Spend Less Than You Earn

by Michael on Jun 17, 2013 · 2 comments

Photo of Financial Help on a Calculator

Perhaps the best known bit of financial advice out there is that you should “spend less than you earn.” You’ve probably heard it over and over (and over!). And for good reason.

This is a bulletproof solution to whatever financial woes you might face. And yet… So many people seem incapable of doing it.

For an extreme example, consider the case of (currently former) NFL player Chad Johnson Ochocinco Johnson… While he reportedly has assets worth a total of $4.7M, he been spending money like it’s going out of style.

According to court documents related to a disagreement of child support payments, he’s currently unsigned by any NFL team and bringing in around $3k/month — so $36k per year. And yet he’s spending far more than that — month.

This includes over $16k/month in child support payments plus over $30k/month in other expenditures. This includes over $9k/month in mortgage payments, $5k/month for entertainment, $3.5k/month for clothing, $2.6k/month for car payments, $2.5k/month for food, $1k/month for pet expenses, etc.

When you total it all up, he’s spending roughly $45k/month more than he brings in. Each and every month. In other words, if things don’t change, he’ll burn that that $4.7M in assets (which is largely tied up in real estate and cars) in 8.5 years.

Who knows… Perhaps he’ll catch on with another team (now that he’s out of jail) and stave off bankruptcy for awhile. But in the grand scheme of things, he’s headed for financial disaster.

No wonder many pro athletes wind up flat broke when they should be fabulously wealthy. They simply can’t handle their own good fortune.

And yes, as I noted above, this is an extreme example. But the math works out the same regardless of the magnitude of the numbers. If you spend more than you earn, you’ll wind up digging yourself into an ever-deeper hole.

Source: NBC Sports

1 Martin June 18, 2013 at 12:33 am

This is a nice article. It also shows how uneducated these people are. And no wonder. Most of them have never received education. If they started playing in their early age, all they know is playing (no matter what sport it is, ice hockey, football, basketball…) All they ever did their whole life was training, practicing and playing. They have a formal education and that’s it. I know it, because I went thru the same drill. I started playing ice hockey when I was 6 years old and played “professionally” (if it can be called that way), representing the country in junior ice hockey team until I was 16. We were training only and in school they just tolerated our ignorance, just because we were great players. Fortunately I got out of this. I could be rich, but totally stupid and dumb.

The same goes with people who win a lottery ticket. How many of them remained rich? I do not know any. They blew it off as quickly as they got the windfall in their accounts. Sometimes I watch the extreme house makeover series on ABC channel. I do not know how many people kept their new house, but I have read about few who were foreclosed because as soon as they received the house, they immediately took equity loan out of it, and didn’t ask from what income they would pay it back. There is an old adage that if we take all the money in the entire world and distribute it equally among all people (as leftists and commies would like to do) in ten years, the money allocation would be back to what it is today. A lot of truly rich people didn’t get rich because they stole their fortune, but because they were able to take care of it (either create it, or manage it if they inherited it.). And no commie will be able to change it ever.

2 Little House June 19, 2013 at 12:45 pm

Yep, at that rate he’ll be flat broke real soon. I use Quickbooks to track my income and expenses. There was a year or two where I spent a little more than I earned and it showed on my credit cards. Now, I pay very close attention to my finances, making sure that I have more INCOME and fewer Expenses. It’s sometimes hard, but totally worth it!

Comments on this entry are closed.

Previous post:

Next post: