Earn More or Spend Less? What Just Keep Buying and The Psychology of Money Actually Disagree On

작성자:

The short answer first. For most people with a salary, the right order is earn more, then save, but “save” here does not mean cutting lattes. It means not raising your lifestyle every time your income rises. Freezing, not trimming.

“Earn more vs spend less” is not a glamorous search term. It is, however, a question almost everyone building savings runs into. Do you tighten the budget, or spend that energy on a certification? When a job offer arrives, do you compare only the salaries, or also where the extra money will quietly go?

Two of the most widely read personal-finance books of the past few years answer it with different emphasis:

  • Nick Maggiulli, Just Keep Buying: spending cuts have a floor; income does not have a ceiling. Look hard at the income side.
  • Morgan Housel, The Psychology of Money: if your expectations rise with your income, your savings will not. Fix the goalposts first.

Neither is wrong. They are looking at different terms of the same equation. This piece comes out of turning both books into a financial-education course, and it focuses on where the two arguments meet and how to decide which lever you should pull right now.

As of 29 September 2026. Figures from the books rest on US data and the authors’ own assumptions. This is educational material, not investment advice, and it does not recommend any financial product.

1. Savings = income − spending. Both camps are right

Maggiulli opens chapter 3 with the long-running split in personal-finance communities. One camp treats spending control almost as a religion. The other says the energy is better spent on a side business or a career move.

His verdict is that both are right, because the arithmetic is this:

Savings = Income − Spending

You can raise savings by earning more, spending less, or both. The argument is really about which side can take you further.

2. Cutting has a floor — the Just Keep Buying answer

Some households have nothing left to cut

Using US Consumer Expenditure Survey data, the book shows that households in the bottom 20% of income have, since 1984, spent more than 100% of their after-tax income on just four essentials: food, healthcare, housing and transportation. For them, “spend less” is not an option on the table.

Maggiulli’s point is that cutting spending, like exercising to lose weight, has a built-in limit. Spending cannot go below zero. Income has no fixed upper bound.

The latte math, done honestly

The chapter also takes aim at the familiar claim that skipping a $5 daily coffee will make you a millionaire. His objection: the people repeating it rarely mention that it only works if you assume a 12% annual return.

We ran the numbers under the same premise: roughly $150 a month (about $5 a day), invested every month.

Annual return assumed After 30 years After 40 years
4% ~$103,000 ~$174,000
7% ~$175,000 ~$371,000
12% ~$458,000 ~$1,455,000

Assumptions: $150 contributed at the end of each month, annual return converted to a monthly compound rate, no taxes, fees or inflation.

To reach a million from coffee money, you need 12% a year, every year, for 40 years. At 4%, the same forty years gets you about $174,000. Skipping the coffee is not pointless, but most of the headline number comes from the return assumption, not the coffee.

Maggiulli’s conclusion

  • If there is little left after essentials, growing income is the bigger lever than cutting.
  • When you do cut, one large fixed cost (housing, car, insurance, subscriptions) usually beats a hundred small daily sacrifices.

3. Earning more has a trap — The Psychology of Money answer

Housel looks at the same equation from the other side.

In the chapter titled Save Money, his argument is that beyond a certain income, what you actually need is whatever sits below your ego. Spending past that line is mostly for other people to see, and as your income rises, the people you compare yourself to change too. His conclusion is that raising your humility does more for your savings rate than raising your income.

In the final chapter, Confessions, the part of his own financial plan he is proudest of is not a return figure. It is that the lifestyle goalpost his family set in their twenties has not moved since. They like nice things; they simply stopped moving the goalposts.

The way we put it when teaching this chapter:

“If your income went up, why didn’t your savings? Because the goalpost went up with it. You didn’t save that money. You just didn’t spend it on a bigger life.”

Restraint demands pain. A freeze only asks you to not do one extra thing. The difficulty is completely different.

4. Where the two books meet: how to split a raise

Chapter 5 of Just Keep Buying asks how much lifestyle creep is okay, and the answer is: more than you might think.

