35–Lever #3: Spending (Part Four—Live Below Your Means)
The path to lifetime financial freedom
By now, you’re very familiar with I > E, which symbolizes “income greater than expenses.” For most of us, our income is relatively static. Therefore, for I to be > E, assuming you don’t have so much income that you have trouble spending it all, your goal is to keep spending under control so that E < I.
You’ve also noticed that I often write that you should “Spend less than you earn because everything else—margin, avoiding debt, saving, and giving—depends on it.” It all boils down to a simple but hard-to-live-out principle: Live below your means.
In the last article, I suggested that you have a plan for your money, even if you are in your 20s. But perhaps you’re thinking, “Hey man, I’m still young with few responsibilities. Isn't this a time to live life to its fullest, upgrade from ramen noodles, and get a nicer car, at least one without a hole in the floorboard?”
Sure, young adulthood is a time of growth, freedom, and possibly more income than you've ever seen in your bank account. But here's the thing: your money mindset is being formed right now. The habits you develop—good or bad—can set the trajectory for decades to come. It is time to think about your “future self.”
So, the principle is the same whether you're 22 or 62 (if you are 102, maybe not so much): spend less than you earn. If you make a habit of living below your means—even if your means are small—you'll build flexibility (a/k/a the margin we discussed in the previous article), reduce stress, and have options for the future.
When you don't have margin, such as an emergency fund, you're just one unexpected bill or repair away from financial instability. And when you consistently spend what you earn (or more), you're stuck in a cycle of work-to-spend that leads nowhere.
Living below your means is how you build a cushion. It's how you stay out of debt. It's how you prepare for the unexpected. And—more importantly—it frees you to give, save, and serve without anxiety. As Proverbs 21:20 reminds us, "Precious treasure and oil are in a wise man's dwelling, but a foolish man devours it" (ESV).
I mentioned “lifestyle creep” in the last article. (And no, I’m not talking about your neighbor next door.) As your income grows, there can be the temptation to increase spending just as fast. New job? => New apartment. Raise? => Nicer car. Bonus? => It's time for that vacation or upgrade. And before long, your expenses match your income—again. There is no “consumption smoothing” now, only “consumption elevating.”
Instead, what if every time you got a raise, you increased your spending just a little less than your income? Over time, you will live 20% or 30% below your income. It works like “reverse compounding.” That extra margin is where financial freedom lives. "Better is a little with the fear of the Lord than great treasure and trouble with it" (Proverbs 15:16, ESV).
This table shows how your margin grows over time when spending increases more slowly than income, demonstrating the concept of “reverse compounding.” As income rises 5% annually and spending rises just 3%, the gap (margin) expands yearly, providing more financial freedom. It starts at $5,000 and grows to $18,852 after 10 years. The gap will grow faster if your income increases by more than 5% and spending doesn’t exceed a 3% increase yearly.
This table also helps me make an important point I have been trying to make: having more savings isn’t exactly the same as saving more. Savings is a noun—it is the money sitting in your bank, brokerage, or retirement account. But saving is a verb—it’s something you do when you choose to spend less today so you can have more later. So, saving isn’t just about building wealth—it’s about reducing consumption. When you live below your means and pay less in taxes and interest on debt, you naturally save—and if you are generous (and I hope you are—the Bible says you should be), give more. It also means you’ll likely pay less in taxes and interest—something we discussed in an earlier article. Want to grow your savings? Start by spending less.
You may feel you don’t earn enough to live below your means. I get that. It can be tricky. But if you can't live below your means when you earn $40K, you probably won't when you earn $140K either. (Trust me, it is true!) There's always something more to buy, always the next shiny thing to chase.
It is tough when you are just starting out. But the earlier you train yourself to spend less than you earn, the easier it gets. Living below your means builds self-control, contentment, and long-term financial flexibility. It's one of the best gifts you can give your future self (he/she keeps showing up, don’t they?).
So, to boil this down, how do you actually do this? Here are a few ideas; do these, and you will be well on your way to building margin and I >E:
Build a spending plan (a/k/a budget). It is not a constraint but a tool for financial freedom. You have many options here, so we’ll cover this in a separate article.
Track your spending. You can’t manage what you don’t measure. This one and the one above go hand-in-hand: you need a plan, and you need to track your progress. You can’t quantify what you can’t track, and it’s hard to change what you don’t quantify.
Delay upgrades. Chill. You don’t need the latest phone or car right now, but save up for it if you think you will sometime in the future. I had an iPhone 8 for a while when it seemed everyone had an iPhone 12, and it worked just fine. And when they called or messaged me, they couldn’t tell the difference. (I got a newer one when it finally went “out of support.”)
Plan for irregular expenses. Car repairs, insurance, medical bills, or vacations (if you plan to take one) shouldn’t catch you off guard. The best way to prepare for them is to save in a “sinking fund,” a savings strategy where you set aside money regularly for a specific future expense. (This fund helps you prepare for those costs without breaking your budget. It differs from an emergency fund meant for sudden, unexpected expenses.)
Avoid lifestyle inflation. Instead of inflating your lifestyle, increase your savings or giving rate when your income rises. Also, think differently about bonuses and incentive awards; use them to pay off debt, give, or save. (Okay, if you want to splurge a little, consider it, but do the other things too.)
Set percentage goals. For example, aim to live on 80% of your income, give 10%, and save 10%. If you are married and have two incomes, see if you can live on 100% of one and 50% of the other, save some of it, and then give the rest.
Being wise with your money is even more critical if your income is low. With less margin for error, a single financial emergency can throw everything off. That's why creating a small buffer matters so much regarding your income and that emergency fund we discussed earlier. It's not just about wealth; it's also about wisdom.
Learning to budget, cut unnecessary expenses, and prioritize saving or giving—even in small amounts—is how you stay out of the paycheck-to-paycheck trap. And it's how you avoid the regret of "playing catch-up" later in life. "Go to the ant, O sluggard; consider her ways, and be wise" (Proverbs 6:6, ESV).
Marketing and social media constantly push the message that more is better. There's always something new to buy, some standard to keep up with, or someone else's life to emulate. But Proverbs 13:7 says, "One pretends to be rich, yet has nothing; another pretends to be poor, yet has great wealth” (ESV).
The more you're driven by comparison, the more likely you are to overspend and borrow. Living below your means is an act of quiet rebellion against the consumer culture. It's choosing simplicity, contentment, and purpose over image.
The Bible says it’s better to live below your means and avoid debt than to “live big” to impress others and constantly worry about paying off your debt. As Proverbs 22:7 says, “The rich rules over the poor, and the borrower is the slave of the lender” (ESV).
We’ll discuss debt more in the “sum of interest paid” lever series later, but if you're in your 20s and already have debt, don't panic—but don’t ignore it either. Remember the old saying, “If you are stuck in a hole, stop digging”? It pertains here: stop borrowing more and start paying it down. Dave Ramsey recommends the “debt snowball” method, starting with the smaller debts to get momentum. Others prefer to pay down their high-interest debts first. Also, look for small lifestyle changes that free up cash for payments.
For reflection: Living below your means is a choice. It’s not always easy, but it’s always worth it. It gives you margin, peace of mind, and freedom. Most importantly, it positions you to respond generously to God’s calling on your life, wherever it may lead. One of the greatest benefits of living below your means is the freedom it creates. Freedom to take a lower-paying job you love. Freedom to be more generous. Freedom to say yes when God calls you to something unexpected. Without margin, your choices are limited. With margin, you are ready and available. And you are not enslaved by debt or driven by fear. Will you do what you must to be financially free?
Verse: "So if the Son sets you free, you will be free indeed” (John 8:36, ESV).