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.


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hand holding bank notes on fire |spend less than you earn |
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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?

2020 goals – with an eye on the decade ahead

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Much has been written everywhere about the decade that was and the decade  ahead. Ten years seem such a long time to wrap my head around, let alone plan for.

Maybe that is why I am having so much trouble deciding what to focus for this year 2020 only, when this whole decade seems to loom large ahead.

Thinking too far ahead causes me anxiety. I am paralysed instead of energised by all the possibilities. As a result, I tend to avoid thinking really long term as much as possible. I don’t want to set myself up to fail.

Except now that I have discovered FIRE (Financial Independence and Retire Early) concepts, I do think long term about my financial goals. My age has caught up with me anyway. In my late forties, retirement is only years away, not ages and ages away. I really have no choice but to think a bit long term financially.

I hope to transfer this financial long term planning to other areas of my life. And so I decide I should have goals for 2020, but with an eye on the decade ahead as well.

Goals for the decade

I am binge listening to Jillian Johnsrud on her new podcast Everyday Courage. In episode 4, she talks about how we don’t give ourselves enough time to achieve our goals, that we get disappointed and throw in the towel because we did not achieve them in a year. That is me!

She shares a quote attributed to Bill Gates – “People overestimate what they can accomplish in a year and underestimate what they can accomplish in 10 years.”

So for the first time ever, instead of having vague goals for the future, I will nail down three big dreams that excite me.

Drumroll please! My 3 goals for the decade are:

(1) Retire (end of 2026 or mid 2027 ie before I turn 56)

(2) Visit Antartica

(3) Run a marathon

Retire at 55

You will notice that only retiring has a timeline – that is because I already have a plan in place to retire at 55. It is so much easier to automate weekly deductions into retirement accounts than it is to automate daily exercise! 

Knowing that this next decade will signal retirement makes me feel excited and apprehensive at the same time.

Excited? Because I will have free time all the time when I retire, yay! All that sleeping in without any regard for alarm clocks. Staying up late just because I can – no need to get to bed earlyish so I can get up earlyish. Now that is heaven to me 🙂

Apprehensive? It is a HUGE change in lifestyle. What if I can’t get there in the time frame I want (ie within the next 7 years)? What if having all that free time is a drag?


Visiting Antartica has been a dream for a long time. There is something about the starkness of the environment, the remoteness, the cold and the wildlife – penguins, in particular, that just ignite my imagination.

It cost A LOT though, so I need to budget for it within my retirement figures. Or visit within the next 7 years while I am still working. Saving up for this expense will give me time to research alternative methods of getting there, if there are any.

Run a marathon

Out of the above 3 goals, running a marathon will be the hardest. Why? Because I don’t like exercising.

But I need to exercise for my health – my cholesterol was the highest it had ever been last year. I have run 10km fun runs before. Running a marathon will be a massive personal challenge. I want a big goal to aim for and get excited about, when I am struggling to get out of bed to run in the mornings.

I also admire the grit and sheer mental strength it takes to complete a marathon.

This is definitely a stretch goal, haha.

So what about 2020?

In episode 9* of Everyday Courage, Jillian chats to David Cain from raptitude.com  They discuss David’s post ‘Go Deeper, Not Wider’ that he wrote in December 2017 (which received 58 000 shares!). It is about a ‘Depth’ year – a year where you don’t start anything new but explore more deeply the stuff you already have.

“No new hobbies, equipment, games, or books are allowed during this year. Instead, you have to find the value in what you already own or what you’ve already started. You improve skills rather than learning new ones. You consume media you’ve already stockpiled instead of acquiring more.”

This really speaks to me. I am someone for whom the thrills of something new always appeals. These days, it may not be new physical stuff but I am endlessly attracted to new ways of thinking, productivity hacks, how to be more efficient etc.  What can I say? I just have a short attention span and get bored easily.

So with Jillian’s and David’s combined wisdom, I want to do my own version of deeper, not wider in 2020.

How will I achieve my goals?

My favourite book of 2019 was James Clear’s Atomic Habits  (affiliate link) – I even wrote a review of it.

Habits is my word for 2020. And this is why – as articulated by James Clear on Twitter:

In 2020, I will build good habits in the areas I want to focus on, to take me through the decade ahead. I want to focus on consistency, not intensity. And I am done with motivation and will power (or lack thereof). I want to embrace the process, not focus on outcomes. In other words, I want to focus on the journey, not the destination.

So what are my 2020 goals?

(1) Exercise and stretch daily

Health is everything. And I would argue, perhaps more important than wealth. Without my health, I will not be able to enjoy my wealth to the fullest. I want to be able to use all that moolah!

My goal is to be consistent this year – run and/or walk everyday and stretch daily. I am notoriously bad at stretching. As a result, I see the osteopath for regular tune ups every 2-3 months. I can save this money if I make the effort to stretch my muscles daily.

I haven’t been motivated to run ever since I completed last year’s Run for the Kids fun run. There is just enough time to start training for this year’s event. The goal is to continue running after the event, through winter. Yuck!

