Should you spend more than you earn?
By Gordon Powers, Sympatico / MSN Finance
How much money will flow through your hands during your lifetime? It’s probably a lot more than you think.
First, get a figure in your mind for your current annual household income. Let’s say that’s $60,000. Now multiply that by 40. $240,000 becomes $2.4 million, a rough estimate of your income over a lifetime of wage earning, not including taxes.
Sure, you may not have earned $60,000 every year since you’ve been working and you won’t stay at $60,000 down the road either. But it’s a quick and easy way to come up with a big picture number, which could be larger still if you’re a two-income family.
All of which is why, despite the grim headlines and admonitions about debt free living from bloggers like Bank Nerd, you should go all out from time to time, says Alan Schram, who blogs at Saving for Serenity. Not on another car or a bigger television, of course, but on those unique opportunities – weddings, birthdays, vacations, higher education – that only come around once and awhile.
Life is expensive. Sometimes it’s going to cost you more than you’re earning, maintains Schram. As long you only break from the plan on occasion, you should feel free to spend more than you earn, he recommends.
Good idea or merely an early introduction to credit counselling?
What would you splurge on and why?
Posted by: daytimedolphin | Jul 15, 2021 8:56:29 AM
I don't think you should spend more then you earn. That is the most ridicules thing I ever heard. That is why there is the problem that we have people spending money that they don't have. I was raised if you don't have the money you don't buy it. So yes I do without oh well I can live with that.
Posted by: J Steed | Jul 15, 2021 9:10:54 AM
I would never spend more than I earn. I have lived by this rule since the first day I joined the work force forty years ago. I live quite well, never had debt (don't even know the meaning of the word). Like "daytimedolphin" says, if you can afford it, don't buy it.
Posted by: AvoidALifeOfSlavery | Jul 15, 2021 9:18:08 AM
Looking for a life of enslavement to debt? Spend more than you earn. Pretty soon, you are a slave to your job and your banker. Its really no different than the the old taxmen that taxed the peasants to keep them barely surviving week to week so that the king could control the country. The only difference here, its that you are sold it, not told it. Which is actually even more dangerous because you feel l ike it was your idea.
True freedom and happiness come from the ability to make choices, and freedom is a critical component in all great societies past and present. Your freedom is critical in allowing you the opportunity to control your life and not have it control you.
Don't put the handcuffs on yourself by taking this poorly timed bad advice. This is recession marketing at its absolute worst.
Posted by: pippu | Jul 15, 2021 9:25:49 AM
If you spend more than you earn, not only do you put yourself in a very precarious position but you deprive banks of liquidity. Saving your money not only makes you financially healthy, but it helps the economy. All of the money that banks hold they turn around and give to investors, who in turn invest in the economy and help it to grow. No money in the bank means no lending, which is a big contributor to the recent credit problems faced by world banks.
As an example, look at Japan- after WW2 the country and its economy were in shambles. There was no such thing as credit, and the economy had to be built up from nothing. People saved every last ounce of money that they could, and bult up the banking systems ability to lend and invest. As such, Japan's economy grew fairly quickly and became competitive with those of the western nations.
Anyway the point of the comment is that living beyond your means and on credit is senseless. It's bad for you and the economy. I'm not saying to avoid using credit, just don't live on it!
Posted by: Ground Zero | Jul 15, 2021 10:13:31 AM
Yeah, sure! How else are we going to make the Chinese the masters of the universe!!
Posted by: jojo | Jul 15, 2021 10:19:56 AM
this article must be sponsored by the Government of Canada, because its the most ridiculous thing ever to come out of a reporters mouth..this is why we have a global economic crisis..people spending money they dont have..wow, the stupidity is rampant.
Posted by: nohobo | Jul 15, 2021 11:28:02 AM
Gordon Powers' credibility takes a hit. This is absurd advice.
Posted by: axiom | Jul 15, 2021 11:53:50 AM
Wow, it must be a slow day or even a slow week in the news for Gordon to write this.
Ok, we all know we're in a deep recession. The Banks' solution to get out of it is, is for everyone to spend more which creates more debt. And when people are constantly paying off their debt, that money is being circulated within the economy, and viola! The economy is moving again... Albeit in a circular fashion.
To the everyday working class person, we know better, and that bloggers like Mr. Gordon Powers is trying to mis-lead people and bilk them out of their hard-earned savings in favour of the Banks' so-called solution to the recession.
It's like MSN Finance is trying to advise us to work for free AND spend more than we earn.
Do I detect a sinister trend here?
Posted by: smartenuff2know | Jul 15, 2021 12:14:15 PM
Yeah sure... I'll go spend more than I earn. When I have $10 million in the bank and my "income" is a stipend I pay myself from some clever accounting that hides my real income. This blogger's either an idiot or very clever. After all, the elites will always need a slave workforce.
Posted by: Tyler Durden | Jul 15, 2021 12:18:37 PM
What you own ends up owning you.
Posted by: Matt | Jul 15, 2021 12:35:28 PM
So we should spend more than we earn for higher education....then a wedding....then vacations....then...then....
Sure, they're only once-in-a-lifetime things, but just from the article, there are 4 once-in-a-lifetime things that are quite common. Then there are the unique things, like, say, you spent on vacation, and then all of a sudden a parent is very sick and you have to fly across the country to see them...and then your partner loses his/her job.....and the kids can't find work so they move in with you.....and inflation and high interest rates hit the credit cards that you've maxed out and loans that you now have....
