I’m a bit older than most of you reading this.
Even so, many of you have likely heard the phrase, “It’s the economy, stupid.” (I have not only heard it, but lived through it.)
Here’s what Wikipedia has to say about it:
“It’s the economy, stupid” is a slight variation of the phrase “The economy, stupid”, which James Carville had coined as a campaign strategist of Bill Clinton’s successful 1992 presidential campaign.
Carville’s original phrase was meant for the internal audience of Clinton’s campaign workers as one of the three messages to focus on.
Clinton’s campaign advantageously used the then-prevailing recession in the United States as one of the campaign’s means to successfully unseat George H. W. Bush.
The phrase was meant to focus a group on one of the campaign’s vital messages — lest their efforts wander to less important topics.
Regular Encounters
For some reason, I have had a number of “interesting” experiences over the last couple months.
Here’s why they have been interesting: I have had a very similar discussion with different people in a wide range of places — the gym, church, my doctor’s office, airports, Ubers, and a few others.
Each one is slightly different but they follow the same general pattern:
- I meet a person I have either never seen before or have only known in passing.
- They ask me what I do for a living.
- I say I am retired.
- They are shocked (probably because I look about 10-15 years younger than I am).
- I tell them I am older than I look (trying to downplay the reason for being shocked).
- This does not deter them. They are still amazed that I could be retired.
After this initial interaction, we usually have a conversation that goes something like this:
Them: Wow, I’d like to retire sooner rather than later. How did you do it?
Me: I earned a good salary, saved a bunch of it, and invested that over a long period of time. (Yes, I really do use the E-S-I words in describing my retirement.)
Them: That makes sense. I could do that but I think I need to earn more. How do I do that?
Let me interrupt here and make a couple side comments:
- I wasn’t born yesterday. I have been giving out financial advice in one way or another for almost 30 years. I’ve seen quite a lot.
- At this point in our conversation I am almost certain that earning more money is not the issue that’s keeping them from retiring.
But for now, let’s proceed.
The conversation then shifts a bit as I go into discovery mode:
Me: Well, how much do you earn a year?
Them: I make about $90,000 a year.
Let’s stop again.
Now I am positive that earning more is not their main issue. You can become wealthy making $90k per year.
We continue:
Me: Does anyone else in your family earn a salary?
Them: My wife makes $40,000 a year.
Me: Ok, do you have any other income?
Them: We have some rental units (or side business, or whatever) that make $30,000 a year after expenses.
Me: Is that it?
Them: Maybe a bit more in interest and dividends, but those are the main ones.
Me: So with your $90k, your wife’s $40k, and the rentals bringing in $30k, that’s $160k per year.
Them: Yeah. It’s just not enough.
I am telling you the 100% truth! I have this same conversation over and over again with random people. If I was a swearing kind of guy, this is where I would do it!
The numbers might be a bit different (some “only” make $125k, but others make $200k) but the essence of the conversation is the same.
Let’s continue:
Me: Well, you know the median household income in the U.S. is around $60k, so at $160k you’re doing pretty well.
Them: Hmmmm. I hadn’t thought of that.
Me: How much do you spend?
Them: Well, we do have a lot of expenses.
Me: Do you have a budget?
Them: Not really. (Some will say they do but when pressed it’s obvious they do not.) And we have some big expenses.
Here they will begin telling me all sorts of spending-related requirements they have: kids’ sporting events, travel, cars, on and on and on.
You wouldn’t believe what people say they “have” to spend money on. Almost all of it is discretionary.
Back to the talk:
Me: I think the issue is that you’re spending too much. While earning more is never really a bad idea, your income is already high and certainly enough to retire on. The problem is likely that you’re spending way too much.
Them: Hmmmmm. I’ll have to think about that.
This conversation can last as short as five minutes (in the locker room getting changed) to a couple hours (on a plane with seat mates).
But the essence is always the same: they make a good income but spend too much. Thus they haven’t saved and can’t retire.
Spending Too Much
This is why I want to modify James Carville’s saying for those wanting to become wealthy and have shirts printed up that say:
IT’S THE SPENDING, STUPID
The personal finance blogging community goes back and forth quite frequently between which is more important: making money or saving money.
