Three Reasons Why Being Told to Spend Less is Bad Financial Advice
Personal finance advice often tells you to cut spending, be more "responsible" with your money, and ask yourself before purchasing,
"Is this a want or a need?"
Even my beloved Suze Orman, who I respect and admire, has a viral video where she wants you to ask yourself, "Is it a need for a want?"
(As she’s calling in from her private island. 🙄)
Here’s what gets me, though:
Several experts teach that it's better to save a dollar than go out and try to earn a new one.
Their reasoning?
If you save a dollar, you get to keep that whole dollar. It's already yours.
But if you go out and earn a dollar, you'll only get to keep about $0.75 of that dollar.
That’s some financial gaslighting if I've ever seen it.
Is it true?
Sure, if you go and make more money at your job or through side income, you'll have to pay taxes on that dollar. Depending on your overall income and deductions, you can estimate your taxes to be about 25%.
So that's it? Don't try to make more so you avoid taxes? Or it's less critical to increase your income because you'll lose about 25% of it?
Or is it making you the problem: you suck at money, so don’t even bother to get more of it?
It's gaslighting because it makes you feel like you're the irresponsible one who's bad with money every time you splurge or have to raid your emergency fund to cover your latest online shopping spree.
Moreso, advice like this asks you to endlessly slash your budget until you get little to no joy from the money you do have.
Let's break down why this is terrible advice in three ways:
1) Endless Budget Cuts Creates an Unhealthy Relationship with Money
For about 20 years, I was an off-and-on dieter. The moment I restricted my calories or a particular food group (like sugar), it was all I could think about.
Food became this thing I used to gain a sense of control. If I was under my calorie allotment, I felt in control, worthy, confident, and capable. Eating was just calories in, calories out, effectively sucking all the pleasure out of food.
That's when the cravings began. It wouldn't be long before I indulged in something sweet or more typically, my kryptonite: chips and salsa.
Thanks to the anti-diet culture, if experts said the same about food as many say about money, it would come across as quite taboo.
Think about it:
"Cut your calories!"
"Are you eating from a need or want?"
"Be responsible with what you eat!"
Yes - that kind of diet language still persists, but it's often, and rightly, criticized as fat-phobic and provoking eating disorders.
Back to money: If you only "allow" yourself to spend money on your needs, you'll crave an indulgence at some point. If you've ever online shopped at 2am or went to Target for one thing and walked out with a $200 bill, you know what I mean.
Then the guilt seeps in, and this is where you can build an unhealthy relationship to money.
Your relationship with money can have real consequences on your bottom line. Think about it: if money feels taboo, uncomfortable, or icky, you're much more likely to ignore it, not save, put off investing, or spend it carelessly.
Look - everyone needs a budget. Not because you aren't good with money but because it allows you to optimize your spending so that it best helps you cover your needs AND create the lifestyle you want.
If you know how much you bring in each month, you can optimize your "needs" spending and then strategize how much you'll save and for what, invest some for retirement, and have some left over for joy and pleasure.
2) No One Wants to Admit the Truth: More Money Can Make You Happier.
Ever heard of the adage “money can’t buy happiness?”
Sure - there’s truth to that. More money doesn’t guarantee happiness. But, recent studies have shown the diminishing return to not be the $75k mark that was popularized in 2012 (still only about $100k in today’s dollars), but actually, closer to $500k.
When you’re less stressed about paying your bills and funding retirement, you’ll probably be happier!
More money makes this easier to do.
This is math you learned in elementary school. I don't know why everyone loves to ignore this fact. Perhaps if you stay stuck and feel broke with your money, you'll continue to purchase their books and courses? I'm not sure.
If you bring in $10k per month from your job, you'll have a much easier time spreading that money over spending, saving, and investing than bringing home $5k.
Even if it means you have to pay more in taxes, so what? You’re still making 75% more of what you make now! I'll take that any day.
The message that you just need to budget and slash more rather than not try to earn more is insulting, condescending, and gaslighting.
3) Maybe Your Spending Isn't the Issue, What You're Not Being Paid Is
Finally, focusing only on your spending as the problem overlooks the vast wealth and income inequality among genders and races.
Who benefits if the media tells women their spending is the problem rather than how much they bring in?
Is it the women consuming the content?
Or is it the executives at the companies they work for which men still dominate? After all, if they pay employees more, it leaves less for them.
Or is it the politicians who generously give tax breaks to the top 1% because they keep them in office?
Plus, when you spend your time and energy stressing about money or bargain hunting, you have less time and energy to find a better job, ask for a raise, or get involved in fairer tax policy advocacy.
Look - you should be *incredibly* mindful about where you spend your money. Not because I think you're bad with money or don’t have a lot.
When you're intentional with your money, you can be more strategic with managing it, better allowing you to cover your needs, save, and invest - while also having some to enjoy now.
But math is math. And it's easier to do that when working with a bigger budget. Period.
“So remember - every time you metaphorically clip a coupon, it’s a win for the patriarchy.”
What would change for you over the next 12 months if you focused on making more money rather than trying to save it wherever you can?