Maggiulli does not treat a better life after a raise as a failure. Instead, he calculates what share of each raise you need to save to keep your original retirement plan on track. In his testing, the variable that mattered most was not your return or income level but your current savings rate.

Current savings rate Share of each raise to save
5% 27%
10% 36%
20% 48%
30% 59%
50% 76%

Selected rows from Table 5-1 of Just Keep Buying. The author’s assumptions include a retirement target of 25× annual spending and 3% annual raises, plus a fixed investment return. It is not a personal recommendation.

How to read it:

  • Someone saving 10% can keep their plan intact by saving roughly a third of each raise, and spend the other two thirds improving their life.
  • The higher your current savings rate, the larger the share of each raise you need to keep, because your plan is built on a lower level of spending.

This is where the difference in nuance shows.

Just Keep Buying The Psychology of Money
Default stance Grow the income lever Lock the expectations lever
Lifestyle upgrades Fine, with a rule Freeze where you can
Evidence style Data and simulation Behaviour and psychology
Unit of action Share of each raise Identity and who you compare with

Maggiulli says you may move the goalposts a little, as long as you decide in advance how far. Housel says the people who never move them tend to win. Put together in practice:

Grow your income, spend some of each increase on your life, and decide the split before the raise arrives.

5. The counterweight we add when teaching it

Turning both books into a course, two lines get added that neither book stresses.

First: people don’t skip saving because they don’t know it’s good. Housel writes that it doesn’t take long to convince people to save. In a room full of working adults, that is hard to agree with. Nearly everyone already knows. What breaks is the moment of decision after payday. That is why the rule has to be an automatic transfer, not a resolution.

Second: frugality is not always the right answer. When your children are young, while your parents are alive, when your health needs protecting, and when an opportunity to raise your income is in front of you, cutting back can be a loss rather than a saving. Leave this counterweight out, and money advice starts to sound like “just deprive yourself,” which is exactly where people stop listening.

6. Which lever should you pull right now?

Find the row that sounds most like you. Rows higher in the table come first.

Your situation Pull this lever first First move
No emergency fund, or high-interest debt (credit card balances, payday-style loans) Spending structure Set a minimum emergency fund and a payoff order for high-rate debt
Housing, car, insurance or subscriptions are large relative to income One big fixed cost Revisit one contract instead of many daily sacrifices
Little or nothing left after essentials Income Pick one income path (skills, job change, side work) instead of a cutting target
Income has risen for years, savings haven’t Freeze the goalpost Decide the savings share of your next raise now
A skill-building opportunity is in front of you Don’t economise here Classify the cost as an income investment, not consumption

In one line: if something is leaking, cut first; if nothing is leaking, earn more first; and whenever income rises, a freeze has to follow.

7. One sentence to write before your next raise

Decide the split after the raise lands and the extra money has usually dissolved into daily life already. So fill this in beforehand:

Of my next after-tax income increase, ___% goes by automatic transfer to savings/investing
the day after payday, and the remaining ___% goes to ______ (one thing I actually want to improve).
I will revisit this split only once, in ______ (month/year).

The right percentage differs by person. Treat Table 5-1 only as evidence that you do not have to save the entire raise to stay on plan. If you want a starting point, calculate your current savings rate first.

To check your cash flow with an AI assistant, the prompts in 10 AI Prompts for Personal Financial Planning walk through it step by step.

Limits of this piece

  • The spending chart and Table 5-1 come from US data and the author’s assumptions. They do not map directly onto other countries’ household budgets, pension or tax systems.
  • The coffee calculation is a simplified illustration without taxes, fees or inflation, and no return is guaranteed.
  • Both books are summarised in our own words; we have avoided reproducing their text.
  • For big decisions such as repaying a loan or buying or cancelling a financial product, check your actual contract documents and official sources.

A Korean version of this article, written for Korean salaried readers, is at 절약이 먼저일까, 수입 증가가 먼저일까.

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