I even battle with it myself. After all, I do have both an “E” and an “S” in this site’s name.
In the end, both are required and I like to think of the balance in these ways:
- The goal is to “spend less than you earn.” This has both spending (which inherently has saving built in — what’s left after spending) and earning. To reach this goal you have flexibility. You can earn more, spend less, or put together an almost endless combination of the two (I call the difference between what you make and spend “the gap“).
- In simple terms, the more you do of earning or saving (or both!), the better off you are.
- It’s easier to become wealthy if you earn a high/higher income. It comes down to simple math — you just have more to work with if you earn more (which is one reason millionaires are where they are.) This is why I talk so much here about making more money.
- You can become wealthy with an average income. You can do it even with a low income. It’s just harder than it is if you made more.
- No matter how much you make, if you can’t control your spending, you are doomed. The person who makes $200k a year has much more potential to accumulate wealth than the one who makes $60k, but if he spends $200k and the latter guy spends $40k, who’s better off at the end of the year?
Given these points, I feel compelled to say:
IT’S THE SPENDING, STUPID
You don’t have to make a fortune (or even an above average salary) to become wealthy.
But you must, must, must, must get your spending under control if wealth is your goal.
Those are the cold, hard facts of financial independence.
How to Control Your Spending
For those of you who may have friends in a similar situation (I know no ESI Money readers would have this issue 😉 ), here are the steps I suggest for getting your spending under control:
1. Create a budget.
I know. I’ve lost most of you already. But you want the tips that really work, right? That’s why this step is first.
Here are the details on how to create a budget (AKA a cash flow plan). Read the post and do what it says.
If you haven’t had a budget in a long time (or ever), you’ll need to cobble one together from past bank statements, receipts, credit card statements, and the like.
If that’s too much of a problem, then simply make estimates of what you earn and subtract what you spend. I do it by month, but you can make a budget by quarter or year if you like.
2. Live with the budget.
Your first attempt will be off in many ways, and as you live with the budget you’ll see where it’s lacking.
It will only take 2-4 months until you find out what needs to be adjusted, so it’s not long before improvements can be made.
3. Adjust the budget based on experience.
Now that you’ve lived with it and seen how it performs in real life (which generally leads to higher-then-expected expenses), adjust the budget accordingly.
4. Look for opportunities to cut.
At all of the stages above you’ll likely identify opportunities where spending can either be reduced or eliminated.
Put these into your budget and continually identify expenses that don’t mesh with your goals.
Hopefully you will be able to balance your budget without having to forego something you really want, but if you’re like 99.9% of Americans, you won’t. Some of the cuts will sting a bit.
That said, your larger goal of financial independence should be more than enough to sooth the sting if you keep your eyes on the prize.
The key is to develop moderate and selective frugality. Spend on the things most important to you and save in areas you don’t care as much about.
And if you need help saving, here’s a list of great places to consider.
5. Keep refining over time.
From here on out, you simply refine again and again to keep expenses as low as practical based on your goals (while also growing income).
Do this over time, invest the money saved, and sooner rather than later you will be financially independent/ready to retire.
Those are my suggestions for keeping spending at bay. Anyone else want to add something I missed?
Michael CPO, From The far side of the planet says
Talking about numbers we just bought a cheap mattress… My sister In .. law was helping my wife to buy it.. My wife asked her how much was your mattress?.. She said all around $30000… And I bought 2… Who spends $60000 on 2 mattresses?… My goodness…. From the far side of the planet
Miguel says
Wow, had no idea it was even possible to spend that on a mattress!
Nichole says
Do not go to one of those Sleep Number stores. You will run out screaming!
Debbie says
My sister spent $8,500 on a sleep number bed and I thought she was nuts. I think the $30K has to be a mistake. She probably meant $3K. No mattress is worth 30K.
Michael CPO, From The far side of the planet says
$30,000 is the correct number….Google top 10 expensive mattresses … I was surprised too … my sister in law’s husband makes several million per year
Miguel says
Ah… well that puts it in some perspective, but I hope that’s a sustainable several million per year, otherwise….
Wilkop says
Wow. Think I would have to sleep on it before making a purchase like that.
jjp says
That’s coffee spitting funny!
