If only I had more money…

I’ve heard this refrain from friends and relatives for years. I’ve even said it myself. The idea is that having more money is the key to financial stability and freedom. If you had more money, you’d start saving. If you had more money, you’d pay down debt.

If you had more money, you’d be able to live the life you want.

The unfortunate reality is that more money isn’t the cure for most money problems. Your long-term financial habits are likely to matter more than your actual income.

Higher Income Can’t Make Up for Poor Financial Decisions

Habits matter more than income because no matter how much money you have, the reality is that your poor financial decisions can negate your income. If more money were the solution to financial problems, we wouldn’t have lottery winners going broke.

While in college, I took a course from the business program. The instructor said that there are some people who, if you take everything away from them but $1,000, would be able to use their money to good effect and create financial freedom. These people understand how money works, and they get the basic principles that lead to wealth. These are folks who can take $1,000, get a job, and then use their money to make more money.

On the other hand, the professor said, there are those who have such bad money management skills that you can hand them $1 million and they will be broke in a year.

It comes down to financial habits. Think about the people you know who make $250,000 a year, but always complain of money problems. I know people who spend every penny they have, even though they have what many of us consider a good income. I also know people who make $60,000 a year and have more financial freedom and stability than their higher-earning peers. This is because they have better financial habits, and are committed to living life on their own terms, rather than buying all the trappings of a consumer-driven lifestyle.

No matter how much money you make, it won’t overcome poor financial decisions. No matter your income, if you spend more than you earn, you will not be able to build wealth and reach financial freedom.

Develop Good Financial Habits

Before you start thinking about how you can earn more money, it makes sense to develop good financial habits. The basics still hold true. You need to live within your means, use credit wisely, and invest for the future.

Start out by setting the stage for long-term success with your good habits. Here are some actions that can help you develop the right financial habits:

  • Determine your priorities: Figure out what’s important to you. Know what you want your money to accomplish, and identify what will give meaning to your life. Prioritize your finances and your spending, and stop wasting money on things that aren’t important to you.
  • Live within your means: Employ strategies that help you live within your means. This might mean clipping coupons or saving on big expenses by shopping around for a better insurance rate.
  • Diversify your income: Don’t rely solely on your day job for your income. Look for ways to get income from different sources so that you aren’t devastated by the loss of one source.
  • Making saving/investing a priority: You need to make saving/investing a priority. Set aside money for retirement, and build up your emergency fund. You need to have a cushion so that you don’t have to rely on high-interest debt to get you through tough times.

You don’t want to completely poo-poo income. After all, a higher income can make life more enjoyable, and provide you with the ability to further shore up your future. However, your income doesn’t matter very much if your poor financial habits counteract what you earn. Concentrate on first developing the money management habits that will help you build wealth no matter your income. Then you can start looking for ways to earn more money — and you’ll be more likely to keep most of those higher earnings.



Miranda is freelance journalist. She specializes in topics related to money, especially personal finance, small business, and investing. You can read more of my writing at Planting Money Seeds.