The Golden Rule of Personal Finance

PUBLISHED Nov 4, 2022, 12:16:48 PM        SHARE

imgBest Interest Blog

The Leaning Tower of Pisa has a foundational problem. It’s 186 feet tall and weighs 14,500 tons. But its foundation is only 10 feet deep and built into silt and clay.

Five years after construction (~1178 A.D.), the foundation shifted and the tower famously “leaned.” Oops.


Every building needs a strong foundation. It applies to all buildings of all sizes at all locations.

This brings us to a golden rule of personal finance, one that applies to all people at all levels of income.

Spend less than you earn.

Ok. Let’s shut the browser. I know this one.

I know. You think you know what I’m talking about. But in my ever-growing experience in personal finance, most people think they know this idea, but have not truly internalized it. It’s a foundational rule we too often ignore.

We know the stories of former athletes or Hollywood stars who file for bankruptcy.

“How is this possible?”

Simple. They spent more than they earned.

“But surely someone with $100 million should be able to not spend all their money?!”

I get it. But overspending behavior is the classic slippery slope. Just as buildings of all sizes see foundational issues, people across the wealth spectrum struggle with overspending.

I have a friend of a friend who played Division 1 football and eventually made it to the NFL. But his family was dirt poor growing up. I thought this admission was so profound:

“We were so poor. There was never much money. But the money that was there…it always quickly disappeared. You got used to this idea that money is scarce and never sticks around. So whenever I got money as a kid, it was like, ‘Spend it now, or you might not get another chance to spend it.’ Boom. And I had a big list of things I wanted to spend money on. It’s like a perfect storm. So now I just want to spend everything, save nothing. I don’t trust saving because I’ve never actually seen it work.”

Here’s a guy making millions. But his financial foundation was only inches deep, not nearly strong enough to support a large income.

Our brains work against us. This is a foundational lesson from behavioral economics. We criticize others for overspending but find ways to justify our own similar behavior.

We say, “If I earned another 20%, then I’d start saving more money.” But when the 20% comes, we buy clothes that are 20% softer, houses that are 20% bigger, or meals that are 20% more organic.


The slope remains slippery all the way down. If you’re a global touring music star partying at the club, you justify a $10,000 bottle of champagne. If you’re the heavyweight champion of the world, you justify owning a tiger. We all struggle to say, “enough“.


No way, you say. I just don’t get it. I’d never own a tiger.

You’re not alone. I don’t get it either. I’m with you.

But a few weeks ago, Kelly and I spent $125 on a dinner for two. A nice treat, right?

But a big part of the U.S. population would look at our dinner and say, “No way. I just don’t get it. That’s a full week of groceries or a month of gas. I’d never spend that on one meal.”

A smaller segment of the population would say, "You call $125 a “nice” dinner? How quaint…”

My point is, overspending and comparison happen to all people at all income levels. We all spend money and all judge others on what they spend. Most of all, we all look at people richer than us and think, “If I were them, I’d be all set. Because I’d never spend money like they do on that thing.”

Getting back to foundational fundamentals, I don’t care what people spend money on. Meals, cars, tigers (though, I’m not sure there’s an ethical way to own a tiger.) Because the key is spending less than you earn. Preferably, spending much less than you earn. I ensure I’m doing this through my budget and net worth tracking.

In my experience, most people (including myself, at times) pay lip service to “spend less than you earn.” Don’t worry. You’re only human. But if you want financial success, you’ll eventually have to back up that lip service with real action. You’ll need to dig deep and build a financial foundation that supports your current and future life.

On the spending front, remind yourself of this simple truth:

  • Advertisers convince you that buying stuff will make you happy.
  • Actual psychological research provides no such evidence. In fact, it might make you unhappy.

You want to spend less? Remind yourself that you’ve probably been brain-hacked by advertising (I know I have) into thinking that more spending = more happiness. I don’t like that I’ve been brain-hacked. I resent it. So out of spite towards advertisers, I actively fight my impulse to spend.

It’s a struggle. I have to dig deep. Just like digging a foundation.

But if you want to build a strong financial life, that’s where it starts. A strong foundation. Spend less than you earn.

Thank you for reading! If you enjoyed this article, Subscribe to get future articles emailed to your inbox.


Want to learn more about The Best Interest’s back story? Read here

If you prefer to listen, check out The Best Interest Podcast, or listen to me on a bunch of other people’s podcasts.

Originally Posted in The Best Interest

Sound investments
don't happen alone

Find your crew, build teams, compete in VS MODE, and identify investment trends in our evergrowing investment ecosystem. You aren't on an island anymore, and our community is here to help you make informed decisions in a complex world.

More Reads

After I had been in college for about a month I went on the Chase app and saw my checking account balance. To my surprise, I noticed that I only had 20 dollars left out of the initial amount that I was given for my first semester. In addition to only having 20 dollars left I had my credit card bill payment coming up soon so I was in a state of intense stress as not paying my bill on time would affect my credit score.