Marco from Mission Ready Finances says
Couldn’t agree more, ESI! After coaching hundreds of folks over the years, the biggest trend I see, and most overlooked area, is spending habits and simply not having a proactive plan for their income each month.
Spend the majority of my time working folks through the development of a monthly cash flow plan, prioritizing giving (for those that choose to do so), needs (food, shelter, transportation, basic clothing and insurances), then any debt payments.
After covering these areas, 99% of clients are shocked by the amount of income still remaining, their discretionary income, with no idea as to where that balance is going every month. Then they have some tough choices to make on wants vs things that will put them in a position to build wealth (paying off debt, saving, investing, etc).
Having a proactive monthly spending plan for your hard earned income, making tough choices on your priorities for any discretionary income, is a key starting point for anyone looking to do better with their finances and build long-term wealth!
The Physician Philosopher says
This post is obviously spot on for my target audience. Physicians have a huge spending problem. The gap between their earning and spending is so small that many physicians live paycheck to paycheck despite earning hundreds of thousands of dollars.
The issue with the conversation you mentioned above is that almost 100% of people get offended when we start telling them they are “spending too much” because that means that they’ve already made the purchases. Going backwards after buying a house, car, or private schooling is really tough.
Regardless, this is what people need to hear because it’s the truth.
Thanks for keeping it real.
TPP
Miguel says
I’ve noticed this spending thing with physicians in particular. Maybe its all the delayed gratification, as it takes so schooling and apprenticeship to reach high income status. But, also seems to be that they think they can keep working and generating high income forever, whereas with other professions, we know there’s a target on our backs when we hit the 50 – 60 range. Car collections requiring immense garages seem to be a special weakness among my doctor pals. That plus what I’ve seen you refer to as “the doctor house” which of course must be constructed from the ground up.
Miguel says
One of my most educational light bulb moments on spending occurred when I was 20-something – I was doing Xmas shopping with my soon to be wife at a department store, and waiting in line to pay the cashier. The man behind me (looked to be 40-something) started a chatting as the line was veryyy longgg – this is back in the stone age before online shopping existed.
Well he started chatting about credit cards and he asked me how much how much my bank charges for interest…” I answered oh I don’t know, something like 16%, to which he gasped and started giving me a long patronizing lecture on how much money I was wasting, how I needed to shop for a low rate card, how he was only paying 5 to 7% with his special teaser rate cards, which he would juggle balances between to maintain his rate, so he would take a year to pay off the family gifts just in time for the next Xmas, blah blah blah….
When he finally shut his trap and I could get a word in, I stated “Well, it really doesn’t matter what the rate is because I pay my bill off in full each month…” to which I got that look. You know the look. That dumbfounded, deer caught in the headlights, shock & awe look. I wasn’t looking to embarrass the man (he did that to himself), but clearly something was wrong with his life if he had to expend that much energy trying to SPEND MORE than he could reasonably pay off.
It took me awhile to process that puzzling encounter. I readily admit that it was my wife (soon to be at the time) who enforced the no CC balance rule. Later I realized what had happened and why this man was so shocked at my response. He simply could not imagine a life of delayed gratification and living within his means, and he assumed everyone else was exactly like him.
I’ve seen that look many time since. We once said to a couple who was worried about possible job loss: You should have at least 6 months of living expenses set aside for emergencies, to which they gave us that blank dumbfounded look and said with 100% conviction “I don’t know anyone who does that…” Of course completely ignoring the fact that they were staring right at people who have followed that rule for decades. Why of course, its impossible to have emergency savings, all funds must be dedicated to buying crap that no one actually needs. Don’t get me wrong, I love buying crap that no one needs. But I like having food and shelter a lot more.
I’ve noticed that once you hit age 50, the stark contrast between those who’ve spent the last 30 years of adulthood focused on preparing/accumulating vs those who have focused their efforts on squandering everything they’ve ever earned becomes really apparent in a way that is painfully obvious – just an observation.
Miguel says
I should add… in my 20’s I did not make much money, nor did my fiancee, but she insisted that we save up for Xmas shopping… putting it on a credit card was just a convenience so we didn’t have to carry a lot of cash. I had already had my ugly run-ins with credit card spending early on in life, so by then I was Mr Responsible too :-).
