Which Comes First: Earning or Saving?

by Joe Plemon on May 28, 2010

Free Money Finance’s recent post, The Seven Pillars of Financial Success:  Pillar 1: Spend Less Than You Earn emphasizes the absolute priority we must give to this principle in order to prosper financially. Based on Proverbs 21:20, “In the house of the wise are stores of choice food and oil, but a foolish man devours all he has”, FMF says,

“Without this one, simple step, you’re dead in the water financially — you’re going nowhere. With it, you have extra amounts left over that you can save and invest — and thus grow your net worth. This is why spending less than you earn is the one, main key to financial success (and thus my best piece of financial advice).”

Who can argue with this simple logic? It is common sense, it is bible based and it is the best piece of financial advice that a very successful financial blogger offers. Done deal. Right? I thought so until this comment to the FMF post made me wonder:

“I’ve found out that the most important pillar is actually “Be able to make a Living Wage”. You have to make a living wage before you can “spend less than you earn”, unless you don’t mind sleeping in a cave (which yes, some people do).

If you don’t have any earning power, it’s IMPOSSIBLE to spend less than you earn, because no matter what you do or how many jobs you try to take on or get, they pay so poorly that you don’t earn enough to pay the most basic of life’s necessities (Shelter, Food, Electricity). That’s my problem (which I’m working on fixing).”

So now we have a dissenting and logical opinion: “One must make a living wage before it is possible to spend less than you earn.

Are we splitting hairs here? Is the “earn/spend less” debate akin to the “chicken/egg” argument? I don’t think so. In fact, I believe this discussion is a critical one for the following reasons:

We are not talking about zero income.

Obviously living on less than you earn is impossible if you have no income or no free money coming your way. However, the proverb, the post and the commenter all assume that there is SOME income. The comment states that this income must be a “living wage” before one can practice the principle, but neither the post or the proverb make this assertion. “Wisdom”, according to the Proverb, is setting aside some food and oil regardless of the income level.

“IMPOSSIBLE”, though difficult, can be possible.

According to the comment, even if you take on several poor paying jobs, it is IMPOSSIBLE (his caps) to spend less than you earn. I disagree. I am not unsympathetic to those who struggle with low paying jobs, but I dismiss the argument that they can’t meet basic needs. I know a forty year old single woman in our community who works for minimum wages, has no debt and $10,000 (all saved from her job) in the bank. She rents a modest apartment and does not own a car (she rides a bicycle) and refuses to borrow money.

While I am not trying to make anyone feel guilty for living in America, we can keep incomes in perspective by realizing that the minimum wage earner in America is ahead of 87.8% of the world’s population. My source? Global Rich List. My point? Think twice before declaring your situation is impossible.

A “living wage” is not definable

What is a “living wage”? Seemingly, it is sufficient wages to be able to pay life’s necessities. However, the definition of “life’s necessities” is so ambiguous that anyone can make it mean what they want it to mean. $15,000 annually might be living wage for one person while $100,000 a year might not be enough for another person.

The “I will do it later” mentality

There is a danger in deciding that one must earn a certain income level before beginning to apply Proverbs 21:20. Why? Because the “I will do it later” mindset is a form of rationalization which will affect not only this decision, but all financial decisions. One can always find an excuse to delay paying off debt or saving for an emergency fund or planning for retirement. “Tomorrow” can be a death knell in the world of personal finance.


I agree with FMF that learning to live on less than you earn is a foundational financial and biblical principle. I realize that this can be very difficult when the income level is low, but I also believe that there is no magic income level when the principle should kick in. When people set their minds to live on less than they earn, and when they make themselves do it even when income levels are low, they are developing a mindset that will serve them well for life.

Readers: are you able to live on less than you earn?  How difficult is it?  Did you have to achieve  a certain income level before you could live on less than you earned?  Are you still looking forward to being able to do so?

