Confessions Of A Financial Planner: Guilty Of Overspending

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USAA Core Advice Principle: Spend Less Than You Earn


Spend-less-than-earn-400px.gifSpend less than you earn. The idea sounds simple, yet 60% of Americans don’t, according to a national 2016 study on Financial Capability in the United States. That statistic may seem surprising, but considering almost half of us don’t follow a budget, maybe it’s to be expected.


Consistently overspending makes it hard to catch up financially and makes getting ahead virtually impossible. It’s not always easy to “spend less than you earn.” Everywhere we turn – on the Internet, TV, magazines and billboards – we’re bombarded with opportunities to buy things. It can be hard to say no when the messages are so loud.


None of us is immune to the temptation to overspend. A few years ago, I calculated that my two car payments and mortgage ate up over 70% of my income. As a financial planner, I know this number should be less than 36%, but the temptations had obviously been strong, and my focus had lapsed.


I suddenly felt like I was in financial prison. Fortunately, my dad taught me early on to limit credit card use to what I could afford to pay off each month, so I didn’t have credit card debt, or things could have been worse.


What saved me? When I recognized the problem, I got serious about controlling my debt payments and created a


monthly budget — the dreaded “B” word I came to love — to cut back on things that weren’t necessary. Because I limited my purchases to the most essential ones, I freed up extra cash to pay off debts faster. Now I only spend 20% of my income on debt payments.


This past year, I had to put my 2005 vehicle to rest. I bought a car that is reliable, practical, and will be cost-effective for the next decade or more. I also paid cash for a good portion of it. Plenty of nicer, more expensive cars were available, but I made a disciplined decision based on what I really need and can afford.


“Spend less than you earn” is simple advice, but it’s easy to ignore. Here’s the good news: If your finances have gotten away from you, don’t worry. You can do what I did — examine your budget, prioritize spending and only bring home those things you can’t do without.