Among our core advice principles at USAA, this one holds a special place in my personal life experience. I say that because the words “spend less than you earn” are the first element of USAA’s core advice and the first half of a mantra that we metaphorically drilled into all of our kids’ heads as they grew up. Add a second element, “and save some to boot,” and I would wager my 401(k) match for the rest of my working days that all three of our kids would answer the question, “What did your parents teach you about money?” with the complete phrase, “Spend less than you earn, and save some to boot!”

In the hustle and bustle of everyday life, it’s easy to lose track of where your money is going. But without a clear understanding of your income and expenses, achieving financial freedom remains elusive. The fundamental principle of financial success boils down to that simple yet powerful concept we shared with our kids: Spend less than you earn, and save some to boot.

This isn’t about deprivation or restriction; it’s about making conscious choices about how you allocate your resources. It’s about aligning your spending with your values and prioritizing what truly matters to you.

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Why Is Spending Less Than You Earn So Crucial?

• Reduces financial stress: When your expenses consistently exceed your income, you’re constantly playing catch-up, leading to anxiety and stress. By spending less than you earn, you create a buffer, reducing financial worries, allowing enjoyment and eliminating the stress associated with the “more month than money” dilemma that many families regularly face.
• Enables savings and investing: Here’s the “save some to boot” element of our mantra. When your income exceeds your expenses, you have the freedom to save and invest for the future. This allows you to build an emergency fund, achieve long-term financial goals such as buying a home or positioning yourself for retirement, and, ultimately, creating a more secure financial future for yourself and your loved ones.
• Provides more financial flexibility: Spending less than you earn gives you more control over your finances. You have the flexibility to pursue your passions, travel or make other choices that enhance your quality of life. In a moment, I’ll discuss the “B” word, but the key benefit of effectively budgeting is that you create the opportunity to use your money in a way that aligns with what is important to you.
• Cultivates good financial habits: The principle of “spend less than you earn” fosters healthy financial habits that will serve you well throughout your life. It encourages mindful spending, prioritization and a greater appreciation for the value of your money.

How to Rebalance Your Spending

Here are some practical tips for making the “spending less than you earn” element of the mantra a reality:

• Track your spending: Monitor your expenses for a month or two to understand where your money is going. Use budgeting apps, spreadsheets, banking and credit-card statements or even a simple notebook to track your spending. If you don’t know where you’re spending, there’s no potential for any type of adjustment or course correction.
• Create a realistic budget: Develop a budget or spending plan that aligns with your income and financial goals. It can seem like a grind, but mapping out how each and every dollar that comes in will “go out,” i.e., various expenses and goals, is critical. Will your plan match your reality? Well, probably not every month, but you’ll have a framework for success.
• Identify and cut unnecessary expenses: If necessary, analyze your spending and identify areas where you can reduce or eliminate costs that don’t make sense in the context of your priorities.
• Find ways to increase income: Explore opportunities to increase your income through a side hustle, freelance work, negotiating a raise or jettisoning unused/unneeded “stuff.”
• Practice mindful spending: Before making a purchase, ask yourself whether it aligns with your values and financial goals. As I’ve written here before, I’m a fan of a “cooling-off period” prior to any big purchases or money moves.

The principle of “spend less than you earn” is at the foundation of financial freedom. That’s why it’s a key element of USAA’s core advice and why it was a focus of my “financial parenting.” By embracing this principle and implementing it into your daily life, you can take control of your finances, reduce stress and build a brighter future for yourself and your loved ones.

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