Creative Commons License photo credit: alancleaver_2000


{ 19 comments… read them below or add one }

Carol@inthetrenches May 28, 2010 at 1:52 pm

Wonderful post Joe, and it answers well the number one reason people give for not saving. Your answer is good solid advice. While reading the post I had to wonder if the person writing it was also giving the same reason for not tithing. God is a miracle worker and He works for those who trust in Him. Sometimes it is tough but if so He has lessons for us to learn and He promises to provide all our needs.


joeplemon May 28, 2010 at 3:21 pm

Yes, God is a miracle worker. This fact does not imply that He will keep us from tough times. To the contrary, He often allows those tough times because many of us won’t seek Him until we are (a phrase of yours) “in the trenches”.

Thanks for your encouraging words!


Darren May 29, 2010 at 9:54 pm

Yes, I live on less than I earn, and I agree that it’s a basic necessity for financial independence. And spending less than you earn does imply earning something FIRST.

But you make a good point as to what a living wage really is. I think it’s definitely different for most people. We all have different expenses, but I think we choose most of those expenses. We decide how many kids we want, what kind of house and car we want, where we want to eat, and other things to buy.

These different expenses are what give each of us a different living wage. So for the most part, we choose our living wage.

If we chose to live relatively simple and modest lifestyles, we’d have a lower living wage, make it easier to spend less than we earn, and move further along the road to financial freedom.


PremiumFinance May 30, 2010 at 10:51 pm

Good Advice , ive started a saving routine now lets yas know how it goes


Roshawn @ Watson Inc May 30, 2010 at 10:58 pm

I like your point but wonder if there needs to be a distinction between what is a “living wage” versus what is a reasonable expectation of comfort. In other words, I think a lot of people mix up their minimal expectation of comfort with what is indeed livable (i.e. high-school civics/Maslow’s definitions of needs).


joeplemon May 31, 2010 at 8:45 am

@Premium Finance,
Good for you! Keep us posted!

Yes, the definition of “living wage” is a conundrum…having perhaps as many meaning as there are people. Help me out here if I misunderstand your point, but it seems to me that one’s minimum level of comfort (especially for low income families) will be determined by what it takes to live on less than you earn. Are you saying an unrealistic expectation of comfort will cause people to have distorted (and therefore unaffordable) definitions of “living wage”?


Roshawn @ Watson Inc May 31, 2010 at 8:53 am

Bingo, the basics are the basics: food, shelter, transportation, utilities. No amount of rationalization is going to make me believe that television is essential (unless this is somehow necessary for your job). Comfort is different and is what most people think of when they say living wage, so I am challenging the assertion that is is difficult to finds one’s true living wage if you apply some basic criteria. People will always rationalize to include other things that they want to afford, but desiring something badly DOESN’T make it essential.


joeplemon May 31, 2010 at 9:04 am

OK. It comes clear to me now! Living wage should NOT be the conundrum I was making it to be, but should be objectively based on meeting the basic essentials of life. This makes perfect sense. But, of course, most people don’t think that way because of their unrealistic expectations of comfort.

I was coming at it from a different direction, stating that when one actually lives on less than he earns, he will discover what his living wage is.


Roshawn @ Watson Inc May 31, 2010 at 9:16 am


You are actually making a brilliant point in the article that when you have an income crisis, then it is almost impossible to live on less than you make. Those of us who enjoy personal finances often forget this fact when talking to others. However, I believe the lack of ability to prioritize is the reason why so many people stay broke. If you can prioritize your finances appropriately and truly distinguish between a need and a want/comfort, you can get ahead financially. People just want to rationalize why they have to live in a certain neighborhood or have to drive a particular car to justify their decisions and their resulting poverty. It is a trap that most of us would be wise to avoid. There’s nothing wrong with comfort, but make sure you can TRULY afford them. Comforts are not essential and should only be in your budget if their inclusion doesn’t put you behind financially. To me, it as simple as that in the vast majority of cases.

