By Patrick Amey

During the month of March, and my most important holiday of the year, St. Patrick’s Day, I am reminded of some advice I received from an Irish friend.  We were having a few pints at a local pub when he said, “Patrick, you want to know the key to happiness (not an uncommon phrase for the Irish)?  Spend less than you make and always challenge yourself in what you are doing.”  Maybe it was the frankness of the conversation, maybe it was the way he laughed after he said it, but I sat there thinking this is the happiest human being I’ve ever met, so he must be right.

Years later, as I practice financial planning, I’ve found this advice can help solve many of a family’s financial problems.

Spend less than you make.

It sounds simple but can be very difficult.  Life’s transitions can present hurdles.  We find partners, join financial households, purchase homes, change jobs, and grow families.  Expenses change constantly.  You spend money (lots of money) on things that you had no idea could cost so much; pitching lessons, dance trips, and wine clubs.  It is very easy for things to get out of control.  Here are three key steps to spending less than you make.

  1. Know where it all goes.

If you don’t monitor your spending today to know where your money is going, this will be the most difficult task.  Luckily, there is technology like or Quicken that can help you classify your spending.  If you can, go back through a full year of spending and classify each transaction.  You will be surprised by some of the things you spent money on while you weren’t watching.

  1. Prioritize your savings and your spending.

Have a plan and know how much you should save for your short and long-term goals.  For example, save a percentage for retirement, save annually for a new business, or have a stated annual budget for travel.

Once the goals and objectives are set aside, you can prioritize the rest of your spending.  The easiest way to do this is to sit down (partners sit down separately) and rank your spending categories from most important to least important.  Use this information to set a budget for spending and saving.  This can be difficult because you are forcing yourself to make decisions and change behaviors.

  1. Establish a cash management system.

The critical element of the system is that it provides you with feedback on how you are spending your money without diving into the details of every single transactions.  You need to know quickly if you are over spending and where.  You can set up several direct deposits or automatic sweeps to several different bank accounts, each providing for different types of expenses.  Here is an example of one.

  • Savings and retirement are set aside – they go automatically from paycheck to their accounts.
  • Debt account – house payments, car payments, and student loans.
  • Monthly expenses – Utilities, school expenses, gas, house cleaner, groceries, etc.
  • Periodic expenses – Travel, car repairs, big entertainment like concert or sports tickets, holiday expenses and other large one-time expenses.
  • Lifestyle and entertainment – Dining out, Starbucks, movies, babysitters, Amazon, or anything that you can control quickly by deferring a purchase.
  • Separate accounts – Couples can have separate accounts for personal expenses. This gives freedom to spend on what we want individually but can’t necessarily agree upon.  For example, I can buy an expensive bottle of Midleton’s Irish Whiskey and it won’t ruin the whole system.

The system is designed to provide feedback and tell you where there are leaks in your spending.

Challenge yourself

Now that you know where your money is going, and you are spending less than you make, it can become clear what you need to do.  If you have big goals that require you to grow your income, you can focus on growing your career, getting continuing education, or changing careers all together.  Each of these are challenges that aren’t solved overnight.  It takes work to get better at what you do and in most cases, it is well worth it.  It can also be a bumpy road, but when you have reached a milestone, received a promotion, or changed companies, it is superbly satisfying.  It can also have a positive impact on your financial plan.  You can expand your lifestyle account, take on a bigger house payment, or increase your savings.

“Spend less than you make and always challenge yourself,” another great Irish export.  That and this Guinness.

For help personalizing these steps to your situation, schedule a meeting by clicking below, contact Patrick Amey –, or call (913) 345-1881.