College ignites excitement and thrill. You are finally independent to explore new cities, follow your own schedule, and more! But with this new found freedom there is also anxiety and intimidation. College is a new environment that requires adjustment. A major change is controlling your personal finances.


College ignites excitement and thrill. You are finally independent to explore new cities, follow your own schedule, and more! But with this new found freedom there is also anxiety and intimidation. College is a new environment that requires adjustment. A major change is controlling your personal finances.

Total Return Forecasts: Major Asset Classes | 2 November 2022

Expected long-run returns for most of the major asset classes continue to look relatively attractive after this year’s market declines, based on updates of models run by CapitalSpectator.com. In turn, a broad measure of risk assets points to a performance premium in the future vs. recent history.

Wealth Managers May Need A Complete Rethink

Economics textbooks define inflation as ongoing increases in the general price level for goods and services in an economy over time, or variants thereof. This innocuous sounding definition belies the cataclysmic consequences for investors of inflation becoming high, then entrenched.

Dividend Stock Watch List: Lanny’s November 2022 Edition

Welcome back to another dividend stock watch list article! The stock market is still down almost 19% year-to-date, but the last full week of October there definitely was a big push!

Is Verizon a Good Dividend Stock?

Despite the recent uptick, the bear market is still growling in 2022. The Nasdaq and S&P 500 Index are down more than 20% each, while the Dow 30 is doing somewhat better. Consequently, many high-quality stocks’ stock prices have also declined, along with valuations. One such stock is Verizon Communications (VZ), trading near its 52-week low and the lowest price in a decade. But is the stock a value trap, or is Verizon a good dividend stock?

AWK Stock Forecast - Is American Water Works A Good Stock To Buy?

American Water Works (AWK) is a good stock to buy. Investors can take advantage of the lower price of this utility stock and get a stable dividend every quarter. AWK stock forecast is also positive.

How to Conveniently Manage Your Private Investments

It’s not easy managing your private investments, but it doesn’t have to be a pain. There are many ways you can make the process easier and more convenient for yourself.

Market Musing 10-31-2022, Halloween, Will Fed Pivot future Rate Hikes after Wednesday?

High Volatility: VIX > 26. The US Markets are waiting on FOMC Rate Hike of 75 basis points on Wednesday

Initial Exchange Offering (IEO): Crypto Exchange Managed Fundraising

Have you ever wondered what an IEO is and how it relates to fundraising in crypto? Read more in this article.

Initial Coin Offering (ICO): Blockchain-based Fundraising

Ever wanted to find out about ICOs? Here an article explaining in detail.

What Stocks are Consumer Discretionary | consumer defensive vs consumer cyclical vs consumer staples

Consumer Discretionary stocks mostly outperform the market. Adopting good strategies helps to get maximum benefit. Learn more.

The Dollar Returns from the Weekend Bid

The dollar has come back from the weekend bid. After the ECB and BOJ meetings last week, the focus has shifted back to the US where the FOMC meeting concludes in the middle of the week and the October employment report is out ahead of the weekend.

Is Life Insurance Better Than Traditional Investing?

There are lots of social media videos where “experts” say life insurance is a superior investment to 401(k) and IRA accounts.

How to Value Utility Stocks

Stable, well-run utilities can be predictable to value. We’ll walk through the steps you need to do to find the intrinsic value of a utility

Risk Rated Funds Are Broken

I have a piece being published in CityWire this week which I think might make some waves. Its message is that passive and active risk rated funds, in which tens if not hundreds of billions are invested worldwide, are broken and could remain so for years. The reason? High inflation.

Recent Stock Purchase October 2022

As you know by now I make a stock purchase every single month no matter what is going on in the world and despite the doom and gloom headlines. Perhaps I am naive or more of an optimist that we will get through these dark financial times somehow. Either way, I have been busy buying up some stock this month and was happy to put some fresh and recycled capital to work to try and recoup some of my lost dividend income courtesy of the numerous cuts bestowed upon my portfolio in recent years.

October 2022 Stock Considerations

A new trading month is about the begin and boy do we have a seemingly endless crop of stocks that are becoming fair valued to undervalued. The reality of the day is that we’ll continue to see stock prices continue to come down as interest rates rise. No reason to believe interest rates will stop climbing anytime soon.

Earnings and Cash Flows: A Primer on Free Cash Flow

It is never pleasant to be in the midst of a market correction, but a market correction does operate as a cleanser for excesses that enter into even the most disciplined investors' playbooks in the good times. This correction has been no exception, as the threat of losing investment capital has focused the minds of investors, and led many to reexamine practices adopted during the last decade. In particular, there has been more talk of earnings than of revenue or user growth this year, and the notion of cashflows driving value seems to be back in vogue.

Resources for Publishers
Resources for New Investors

Boosted with BossCoin