• David Chedgy

A penny saved is a penny earned

Updated: Mar 18, 2019

“No one is rich whose expenditure exceeds their means; and no one is poor whose incomings exceed their outgoings.” Thomas Chandler Haliburton





As I’ve already mentioned, once you can take money out of the equation, it is much easier to make decisions that bring you a happier life. I’m not saying that money will automatically make you happy. But, what it will do is give you options and allow you to make decisions without being so concerned about the financial implications. If you’re able to make a decision based upon what you want to do, or who you want to be, rather than where the next pay cheque is coming from, the world immediately becomes a bigger more exciting place to be.


All of a sudden it feels as if you have regained control again. The vast majority of us blindly travel in the direction that society expects and become wage slaves. Once you have taken this path it is not so easy to alter your course, and the longer we do it for the harder it becomes. Most of us spend at least what we earn, thus trapping ourselves in a never ending cycle, unless we consciously do something about it. Before we can even consider putting together an exit plan we need to make sure the economics work in our favour, rather than against us.


For the more mathematical amongst you, this can be simply summed up by the following equations:


INCOME > EXPENDITURE = 😀 LIFE

INCOME < EXPENDITURE = 😥 LIFE


It’s hardly Einstein’s theory of relativity, but so many of us get it wrong!


The amount spent by the average household in excess of its income was £900 last year (The Sunday Time July 2018) – the first time Britons have lived beyond their means since 1988. The figure, from the ONS, means households borrowed a net of £25 billion to fund their outlay. This is obviously unsustainable.


This relationship between income and expenditure holds true no matter how much you’re earning or spending.


For example, you might assume that someone earning £250,000 a year on the face of it should be happy. But behind the scenes they could be paying half of it to the government in taxes, £60K a year on a mortgage, £50K a year on school fees, £10K financing a car, and £20K a year on holidays and entertainment. They’re actually running a £15K annual deficit! Before long they will be very far from happy and in fact be bankrupt. I always found it amazing how many people in the city run their lives in this way. They’ve virtually condemned themselves to a lifelong task of running on the London treadmill with no option to get off and yet never quite being able to keep up. Very reminiscent of a swan calmly swimming against the current, whilst under the water it’s feet are going like the clappers!


Will Rogers (and later Ed Norton, in Fight club!) put it very succinctly when he said “Too many people spend money they earned … to buy things they don’t want … to impress people they don’t like.”


It’s very difficult to feel very sorry for anybody that gets themselves in this position when they’re earning such a good income, but unfortunately it’s all too common. The crazy thing is that the more you get used to earning the harder it is to curtail your spending, so quite often increasing your income just escalates the problem. I believe a large proportion of people could lead much happier lives if they just looked at life through the other end of the telescope. Rather than making their main focus about trying to earn more, they should be targeting how to spend less.

At the other extreme of this example someone earning £25,000 a year but only spending £20,000 a year has a smile on their face and a spring in their step. Society would suggest that the former case is more successful, but I would argue that the latter has the real answer to life’s money problems.


So in order to give us a chance of leading that happy life with options available, we can either increase our income, or decrease our expenditure – or ideally both!


Faced with the two options, it’s often easier to reduce what we’re spending ourselves rather than increase our income or what someone else is willing to pay us.


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