it’s because I didn’t want for anything – I have enough clothes, shoes and stuff, I just haven’t spent the gift cards.  

And now, I’m going to blow the whole lot (with change of $51, mind you) on Roomba, a-Roomba. The euphoria! I was ecstatic. Not only am I getting a miracle gadget but I did not spend a single cent on it. 

How clever am I! 

This was two weeks ago. My floor has never been cleaner. It is such fun to set Roomba to work from my phone while I am at work. Ah, the entertainment is an added on value. I LOVE my Roomba.

That guilt again

But at the back of my mind, I still feel a twinge of guilt …  

You see, I have always considered myself a spender. All through my 20s and 30s, I spent money freely –  on clothes, shoes, kitchenware, food and travel mainly. The only saving grace was that I spent less than I earned.

But as I started pursuing FIRE in my late forties, I worked hard at changing my mindset from being a spender to that of a saver.

A spender has such bad connotations and in need of reform. You don’t care about the future, you live for the present. You have no qualms spending money to make today bearable, for tomorrow will take care of itself. You love shopping, buying things, experiences to make yourself feel and look good. You are generous in showering your friends and family with gifts, whether you can afford them or not.

A saver, on the other hand is looked upon as a saint. You think about your future, ensuring you save for a rainy day. You spend judiciously, only on what you can afford. You are frugal, spending only on what brings you joy. 

And so, once my euphoria subsided a little, I was a bit shocked (and felt a bit guilty) at just how good I felt buying Roomba. That dopamine hit! The excitement of finding a good deal, the sheer joy of spending my money (even though I used gift cards) … I don’t know, I haven’t felt this good in a while. Maybe it’s the recent stress and I’ve kind of emerged from it, happy to be still alive.

It seems I am still a spender at heart, after all.

There must be a spectrum …

As in, maybe it’s not so black and white, either or.

Maybe we can be both spenders and savers.

On this spectrum, I would probably still lean towards the spender side but just, I think.

I cannot deny the thrill of spending money on what I want, no matter how much I suppress it. Roomba was a big purchase. But I also spent $30 on a banneton and a jar for my new hobby of baking sourdough – luckily the proofing container was out of stock. Did I really need it? No. But my bread loaves look really good with the patterned rings. 

Left: dough resting in a banneton
Right: bread loaf baked with distinctive ring pattern of banneton

Old habits die hard.

But the fact that I am mindful of my wants and needs must mean that the spender in me is slowly but surely being reformed, right?

And if I delay that urge to buy – in both cases, I waited before finally purchasing – I’m learning how delay gratification works. With Roomba, I was thwarted by the price. With the banneton, I started baking without it and only after succeeding a few times, that I then looked for one. The old me would have bought one without establishing if my new hobby would survive past a few weeks.

I do get a quiet satisfaction and sense of achievement when I see my retirement nest egg grow (not lately, but it will grow again) or that my emergency fund is funded. I am thinking of the future and saving for a rainy day. So that means I am a saver, right?

But I will tell you I am most excited to see my travel fund grow … I’m not in the mood to plan any travels at the moment with the corona virus still alive and kicking but the time will come when I look at the fat balance and want to spend it! Ok, I’m not as reformed a spender as I’d like to think. 

Final thoughts

Is it even important to label ourselves as one or the other, a spender or a saver?

If we are saving for an emergency fund and our retirement nest egg, if we are frugal in every day expenses, surely, we can splurge on our hobbies or a Roomba occasionally. Or if travel is important to me and I save up for it, surely that’s ok. There must be a balance – I want to live today for tomorrow may never come. 

And lately, with Roomba working so well, I’m thinking maybe I can cut the cord with my cleaner … so maybe, another recurring expense can bite the dust.

Will I always be a spender, albeit a responsible spender?

Or am I deluding myself – that I can be both a spender and a saver?

What are your thoughts? Are you a spender or saver or both?


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