Posted by Mike Smith :: September 16, 2008 @ 7:15 am

Spending less than you earn is one of the most basic principles of making positive progress towards your personal finance goals, yet so many of us have a difficult time implementing the process. Below are some of the ways we allow ourselves to falter, along with suggestions on ways to improve.

We aspire to a higher class

It’s perfectly normal to want nicer and better things in our lives, but we need to be patient enough to earn such things. You can only “fake it till you make it” for so long without actually making it. Consistently living above your means is not sustainable. If you are looking for habits of the wealthy to fake, try to mirror their frugal habits rather than their wasteful ones.

We don’t practice what we preach

Living a frugal life is usually fine with most people; at least until we are tempted by something we want to buy. Obviously it might take a few tries to persevere and meet your goals, but if you are going to give up each time you face a difficult choice, it’s not worth your time pretending to be someone who wants to improve.

We often confuse our wants and needs

This is one of the biggest culprits. In such cases we convince ourselves that even our most basic living expenses consume most of our income, making it virtually impossible to get ahead. Other than true necessities like food and a safe place to live, nearly every other expense satisfies a want in our life. It’s hard to believe that we don’t need a cell phone or cable (or a TV at all), but that’s the honest truth.

We’ve made poor decisions in the past

It can be difficult to spend less than you earn when some expenses are from past mistakes. Until you pay off old credit card debt, for example, the interest that you pay each month may be hurting your ability to reach your goals. The only consolation is that good habits will eventually overcome such obstacles, though rarely as quickly as bad habits created them in the first place.

We choose to live in an expensive area

We can’t change where we were born or grew up, but we can choose where to live as adults. Taking a pay cut to work in a less expensive area could end up cutting expenses by an even larger percentage. Your income can only take you so far; eventually expenses need to be reduced in order for you to spend less than you earn.

We justify our actions because “Everyone else is doing it”

Our perception of “normal” is highly correlated to what we observe in our daily lives. Everything is relative. That’s why people would rather earn $50K if all of their neighbors earned $40K than $60K if all of their neighbors earned $70K. The fact is that it’s usually the people you least expect who are probably doing the best financially. Sure, some people are flashy with their wealth, but many more are discreet.

These are just some of the many excuses and reasons we use to justify spending more than we earn. We all have tough breaks and reasons for bad habits in our lives. The important thing is to identify the ways we fool ourselves and take positive steps to improve. For those with the determination to do so, spending less than you earn is achievable in nearly every case.