The Savvy Scot

Personal finance and lifestyle blog

SALLTYE – Spend A Lot Less Than You Earn

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SALLTYE

Personal Finance is freaking boring!!!!

From the outset, personal finance is exactly that – boring. A mundane administrative task that nobody wants to do. Most of us sit in front of spread sheets all day at work – why would we want to come home and start again? We all have different financial situations, but in the purest and simplest form personal finance is not exciting.

Personal finance essentially involves taking a high-level look at your finances; a process of checking that you pay bills on time and (in general) spend less than you earn. I’ll say it again, the fundamental rules of personal finance are SIMPLE!

  • Pay your bills on time
  • Ensure that you have enough money in your accounts to pay said bills
  • Ensure that you can keep replacing the money in the accounts so that it will never run out
  • Diversify the replacement methods such that if one fails, you have backups

The fundamental principles of personal finance are remarkably easy… even an idiot can understand them; Spend Less Than You Earn. A Lot Less! Unfortunately, as easy as that may be to understand, we live in a world that is trying to trick us. From lucrative advertising that is trying to make us all fall in love with the latest gadget, to the easy availability of credit… they system is trying to catch us.

The System is Trying to Smash the Equilibrium

People run into financial trouble for a number of reasons. The high-level view is simple. The required spending does not equate to the income (for some reason or another). Whether it be that the spending increases to a level that the earning simply cannot compete with, or the earning capacity suddenly reduces or even stops altogether; the principle is the same:

The spiral is so easy to get into and so very difficult to get out of – a single loan can start a chain reaction – and if you are not careful, may never let you go. The Butterfly Effect

From a young age, we are tempted with lines of credit – ‘free money’ – which flicks a switch inside our heads. It feels so damn good to buy things and especially without having to go to the effort of working – putting in the graft – beforehand. Subconsciously, we put the associated negative feelings of owing money to one side and continue down the glorius path of spending. We ‘treat’ ourselves to a new item of clothing, or a night out with our friends to celebrate an unknown occasion. All this time, trying to keep those negative feelings of debt on the sidelines, in the backs of our minds.

It Can’t Be That Bad… The Banks are Offering me More Money

Wrong. The banks will continue to lend us money the more we go into debt. We suddenly fit the profile of a dream customer and an analyst has predicted that we have the potential to end up paying a lot of interest. I would go as far as to say that if the banks are offering you interest free credit or to extend limits, then it is a warning sign that you may be getting into trouble. You see the thing is:

If we were all responsible and paid our credit card balances in full each month, the banks would not make money from them. In fact, the banks would start to lose out so badly that they wouldn’t be able to afford to offer the same attractive rewards and cash back deals that are available today. Those of us who do pay back what we owe in full are being rewarded by the misfortune of others.

Make the Change

What I am essentially saying is that not everyone will pay of their debts and become financially responsible – but you can. Not everyone will get this message – but you did. Not everyone will pay attention – but you might.

It is about time that you started benefiting from the Perks, rather than funding them. You need to start by Making Personal Finance Exciting. You need to realise that the spreadsheet that you have (or don’t have) at home is the most freaking important spreadsheet in your life. You need to take responsibility and finally start realising that you need to SALLTYE – Spend a Lot Less Than You Earn.… The lesser the better.

 

Do you know anyone that doesn’t follow the SALLTYE principal? Any EXTREME examples?

image credit – moneysavingexpert

Lovely comments

  2. John S @ Frugal Rules says

    So, if I like personal finance does that make me a nerd?!? 😉 Seriously though, great post…spot on! I have a family member who tells me that they don’t believe in budgets. Ok, they may not be for everyone and I get that. But, they tell me they just spend whatever they want and hope that their bank account is still positive at the end of the month. I just want to shake them!
    John S @ Frugal Rules recently posted..10 Ways to Stretch Your Grocery BudgetMy Profile

    • savvyscot says

      You can be a nerd with me John – Thanks for the Kudos though! That is unbelievable – I know a few people like that too and it winds me up something rotten!!

  5. Rachael says

    Great post Savvy. I was a slave to my personal loan and credit card until a few months ago. A weight I didn’t know I was carrying had been lifted!