Debbie says
Yes, I see this in my own family. Now the overspenders need to borrow money from me.
Dave @ Accidental FIRE says
Spot on…. but there’s still a large contingent who claim you can’t become rich with an average (or median) salary, including many FIRE bloggers. Is it harder on that average salary – yes. Will it take longer – probably. But it can be done.
Debbie says
It is definitely the spending. I make 90K and have a solid successful current plan along with a retirement plan in place. I have budgeted down to the pennies every paycheck since I was 19 y/o. Put away what I will need for two weeks, this month and future bills along with savings for wants. But Retirement savings always comes out of the paycheck first before I get paid.
Funny how there is only one other person that I know of that also budgets. He is 30 and definitely on his way to FIRE. All the other people are scrambling. I actually have a friend that refi’s her house every 4-6 years to pay for her new Jeep. I’ve given up trying to get through to her.
I would love to be your seatmate on a plane to pick your brain and adjust my budget/goals for even better success!
ESI says
Haha! That did make for an interesting plane flight! I may have to write about it separately one day. 😉
Xrayvsn says
Out of the ESI moniker, I really do think it is the S part that is the downfall of most people.
Because of the progressive tax system, the Earning part just not give as big a bang for your buck. S and I are definitely inversely correlated. The more you have of one, the less you have of the other.
We are always under so much pressure to spend, with the latest IPhone or other tech that has people waiting in line. It starts at an early age as my teenage daughter believes her 2 year old IPhone is already outdated and eyeing the IPhone X. I have purposely not bought her one for Christmas because I don’t want her to get in the habit of always keeping up with the latest tech and create a habit that will carry into adulthood.
Fritz @ TheRetirementManifesto says
ESI = Earn, SPEND, Ignore
The Path to FINDER (Financially Ignorant Never Doing Early Retirement)
It IS the spending, and you’re anything but stupid.
Andrew @ Wealthy Nickel says
I would have disagreed with this a few years ago, but as I get older (and possibly wiser?), I’ve realized that keeping up with the Joneses is a problem at every age and income level.
Personally, I have focused pretty heavily on the earning side since we have a single income for a family of four (side hustles and passive income). But I’m still always looking for ways to cut spending without impacting quality of life – that’s almost like free money 🙂
Tom Murin says
I’ve never done a budget. However, I have Quicken data going back to 1995 – so I know where the $$ goes. I believe this is the most important thing.
ESI says
I’m in the Quicken camp too (though we now do a budget as well). We must have started about the same time!
Gary @ Super Saving Tips says
I’m impressed! I have Quicken data going back to 2005 (as well as budgets) and it has been tremendously helpful.
FullTimeFinance says
You know, I came across an article the other day in travel and leisure that illicited just this response. Before anyone comments on the choice of magazine we receive it for free, but I’m apparently not their demographic. Anyway they had an article on an around the world private jet tour. Now mind you I can’t see why anyone would want to travel a country per day. But the price is what got me. 128k for 28 days…. not sure whose dropping 128k dollars for 28 days but it’s a good reminder no matter how much you make there are things so expensive you probably shouldn’t buy them.
Joe says
I’ve seen that ad. There’s a lot of rich people who have money to burn so I’m sure there are enough takers.
Joe says
What I found the most interesting about this article is the kind of people you have struck up random conversations with…
During flights or at the airport or at the gym, I tend to run into serial entrepeneurs, small or mid-sized company CEOs, or otherwise well-off people. I fly economy and go to the YMCA. But I live in Silicon Valley.
I early retired 11 years ago, many of these people appear more well-off than me and think I’m an idiot for early retiring. They think I should be contributing knowledge to smaller companies or helping build the next big technology. No one has ever asked for tips about how to early retire, although it’s obvious to most you need to have a big stash to early retire in SF.
Jeremy says
Couldn’t agree more with everything you said. Print up those shirts. I’ll buy one!
Francis says
I’ve had similar conversations like this on two fronts, personal finance and health/ fitness.
Most people will not make the effort until disaster or a medical crisis scares them into an action of changing habits. It’s human nature and years of affluence exposure.
