The Formula for Financial Stability

When You Have to Learn the Hard Way

“One of the big problems in life is spending more than you make,” said Mike, a good friend and one of the wisest people I know.

We were talking about how one of his kids continues to struggle with overspending.

“He is 30 years old. It seems so easy. I don’t understand why he doesn’t get it. Simple principle: Spend less than you make,” he continued.

“It is an easy principle to understand. It is not an easy principle to practice. In fact, I had the same problem in my early twenties when I got my first credit card,” I said.

After the call, I began thinking about why this happens to so many of us. The formula is simple.

Income – Expenses = Savings (+) or Debt (-)

I graduated with a degree in accounting, and I still spent more than I made. So why did I do that? What got me back on track sooner rather than later?

Here’s what I came up with.

I Want It Now

I didn’t want to wait on things I wanted to buy. I didn’t want to say “no” to my buddies who were going out for food and drinks. I am working and making money so why can’t I do what everyone else is doing? I thought.

That was what caused the problem. Wanting it now put me in spending mode.

Easy Credit

I discovered credit cards and my whole world changed. It was free money. I no longer had to reach in my pocket to see how much cash I had. I just whipped out a piece of plastic, charged, and signed. It was that easy to get exactly what I wanted when I wanted it.

Why did I continue to overspend?


I just didn’t want to know how irresponsible I was, and no one was holding me accountable. This gave me the freedom to ignore the hole I was digging while I lied to myself. I would say, “You are making good money and doing a great job. In a few months, you’ll be getting a raise and a bonus check. Then you will pay everything off and be OK.”

What a big fat lie! I blew through my credit, and I was spending ahead of anticipated income. The spiral continued until one day I couldn’t borrow money. (And I didn’t have parents who would give me money.)


Yep. This solved the problem.

I was forced to figure out how I was going to pay my rent, get food, and put gas in my car. When my nose got pushed into meeting my basic needs, I figured out the formula, life’s financial principle. Spend less than you make. Thank God I had a job!

Once I got to this point, I started budgeting just like we do in business. I now saw in black and white how much I was spending and where I was spending it. I knew every day where I needed to say “no” and where I could say “yes.” All because I had to. I was on my way to getting back in balance.

Then I had to address the credit card debt. Little by little, I paid it down until it was gone. A short time after getting myself straightened out, Kathy and I got married. I thought her dad was rich. I’m not saying I expected anything from him, but in the back of my mind, I thought he was a safety net.

While on our honeymoon in Hawaii, which I financed on a 90 day bank note, Kathy wanted to buy me a gold necklace as a wedding gift. She pulled out her credit card, the one she was using before we were married, and tried to buy the necklace. There was one problem. The card was declined. Her dad had canceled the credit card the day after we were married.

Good Lesson

“We are in this together,” I said. By the way, we got the necklace. I charged it on my, I mean our, credit card.