    But your right, I was brought up to think that credit cards and overdrafts were an accepted way of life which got me in the mess to begin with!

    What irritates me now, is whenever I pop into branch they try and sell me another loan!?? They didn’t even bother to try and drop it into relevant conversation like “Oh I’m sorry to hear of your car troubles, maybe a loan would be a quick solution to this?”

    Nope, offered it to me like sweets at a Weight Watchers party! I was really annoyed! They could see I had just paid it off!

    Trying to claw me back in!

    • savvyscot says

      Thanks Rachael – I know just what you mean about the weight being lifted. It is quite amazing the feeling of relief you get! I think the western world has become too accepting of debt and as you say – staff are given huge incentives / targets to sell products! Don’t let em get you back!!

    • savvyscot says

      Hey Ashlee – sorry for the delay in the response – had a lot of comments! That is a great shout – maybe on a small piece of paper in front of the mirror where you brush your teeth, or as a reminder on your phone / background. 😀

  8. Budget and the Beach says

    I think the idea is a lot easier understood than executed. It’s sort of like saying, well all you have to do to lose weight is diet and exercise. duh! But look how many people fail. I still struggle with spending less than I earn, mostly because I earn so little. I’d like to do both of those things. Spend less, but earn more. Actually not true. I wouldn’t like to spend less than I am right now because it’s not that much-I really want to earn more, but not go crazy with spending.
    Budget and the Beach recently posted..Looking Back, Looking Forward: Part 1My Profile

  9. Drew @ Objective Wealth says

    You’re right, Scot, personal finance isn’t very sexy. But if you follow the basic principles for long enough, especially SALLTYE, you’ll end up so rich you’ll be the one who’s sexy!
    Drew @ Objective Wealth recently posted..A Christmas Carol? Bah, Humbug!My Profile

  11. AverageJoe says

    Funny. Everything is boring from the outset unless it has frosting, cheese, or pretty lights (in that order).

    The fun in financial planning is in digging into the numbers. I remember meetings with new clients would begin with them bored to tears. My goal (and I succeeded a fair amount, I’d say!) was to excite them about the topic. Of the planners in my area, my “show ratio” (percentage of clients who didn’t cancel meetings) was usually highest. That’s not because I’m some brilliant dude (well….that COULD be it), but it was because I’d dig in enough that we’d find money in the details. Clients would love to build a plan together that they could see.

    Actually, I might even call those meetings “sexy.”

    Thanks for getting me fired up.
    AverageJoe recently posted..The Worst Gifts Ever: Crystal Frogs, Re-gifted Candy and More Bad Holiday “Fun”My Profile

    • savvyscot says

      Hahaha! You got me laughing here – frosting cheese or pretty lights – I like that!

      I like it! Get some passion behind you and in your case and you can literally do anything and make anything fun. I seriously believe that – 100%!!!

  12. David @ Alberta bankruptcy says

    Yes, personal finance can really be boring. But this is beside the point. You composed it so well.It is all a matter of being responsible such as paying credit card balances completely and promptly. Let us all learn about the rudiments of personal finance.

  13. Pauline says

    I am considered extreme by most because I have left the corporate world at 29 and I do spend much less than I earn but still have fun on the way!

  16. Bryan says

    Great post. If only everyone followed the SALLTYE strategy, the World would be a much better place!

    In my experience, some people ignore SALLYTE and go down the insolvency route too quickly without giving due thought about the future impact of this.

    As a contractor accountant, I love the “You need to realise that the spreadsheet that you have (or don’t have) at home is the most freaking important spreadsheet in your life.” comment.

    I suggest to my contractor clients that whenever they update their spreadsheet they reward themselves with a pint of real ale, glass of wine, bar of chocolate or some other little treat. That way the task soon becomes associated with the treat and is much more appealing!

    Bryan
    Bryan recently posted..The Autumn Statement – What impact does this have on Contractors?My Profile

  17. Vaptisi says

    I have to agree with Grayson that finally “The fundamentals of finance are extremely easy to understand” but although we all know what we have to do with money, finance but also other aspects of our life at the end of the day we loose our focus and we do mistakes small or bigger! It looks that mistakes goes with the nature of human race…

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