One casual conversation like this rarely changes a thought pattern or a habit. At least it’s a nice conversation to pass the time while trying to plant a tiny seed of awareness.
Mr. r2e says
You have to know what’s coming in (E), what’s going out (S), and to handle what’s left (I).
Put Save before Spend and you can better control your spending.
Strongly recommend those just starting out follow the ESI post and budget. Budgeting forces you to look at your spending habits, where you can identify areas to reduce.
Tom says
Maybe change the name to “E/S I” because it’s the ratio of savings to earnings that will set you free…or not!
Poornomore says
Spot on. We fit your descriptions to a T :-(. Maybe do a series of blogs on the moderate income success stories to encourage others?
ESI says
Would love to tell your story. Do you have over $1 million? I have a series for that… 😉
Bernie Johnson says
I am surprised I never saw the word “Discipline” in this article. Maybe I missed it.
It’s a such an under rated skill for life. It’s a skill I have struggled with my whole life. It’s the people I meet who seem to have an innate ability to exercise discipline across the various aspects of their life that inspire me.
BJ
ESI says
I could probably put “discipline” in every single post if I wanted to.
Both millionaire books I’ve read recently (one out and one out in January) hit this topic very hard as one thing millionaires do to grow net worth.
MM 55 Interview says
You’ll note by my signature that we did the 55th Millionaire interview on this site and we’ve FIRE’d as of July 2017 (thanks for quoting me in some of the recent recaps ESI !)
I’m a huge fan of budgets (or maybe more accurately, spend tracking) and can’t imagine having taken the leap into retirement without having developed one while we were working and then morphing it to use in retirement.
I know it may sound a bit too detailed but once you have your budget set, dividing up the discretionary vs non-discretionary expenses can provide a huge insight into where and how your money is being spent. I just did mine recently for the first time and found that our budgeted discretionary to non is 40% to 60% respectively. I was actually a bit surprised that it was that much in the discretionary column. That means we could theoretically cut back ~40% of our spending if absolutely necessary (but wifey says nooooo! ;)) We’ll see this year whether we hold to that ratio with actual spending.
Of course deciding which goes into what column is subjective, but once you decide, then excel does the rest.
RE@54 says
Just this morning, our family of three went to the gym. After working out, we considered going to a breakfast place to “fuel” up from the workout. We decided to make breakfast at home since we had food in the fridge. We made a egg scramble with fresh spinach, onions, leftover stir fried beef, cheese, tortillas, and coffee. We joked that the meal would have cost us $15/person and total of $55 with tip. We probably spent $3 making the breakfast that took 10 minutes to make.
These little things add up. The cost of going out this morning would not have made a dent in our finances, but we feel a whole lot better cooking ourselves and saving over $50 for breakfast.
Together, the wife and I make over $200K, but live like we make $70K. Save and Invest and Give the rest and we don’t feel like we are missing out.
Anthony says
Spot on. 3 years ago we started a budget and magically found a way to pay off our debt and start building our retirement accounts. The money was there all along – it just leaked out in mindless discretionary spending. We found YNAB and now 3 years later we save nearly 30% of our income. Magic.
Rohan says
Great post. I am early on in my life but I still hear family making 150-200k (NZD) complaining about not having enough money for life. And the same happens- it’s the spending and not having a budget that does it. What puts people off budgets or not sticking to them is that sometime a budget feels like its set in stone, so I like that you added keep refining your budget over time.
Phillip says
People with $100k+/yr. annual income may feel they can’t save their way to multi-million dollar portfolios by clipping coupons and making a few more meals at home … and they may be right. But I do agree that most people do have excessive spend issues for their income level whereas there are probably perfectly adequate lower cost substitutes. A couple examples I see for those in this income level:
Friend: I send my kid to a “premier” soccer/karate/gymnastics/whatever sporting events where we pay $3k in dues a season, need to go to out-of-town competitions, etc. We know our kid probably isn’t good enough to be a pro or even get a college scholarship but it’s worth it since our kid learns from a more competitive league.
