Personal Finance

How to Develop the Habit of Spending Less Than You Make

My number one piece of personal finance advice is to always spend less than you make. Here's how you develop this discipline.

If I could write just one thing about achieving financial freedom, it would be this—spend less than you make.

Like all habits that lead to financial freedom, spending less than you make is simple to understand, but hard to follow. For some reason, we always want more. At times in my life I’ve made very little, and other times I’ve made a lot, but at all times I’ve wanted just a wee bit more. I find it just as difficult to live below my means today as I did 15 years ago making about one-third of what I make today.

The problem isn’t about how much we make. We are the problem. And this is critical to understand because until you identify the problem, you can’t fix it. If you think the problem is your income, you’ll spend your energy trying to make more money. While there is obviously nothing wrong with making more money, I speak from experience when I say that making more money will not make the concept of spending less than you make any easier. So what will?

Before I attempt to answer that question, a word of caution. Spending less than you make is the single most important financial habit to develop. And as fate would have it, it is also the hardest. Consistently living below your means is the hardest thing to do in the world of personal finance.

As they say: if it were easy, everybody would do it. However, like any habit, once you start spending less than you make consistently, it does get easier. And with some determination, you can do it. So, here are some tips to develop this new habit and make it part of your financial lifestyle:

Distinguish Between Your Wants and Your Needs

Let’s make this simple. Basic food, shelter, and clothing represent your needs; everything else is a want. We’ve convinced ourselves that two cars, cable TV, and eating out three times a week are essential to our way of living — if not a borderline “need.” They certainly have become standard for many in America. Then again, so has spending more than we make. See? I told you this wasn’t easy. To really distinguish between wants and needs, think about a Doomsday Fund. Imagining what you’d do in a real sustained financial crisis will help sort out the needs from the wants.

Understand What Truly Brings Meaning to Your Life

When I was a teenager, my family didn’t have much money (you can read about my childhood here). At one point, our TV broke and my parents couldn’t afford to get it fixed or replace it. Oh, the misery! I literally went through withdrawal symptoms for a week… I didn’t know what to do with myself. But after that first week without a TV, I didn’t miss it at all. I spent more time reading or outside and went to bed earlier. I ate less junk food, too. What I thought was so important in my life turned out not to be that important after all. We went a year without a TV and why we eventually replaced it, I’ll never know. Living below your means is not just about distinguishing between wants and needs. It’s also about distinguishing between wants that really bring us fulfillment, and those that don’t. Learn the difference and you’ll spend less money.

Use Trial Periods to Evaluate “What ifs”

What if you didn’t have a TV? What if you didn’t have a second (or third) car? What if you ate out just once a week? What if you took your lunch to work everyday? I’m a big fan of the trial period. Go without TV for a week or (God forbid!) a month, to see if you really miss it. If it turns out that TV is not as important to you as you once believed, cancel the cable and sell the TV. Or don’t use your second car for a week. This will undoubtedly be inconvenient for many, if not most, of us. Is the second car really worth the payment, gas, insurance and repair bills, though? Trial periods are a great way to figure out what works for you, and they can be an effective way to convince a spouse to give something a try.

Learn How to Fight with Your Spouse Over Money

If you share your finances with somebody, how they spend money is as important as how you spend money. Working together is critical. If you’re having some difficulty seeing eye to eye on money, maybe you need to learn how to fight with them over money.

Focus on Your Weaknesses

We all have spending weaknesses. For many, it’s eating out or impulse buying. Whatever your weakness is, you need to identify it and address it. Monthly expenses fall into many categories that can seem overwhelming at times. But most of those categories don’t need to be monitored. They are either fixed expenses (like the mortgage payment), or they are for something that’s not causing you to spend more than you make (like the heating bill). Focus your effort and energy on those areas that are out of control.

Make Mountains out of Molehills

In finances, everything counts… even the small stuff. One of the biggest mistakes made is ignoring the small expenses. This is one of the reasons I started the “Buying the B Share” campaign here at The Dough Roller. Small expenses (or income) will add up to substantial sums, given enough time. You certainly don’t want to ignore the big expenses, but keep an eye on the small expenses, too.

Get Radical

If credit cards are causing the problem, either get rid of them or have somebody you trust hold them for you. You need to remove temptation from your life. What matters most is results — self-discipline and control will come later.

Spending less than you make will be a challenge and test of willpower, no matter how much money you bring home. If you’re serious about cutting back, though, try the tips above. As long as you stick to them, the savings will add up and you’ll be well on your way to carving out the unnecessary expenses in your life.

If you’ve tried other approaches to controlling your spending, please leave a comment so that we can all benefit from what’s worked for you.

Rob Berger

Rob Berger

Rob Berger is the founder of Dough Roller and the Dough Roller Money Podcast. A former securities law attorney and Forbes deputy editor, Rob is the author of the book Retire Before Mom and Dad. He educates independent investors on his YouTube channel and at

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