In this post, I’d like to talk about a basic rule in finance in general and, more specifically, personal finance. The rule is that you should spend less than what you earn.

This rule might sound simple, but it isn’t easy to do. In fact, so many people fail to do this simple rule and as a result make their personal finance a mess. It won’t happen right away, of course, but over time those who do not obey this rule will have to pay the price.

But why do people break this rule? One reason is because it’s much easier these days to spend more than what you earn. There’s one financial innovation that makes it easy: credit cards. Just think about it. If you have a credit card then you can spend money that you don’t own. You don’t even need to ask permission to borrow and use the money. The money is there for you to borrow as long as you don’t go over your credit card limit. Furthermore, it’s so easy to pay with credit card. It makes spending your money (and even the money you don’t own) so much easier.

There’s still another big reason why many people spend more money than what they earn and that is consumerism. Consumerism is the lifestyle that desires more and more stuff and convenience. You want to have car and once you have it, you want to have an even better car. You want to have good computer, have a nice dine, and more. In short, consumerism is the desire to live big.

The desire to live a convenient life isn’t wrong, of course. But it becomes a problem when it causes you to live above your means. The desire to keep up with the Joneses will only exacerbate the problem. As such, you need to be careful not to fall into the trap of consumerism (that is, the kind of consumerism that lures you to live above your means). Only by doing that can you spend less than what you earn and have good personal finance.