Response: Since our kid isn’t good enough to get a scholarship, we spend $150/per season to play in the local rec league. He still gets the sports experience and since he’s one of the best players, gets to pick his position, plays most of the game and teaches the other kids. We did elevate him to a more competitive league recently since he really did need more competition recently, but we kept him at a local competitive league where he’s still one of the best players, but it’s competitive enough that he’s still learning. We are paying $1300/season but all competitions are still local. We can easily afford this and he likes it … plus, it’s an incentive for him to work hard at school since if his grades drop, we’re dropping him from the league. He’s getting 90% of the benefits at 1/3 the cost of a “premier” league.
Relative: We took our family to Disney and really enjoyed the resort. It was really convenient and it was a nice place. You should try it when they have the 1 night free for every 2 nights stay (at $550/night).
Response: We spend most of our time at the park so the resorts, although nice, don’t give us much benefit other than a clean place to sleep. So we’re fine with a $150/night tourist class motel that’s about 1/4 mile further away from the resort. You walk so much at Disneyland anyways so what’s an extra 1/4 mile.
Obviously, families with different incomes will have to make different trade-offs. Our “Jones” may have nicer vacations, send their kids to more exclusive clubs or schools (ours go public), etc. We spend on what we can comfortably afford and try to balance spending for today as well as invest for a nice, comfortable future. It’s just common sense and it’s really surprising most people don’t do this.
DaveS says
There are some simple things I think many people take too long to figure out:
Compounding works best over many years. People think there’s always time to get their house in order later in life. Wrong. Time goes by quickly.
Budgets are great, honestly I could use one still. But I don’t and I know I’d have more if we were more disciplined (that’s where the value of high ‘E’ helps). However I always believe in the pay yourself first concept! I’ve almost always contributed to a 401k plan. My wife and I now max out our plans and have for years now. I think if more people used this one single step the road to wealth would be a much easier path… especially if you get any matches.
Laurie@ThreeYear says
I think it’s funny that you straight-out ask people what they earn. I love to talk about money, but I don’t ever feel like I can give good financial advice because people are loathe to share the specifics. It’s when you really know the nitty-gritty numbers that you can say, “It’s the spending, stupid!” But otherwise, you’re just guessing at someone’s financial situation. I guess it’s easier to ask a perfect stranger their income than someone you know well.
Matt says
I’ve always been curious if big spenders ever look back once they reach a certain age and realize how much money they wasted in their lifetime. Or are they just oblivious forever? Surely when they get to retirement age and figure out that they can’t afford to retire, something clicks, right?
My parents are very frugal, but my Dad’s two brothers spent insane $$ on Porsche’s, JAG’s, clothes, and all sorts of other worthless stuff over their lifetime. All the while, my teacher Dad stayed the ESI course. Well, sure enough, when his brothers got into their 50’s and were laid off, they had to go begging to their parents (my grandparents) and later to my parents for money, just so they could keep their house, pay for food, etc. As you can imagine, it certainly led to some disagreements between my Mom and Dad.
I ask my Dad to this very day if there’s ever any reflection from his brothers now that they are in their 70’s about all the money they squandered. I ask if they ever ask him how the sibling who’s income was probably the lowest for many of their working years (my Dad), drove the oldest cars (my Dad), and wore the most basic clothes (my Dad), was able to retire 15-20 years earlier then them, travel the world, and send them money when they struggled.
So far the answer seems to be that neither of his brothers have ever wondered how my Dad made it work. I think this speaks volumes about peoples mindset. They have no money, and they aren’t curious enough to try to learn how to have more money, short of some get rich quick strategy.
Lack of financial education and the constant barrage of marketing that starts so early in life prevent most people from understanding that constant consumerism is a disease. Unfortunately, the CDC doesn’t view it as an epidemic yet…
DaveS says
Interesting stuff for sure. I think of these things all the time- what is the right balance? What is the kind of life you want to live “now” vs what life you want ‘later’? Do you want more money later when you are potentially old? Or do you love nice cars, adventures, etc when you are young? I’m not one to judge but both sides of the spectrum are unappealing to me honestly (I post this a lot too I think).
