• Steve Martin

The Key to Creating Wealth - Spend Less than You Earn

Updated: Oct 21, 2020


One of the key things I have learned over the course of my life is that it is a good idea (great idea) to spend less than you earn.


If you can learn to follow this one rule, you will be well on your way to living a successful financial life.  Everything else is icing on the cake.


If you do not follow this rule – anything else you do is pretty much wasted. 


If you follow this rule – you will automatically be doing a lot of things right: 

  • You will not need credit cards - or at least will be paying the balance off every month.

  • You will have emergency funds.

  • You will be building funds for financial independence.

  • You will be living simply - and enjoying the benefits of living simply.

I did not invent this rule.  It has been around for a long time and goes by many names: 

  • Live within your means.

  • Save 15% of what you make.

  • Pay yourself first.

When I say, “Spend less than you earn,” I mean live on at least 15% less than your total income.  This will allow you to save at least 15% of all money that you receive during the year for your future security and financial independence.  Here are Four Hints to help you do this: 

  1. Make a commitment to yourself: Commit that you will spend at least 15% less than you earn and manage the money you save reasonably.  Once you make the commitment, the details of how to do it will fall into place. 

  2. Make the savings automatic: Having to write a check to savings each month significantly decreases your chances of success. Find a way to automatically take the savings out of your paycheck before you see it: use automatic withdrawals and make automatic contributions to your savings plans (401Ks, IRAs, etc.).  Do whatever it takes to make this happen. 

  3. Forget the Joneses: Most of our problems stem from trying to keep up with the “Joneses” – comparing ourselves to others – what we earn, what we have, etc.  The Joneses have done far more harm to us than any of us know. 

  4. Learn to enjoy the simple life: We make life too complicated.  Learn to enjoy the simple pleasures of life.  Vacation locally, cook more, and go out to eat less.

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