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Why Expenditure Is More Important Than Income

Updated: Jul 10, 2023

If You Want to Ensure Your Finances Don't Run Dry, The Best Place to Start Is With Your Expenditure

It’s sometimes useful to think of your finances as a broken bucket.

Your income flows into the top, but there is a constant leak of expenditure out of the bottom. As long as there is always water - liquid assets - in the bucket you’ll be safe.


Visualising it like this can help focus the mind on what is easiest to control.

You may have a reasonable degree of control over your assets and your income sources, but there are plenty of external forces that can impact on these too. You can’t control the stock market just as you can’t control the jobs market for example.

We’ve all been hit by spiralling food and energy costs lately, and anyone with a mortgage will be feeling the impact of rising interest rates. Nevertheless, there are other areas of your expenditure that are pretty much all down to you.

Not just what you spend now, but what your expectations are for the future - how much are you planning to be able to spend in retirement? And for how long?


The bigger your expenditure ambitions are, the bigger your bucket will need to be because, one day, when you retire, the income tap is going to be suddenly turned off and what’s in the bucket will need to last you until the day you die.

It is by some stretch the biggest factor in the success or failure of most household financial plans. Yet it is often the most overlooked. Maybe it’s because some of us see budgeting as a bit boring and a bit restrictive. Maybe we are scared to delve too deeply into what our bank account’s debit column might tell us. Perhaps some of us are just addicted to spending.

But, for most of us, earning money is much, much harder than spending it. It’s why people get sucked in to “get rich quick” schemes. It’s why lotteries exist. It’s why gambling is such an enormous industry.


And so we owe it to ourselves to be very deliberate on what we spend, trying to focus on things that we genuinely need and value, that make us happy, that add to our lives, rather than on stuff that advertisers want to sell us, because the more we desire to spend now and in the future, the more money we are going to need to earn in order to pay for it.

If you would like help making a plan for keeping your expenditure on track, please give us a call on 020 3488 9505.

The value of your investments can go down as well as up, so you could get back less

than you invested.

Tax and Estate planning is not regulated by the Financial Conduct Authority.

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