This is where I need to create a new habit … or tell myself I am a runner, therefore I run.

(2) Journal daily

I started this well last year as I desperately needed to find clarity – writing helps me sort through my jumbled thoughts.

But I wasn’t very consistent.

So once again, I will use the lessons learnt in Atomic Habits to be consistent and incorporate it into my morning and night routines.

This is still a goal as living an intentional life is a perpetual goal and I need to be in touch with me to do that. For too many years, I lived a stress filled life and just survived day to day. I never want to go back to that way of life.

(3) Read more

This is not a new hobby.

I’d forgotten how much I enjoyed reading fiction. Since discovering FIRE, I have read mainly personal finance blogs and books.

During my time off after my extended family had gone home on New Year’s Day, I read (and listened) to 6 books, 2 of which were related to personal finance. I was astounded. I have got my reading mojo back!

My goal is to read 20 books this year.

(4) Be more sustainable

I installed solar panels at the end of 2018 and as a consequence, reduced my electricity bill significantly. I paid less than $150 in total in 2019. Some of my colleagues who installed their panels (albeit with slightly larger systems than mine) managed to pay nothing at all ie they produced more electricity than they needed.  So I can still improve in this area.

What I desperately need now is to reduce my water and gas consumption. While this will be good for the planet, it will have financial benefits too. Gas prices have doubled in the last 5 years.

And I will look at reducing my use of plastic, just starting small. For example, not buying any fresh fruit and vegetables wrapped in plastic and use a shampoo bar instead of shampoo and conditioner in plastic bottles.

(5) Declutter

This has defeated me every year. For many years.

Marie Kondo, Joshua Becker (Becoming Minimalist) etc – I just read, agree and then not take any action!

I considered not putting this as my goal this year but I decided that in this year of diving deeper, I will tackle it again. It ties in well with reducing plastic, having less stuff generally. I am pretty good about not introducing new stuff into my house but I can’t seem to part with the stuff I do have which I don’t use.

I will start small just by keeping my kitchen bench clutter free – this will be a huge effort as it is my ‘dumping ground’, haha.

This may be the year to learn how to sell stuff online. Or just donate them.

(6) Financial goals

My main goal is to retire at 55 – I have a 7 year timeline.

In order to achieve this goal, I need to:

(a) Invest $25000 annually into my shares portfolio 

This is a challenge this year as my salary is now reduced due to transitioning to a lower stress role since July 2019.

My focus is to find every bit of extra cash and throw at it. This is important because the majority of my net worth is tied up in my house and superannuation, neither of which I can use to sustain me from 55 to 60.

(b) Maintain salary sacrificing into superannuation (retirement account) until end of financial year in June then reduce the amount

My rationale is that based on existing fund balance, it will grow to the desired amount by the time I can access it at 60 years old, if the fund can maintain a growth rate of 7%. 2019 was an amazing year – not sure 2020 will come anywhere close. So I will review the balance at at the end of June and decide. I do need every spare cent to increase my shares portfolio.

(c) Aim for a savings rate of 50%

My overall savings rate was 40% (based on after tax pay) in 2019. I did not feel deprived in any way so I think I can still do better. And that was with 2 overseas trips.

This year, I will have one trip only –  to visit family in  London and attend a wedding Toronto. My challenge is to find less expensive accommodation especially in London. House sitting is not a good fit personally as I am not great with animals. I use my Qantas points for airfares so airfares will not blow the budget.

I am also hoping my utility bills should reduce as a result of reducing my water and gas consumption. This is part of my overall plan to reduce recurring costs such as home insurance and private health insurance.

I started a vegetable garden last year. The benefits were more than financial – the well being and relaxation from pottering around and watching plants grow then eating the fruits of your labour cannot be overstated. I will attempt to reduce costs this year by learning how to plant with seeds instead of buying seedlings.

And I have started to compost this year – this is an attempt to reduce my waste going to landfill plus I should save some money from not buying as much proprietary potting mixes, organic compost and the like.

And if I am successful in decluttering and learn how to sell stuff online, I just may be able to reach my aim of 50% savings rate. We’ll see.

Final thoughts

Phew! We come to the end, at last.

I will not be tackling the above goals with the same intensity all at once. Instead this year, I will ‘lean in’ to 3 goals every 3 months and as I develop the habits I need to succeed, I will move on to the next 3 goals. Thanks, Jillian – episode 10* of Everyday Courage.

So until the end of March, I will focus on exercising and stretching daily, journaling daily and becoming more sustainable. I will keep you up to date with my progress – it will give me an incentive to track my progress which I wasn’t so good at last year. So you can keep me accountable.

Deciding what to focus on in 2020 has taken most of my January! I am really looking forward to diving deeper into my 2020 with no new hobbies or philosophy.

How about you? Have you set goals for the decade ahead in addition to 2020? 


*A note on Everyday Courage podcast – a new episode is released every Monday and at the time of publishing this post, episodes 9 and 10 have not been released. I signed up to get the whole season plus a workbook so I could work through them  over 10 days or so.

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