P.S. I just replied to your comment… (great discussion)


Khaleef @ KNS Financial May 31, 2010 at 7:56 pm

Great article, and great comments! I agree that “living wage” should be defined as enough to supply the basics for living (food, water, clothing and shelter). In the US, our standard of living has skyrocketed in the last 60 years, and so we cannot imagine living without cable tv, computers, smartphones, etc. We almost feel entitled to those things just because we were born.

In Matthew 625-34, Jesus teaches about the sin of worry – particularly regarding one’s basic needs. He mentions food, drink, clothing. While this is by no means an exhaustive list, it is very informative.

Ultimately, we must determine our living condition ONLY AFTER our wage has been determined, or else we will plunge into debt once our wage becomes lower than our expectations.


Jackie June 1, 2010 at 10:57 am

This post really got me thinking. If you had asked me this 20 years ago when I was struggling to save even a dollar a week, I would have said yes, you need to make a minimum amount to be able to live on less than you earn. In retrospect though, I’m not so sure.

We do live on less than we earn now. I think what made that possible was paying attention and being intentional.


joeplemon June 1, 2010 at 11:17 am

Right! Your sentence “We almost feel entitled to those things just because we were born.” cuts to the heart of the issue. My mom grew up during the Great Depression and, though very poor, never felt cheated because she didn’t have a higher standard of living. Those early lessons in forced frugality have served her well in good times and bad (she just turned 90 by the way).

Thanks for sharing your story. Here is my question for you: would you be able to live on less than you earn today if you hadn’t struggled to save a dollar a week 20 years ago?


FinEngr June 2, 2010 at 2:17 pm

Taking the reverse of Khaleef’s point…

If you decide at the onset you’ll save X% of your income or only allow entertainment to account for Y% of your income (assuming Y is 100% or less of course!) – then you will always be able to save no matter what conditions you are put in.

The mentality portion (mostly entitlement) becomes a significant factor. Here’s a great phrase: “You can have anything you want in this life, but you can’t have everything”


jacqjolie June 5, 2010 at 12:07 pm

I’m inclined to say that the mentality required to live below your means is far more important. Back around 1990, I managed to live for a few months on about $200/month(yes, that was my earnings) – here’s the post:

Yet just 5 years later, I was spending double my income due to underearning – and being stupid:

Yet in between those years, I was going to university and lived within my ~$800/month means quite easily. Today, I can easily live on less than I did back in 1995, yet have had years where I earned over 10 times as much. How most of us deal with money is just not logical and once you figure out the mental game of it, the rest is easy.


joeplemon June 5, 2010 at 9:34 pm

I read both of the posts you referenced, and I am confident that when you say that “the mentality required to live below your means is far more important”, you know what you are talking about. You have even gone through some stupid times in your financial time (haven’t we all?) but you learned from them.

Readers: go read these posts! You won’t be sorry.


jacqjolie June 5, 2010 at 10:35 pm

Hi Joe,
I can’t recall the name of the book or the young guy’s name off the top of my head now, but about 3 years ago a young mid 20’s guy used himself as a “social experiment” where he went into a homeless shelter, started from zero and ended up in his own apartment, saved money, ended up doing quite well. Of course he wasn’t the typical homeless person since he was doing it voluntarily.
Another story you might like is Liz Murray – From Homeless to Harvard.
Here’s an interview with her: http://www.youtube.com/watch?v=ZZ-SXHyjXgA
And here’s the Emmy award winning movie of her life (Part I):


joeplemon June 9, 2010 at 8:39 am

Thanks for more inspirational links. The Liz Murray youtube video is a great one. I just had a single mom contact me about how she was struggling. I am going to tell her to read your blog.


Billy June 23, 2010 at 11:57 am

Hi Joe,
Thanks for the wonderful article! I really enjoyed reading. I found you through the blog carnival (http://goo.gl/fb/Dq7Oa). BTW what is a “Cetified Financial Counselor”?


joeplemon June 23, 2010 at 2:23 pm

Thanks for the encouraging words. A Certified Financial Counselor simply means that some organization has trained you and given you a certification that it is OK to say you represent their standards in what you do. I have been trained and certified through the Dave Ramsey organization.


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