There are way too many variables in life without being irresponsible by spending beyond your means. I'd much rather not take my chances, thank you very much.
Posted by: SoCynical | Jul 15, 2021 1:19:24 PM
I'm glad I'm not the only one who thinks only a complete idiot would heed such nonsense. Unfortunately there are many who will agree with the ir-rationale of this article, which is why we have a crisis on our hands - common sense and good judgment have not prevailed among the many.
Posted by: jdogg | Jul 15, 2021 1:22:09 PM
Credit has been far too easy to get so we have lived well beyond our means for many years. It had to end sometime. It's hard to believe that someone thinks that we should begin that cycle again!!
I welcome the credit crunch right now. Hopefully it changes all of our mindsets on how much we spend, but even more, how much WE THINK WE DESERVE. We have been living in a dream world for far too long driving expensive vehicles, buying all the toys that we don't need, spending and spending and spending. We need some reality...
Posted by: Ron | Jul 15, 2021 1:27:47 PM
Gordon's point is not that we should generally spend more than we make. Rather he is saying if you have one of those once-in-a-lifetime opportunties - it is ok to do it even if you don't have the money. His reasoning is simply to recognize that will likely be earning alot of money over your lifetime and in view of that - it is ok to do those rare splurges.
Of course the danger is when we allow those rare occassion to be commonplace.
Posted by: Accter | Jul 15, 2021 1:27:50 PM
I peronsally do subscribe to this theory and find it a healthy way of living. I have no debt from day to day life (if you can't live in the positive then inevitably you are going to go bankrupt). However I do have lots of debt. It is investment debt and unique opportunity debt.
I invest in leveraged investments as they are the best return you can earn by far. Yes they are risky but with proper planning at the front end the rewards can be well worth it. Many people have a strange negative stigma about debt and consider themselves "free" when they have no debt. I just make sure the asset is worth more than the debt and I am happy. In the last five years (yes I am still in my twenties) my return on investments has been greater than my gross pay from work. Debt free life means missing huge opportunities.
This also extends to unique items (wedding, travel, education etc). Many high school kids can not afford univeristy without debt however after graduating (with the right degree of course) their return can be many times the debt. This is an investment in yourself. My wedding is unique to me and the memories will be priceless so I really am not going to worry about the cost. Vacations enrich my life more than the cost so again debt is ok with vacations.
Call me foolish if you wish but I live a very good sustainable life that financially works well. I am financially secure, having the time of my life and I am already 10 years ahead of my retirement plan. On my deathbed am I going to wish I had another 5K to go to my kids or am I going to wish I had backpacked Europe one more time?
Posted by: jojo | Jul 15, 2021 1:49:06 PM
accter - being in your 20's, you havent experienced hardship, your great investment opportunities that you are talking about I'm sure is RE, well, let me give you a piece of advice..as easy as you made it..you can lose it..lots of dummies made inlfated profits that will soon disappear like they have and are all over the world..your time will come, the wise can make money in a downturn..a monkey can even make money in the up and up..quit bragging cause you'll be bit.
Posted by: jdogg | Jul 15, 2021 2:00:11 PM
Accter - I agree that some debt is good debt - housing, some manageable school debt for those entering professional careers - doctors, dentists, lawyers, and investment debt (where you are setup to manage the bumps along the way). Leveraged investing does have its place, but for the average person with minimal excess cash reserves available, the last year could have easily bankrupted them so I think it is dangerous to suggest that possibility for someone who is not setup for the bumps. I'm glad it is working for you...sometimes timing of when you start something like that is everything.
I agree there are times that we may be able to treat ourselves beyond what we currently have in our bank account, but if we don't have the money upfront, shouldn't we really look at how we could treat ourselves without creating another financial burden on ourselves that we will pay for later...the most expensive life is not necessarily the happiest life. Simple can be happy...
ONE MORE THING...ARE WE JUST TAKING CARE OF OURSELVES AND OUR OWN "HAPPINESS" OR ARE WE HELPING THOSE AROUND US AND GLOBALLY WHO HAVE FAR LESS THAN WE DO?
Posted by: Brad | Jul 15, 2021 2:20:49 PM
Didn't the ladies and gent's on Wall Street spend more money than their companies earned as well as push banks through backing to loan people more money than they can possibly ever afford to pay back?huh? No wonder people drink with this logic.
Posted by: Rolf | Jul 15, 2021 2:53:33 PM
King Solomon, purported to be one of the wisest men who walked the earth coined these words three thousand years ago in Proverbs 21:20: "In the house of the wise are many fine wines and oils, but the fool devoureth what he hath". Living within your means is pure wisdom whether on a micro level, or a macro level. Long run debt never is a good idea. Occasional splurging, perhaps yes, but sooner or later the debt must be repaid. The borrower becomes slave to the lender. Have you not heard of interest being charged???
Look at the problems the USA now has itself in with a twelve trillion dollar debt! They will soon either have to reduce services, raise taxes, or default on their debt. Maybe all three. Scarey thought.
Don't listen to Schram, listen to David Chilton in The Wealthy Barber: "Pay yourself first!". Another way of saying: "Live within your means!" Or, perhaps better yet, listen to King Solomon.
Posted by: Frank | Jul 20, 2021 11:08:47 PM
jdogg, given that the average Canadian is about $40,000 in debt, it turns out that those people around the world "who have less than we do" that you referenced are actually richer than we are.
Zero is still worth more than -40,000.