IMO it’s more important to work on making yourself valuable so you can Earn more, Save more, Invest more- all while enjoying some of the finer things in life while at a young age. Maybe I’m biased as when I was a kid my mom had nothing- we ate no name brand food, didn’t do vacations, she had old cars that weren’t always reliable, etc. I didn’t want that life. Saving alone was not an option for me. I do however have multiple degrees that have helped provide me with a decent living now and hopefully in the future.
Matt says
I certainly can’t answer for my uncles, but if I were them, I would wonder why I’m still working in my mid-70’s, can’t afford to retire, can’t afford the fancy cars any more, and now looking at my kids for financial support (luckily not my Dad anymore).
But then again, that’s probably why I read this blog and they don’t!
DaveS says
Clearly they were too reckless!
Miguel says
DaveS, Matt,
In my experience with characters similar to Matt’s uncles, they have absolutely no perspective whatsoever. People like that tend to attribute their fate (and yours) to luck. They are often too egocentric to allow themselves to blame themselves. So, its always the lucky break they never got, or the misfortune they didn’t deserve, etc. Since they can never see themselves at fault, they can never change. I get that hey, its family, but financially supporting people like that is a slippery slope… pretty much a bottomless pit. Not always, but mostly. We helped a relative salvage his home from default once, after a lot of reckless behavior (cash out refi’s to fund lifestyle) and he did somewhat straighten his life out afterward and even paid us back (after we insisted). I think he discovered that it felt good and proud to be a half-way responsible adult and some of it stuck. Most, however, will not change.
Financial Pilgrimage says
So I am probably just slow, but never made the connection that ESI was for earn, save, and invest. How cleaver!
Growing income is great but if not intentional about the spending side all of that money will go out the window immediately. Creating a budget is obviously a great way to do so. However, we’ve had good experience with automating our finances so that we invest, save, and pay our bills first and then spend whatever is left over. This approach takes Moreno discipline but it has worked for us for years.
Icehouse17 says
I’m likely in similar circumstances – retired somewhat early (mid 50’s). We know who we are, where we came from, how we got to where we are currently and have a pretty good idea where we are going. My greatest asset is my wife. She “molded” me when we were first together (I was the spender in the family!!). Our first mortgage was our last… which we paid off with all of our efforts in a very short period of time. Debt to her is truly a four-letter word. My wife always focused us on spending wisely. We weren’t ridiculously frugal, but we bought stuff on sale and stocked up, we avoided unnecessary costs, we bought vehicles and held them for 8 – 15 years, etc., etc., etc. We also had reasonably high incomes. And we have been investing since being debt free. But I truly believe virtually all of our financial success came from my wife’s early focus on controlling our spending… right from the outset. This allowed us to save, to invest and to live financially stress free. Now we reap what we sowed. And it all comes back to watching the pennies, nickels and dimes… so that the dollars can grow like a snowball going down a hill. Hopefully we’re effectively passing this message on to our daughters.
Miguel says
“..I truly believe virtually all of our financial success came from my wife’s early focus on controlling our spending… right from the outset.” – Icehouse 17
Amen to that brother… same here. I am very good at making money, but dear wife is excellent at making money last. Early career was in sales, and the sales culture was spend it like you can always make more and then some…” They wanted their salespeople hungry and scraping for more and more, so I worked in a culture of excess. If not for my wife I would have never understood the value and saving and thrift, at least not until it was too late. I’m a big believer in the value of a mate/partner who can balance out one’s weaknesses.
I’m happy that I found that balance – My wife is the best, wisest, most loyal friend anyone could ever hope for.
We do enjoy many luxuries, like a large home, an incredible vacation home, travel, nice car, quality clothes/accessories, etc. but still try to keep it modest relative to our income and NW, and try to enjoy both our vocations, businesses (after all, it does occupy much of our waking hours) and our personal time together. I’ve learned so much from my wife that I’m now the one to say… hey we need to reign in the spending as frequently as she does – A couple decades of marital conditioning will do that!
gary DeMay says
Spend over $1000 on a mattress means your an Idiot unless unless you are a Multi-millionaire ! If you are spending like this in other areas you’ll never have enough money, no matter how much you work. GOOD LUCK ! no further comments. Mr. D
DS says
It’s really interesting that you’ve had these conversations with folks who have household incomes over $150,000. It goes to show that it’s possible to spend away every penny, no matter how much you make.