3439: The Golden Rule of Personal Finance by Jesse Cramer of Best Interest Blog on Money Principles

Summary

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Episode Overview

Podcast: Optimal Finance Daily
Host: Diania Merriam
Episode: 3439: The Golden Rule of Personal Finance
Featured Blogger: Jesse Cramer of Best Interest Blog
Date: January 29, 2026

This episode centers on the single most fundamental principle in personal finance: Spend less than you earn. Through vivid examples, relatable anecdotes, and behavioral insights, Jesse Cramer explores why this "golden rule" is both universally understood and widely unpracticed. Diania Merriam adds her own perspective, reinforcing that financial health doesn't come from income alone but from consistently applying this timeless principle, while also stressing the importance of investing the surplus.

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Key Discussion Points & Insights

1. The Leaning Tower of Pisa Analogy:

[01:03]

• Jesse opens with a metaphor: the Leaning Tower of Pisa suffers because its massive structure rests on a shallow foundation.
• Insight: Just as buildings require a solid base, so do our finances. Without a strong foundation, instability is inevitable, regardless of scale.

“Every building needs a strong foundation. It applies to all buildings of all sizes in all locations. This brings us to the golden rule of personal finance, one that applies to all people at all levels of income: Spend less than you earn.”
— Jesse Cramer [01:23]

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2. The Golden Rule and its Misapplication

[01:30]

• Cramer notes that everyone thinks they know this rule, but most have not internalized it.
• He cites examples of high-income earners (athletes, celebrities) who go bankrupt from overspending.

“How is that possible? They spent more than they earned. But surely someone with 100 million should be able to not spend all their money…overspending behavior is the classic slippery slope.”
— Jesse Cramer [02:11]

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3. Personal Anecdote: Scarcity Mindset

[02:27]

• Jesse shares a story from a friend who, despite making millions in the NFL, still spends everything due to a childhood marked by scarcity—a “perfect storm” leading to a distrust of saving.

“Whenever I got money as a kid, it was like, spend it now or you might not get another chance to spend it…So now I just want to spend everything, save nothing. I don’t trust saving because I’ve never actually seen it work.”
— Jesse Cramer quoting friend [02:35]

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4. Behavioral Economics and Lifestyle Inflation

[03:30]

• Jesse discusses how our minds justify personal overspending while criticizing others.
• Many believe an increase in income will prompt saving, but often, increased earnings simply lead to "lifestyle inflation."

“If I earned another 20%, then I’d start saving…but when the 20% comes, we buy clothes that are 20% softer, houses that are 20% bigger, or meals that are 20% more organic. The slope remains slippery all the way down.”
— Jesse Cramer [03:40]

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5. Relativity of Spending & Judgment

[04:10]

• Jesse gives the example of spending $125 on a dinner: some view it as extravagant, others as quaint.
• Insight: Overspending and comparison operate at every income level—everyone both spends and judges spending in relative terms.

“We all look at people richer than us and think, if I were them, I’d be all set, because I’d never spend money like they do on that thing.”
— Jesse Cramer [04:49]

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6. Building a Financial Foundation: Budgeting and Awareness

[05:20]

• Jesse reiterates that the key is not what you spend on, but that you spend less than you earn (preferably much less).
• He tracks his own budget and net worth, acknowledging it's easy to "pay lip service" to the golden rule but much harder to live by it.

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7. Behavioral Hacking and Advertising

[05:45]

• He explains that advertising “brain hacks” us to think spending brings happiness when psychological research shows it does not.
• Maintaining discipline requires fighting the urge to spend, much like the effort to dig a deep foundation.

“Remind yourself that you’ve probably been brain hacked by advertising…out of spite towards advertisers, I actively fight my impulse to spend. It’s a struggle. I have to dig deep. Just like digging a foundation.”
— Jesse Cramer [06:20]

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8. Host Reflection: Completing the Rule with Investing

[07:39]

• Diania Merriam concurs with Jesse’s golden rule but adds that one must invest the gap between income and expenses.

“Spend less than you earn and invest the difference. Our wealth is built in the gap between our income and our expenses. But we have to put that gap to work…our money can work way harder than we can.”
— Diania Merriam [07:41]

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9. Financial Literacy Regardless of Income

[08:00]

• Diania emphasizes that income alone doesn't improve financial literacy. Managing small amounts is essential practice for managing large ones.

“If you can’t manage $1,000, then you definitely can’t manage a million dollars. And this golden rule of spending less than you earn applies, no matter how much money you do or don’t have.”
— Diania Merriam [08:06]

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Notable Quotes & Memorable Moments

• “Spend less than you earn. I know you think you know what I’m talking about, but…most people think they know this idea, but they’ve not truly internalized it.”
  — Jesse Cramer [01:30]
• “Our brains work against us. This is a foundational lesson from behavioral economics. We criticize others for overspending, but find ways to justify our own similar behavior.”
  — Jesse Cramer [03:25]
• “Advertisers convince you that buying stuff will make you happy. Actual psychological research provides no such evidence. It might in fact make you unhappy.”
  — Jesse Cramer [05:50]
• “It’s important to remember that having more money doesn’t magically increase your level of financial literacy.”
  — Diania Merriam [08:00]

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Timestamps for Core Segments

• 01:03 — Leaning Tower of Pisa Analogy, introducing the golden rule
• 02:11 — High-income earners and financial instability
• 02:35 — Psychological roots of overspending: anecdote from NFL player
• 03:25 — Behavioral economics and self-justification
• 03:40 — Lifestyle inflation
• 04:49 — Universal nature of overspending and judgment
• 05:20 — Budgeting and net worth tracking
• 05:50 — Advertising and happiness myth
• 07:39 — Diania’s host commentary: “and invest the difference”
• 08:06 — The unchanging golden rule regardless of income

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Summary

This episode distills personal finance to its essence: The only way to lasting wealth—across all income levels—is to spend less than you earn and, as Diania adds, invest the difference. Through real-life anecdotes and behavioral insights, Jesse Cramer highlights how ingrained habits, advertising, and mindset can undermine this simple rule. Diania’s closing reflection urges listeners that wealth is determined not by what you make, but by your actions and habits with money, reinforcing that everyone—regardless of income—must build their financial house on a solid foundation.

Your optimal life awaits—one solid step at a time.

Transcript

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[Jesse Kramer]

This is optimal Finance Daily the Golden Rule of Personal Finance By Jesse Kramer of BestInterest Blog the Leaning Tower of Pisa has a foundational problem. It's 186ft tall and weighs 14,500 tons. But its foundation is only 10ft deep and built into silt and clay. Five years after construction, about 1178 AD, the foundation shifted and the tower famously leaned. Oops. Every building needs a strong foundation. It applies to all buildings of all sizes in all locations. This brings us to the golden Rule of personal finance, one that applies to all people at all levels of income. Spend less than you earn. I know you think you know what I'm talking about, but in my ever growing experience in personal finance, most people think they know this idea, but they've not truly internalized it. It's a foundational rule we too often ignore. We know the stories of former athletes.

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Or Hollywood stars who file for bankruptcy.

[Jesse Kramer]

How is that possible? They spent more than they earned. But Surely someone with 100 million should be able to not spend all their money. I get it, but overspending behavior is the classic slippery slope. Just as buildings of all sizes see foundational issues, people across the wealth spectrum struggle with overspending. I have a friend of a friend who played Division 1 football and eventually made it to the NFL, but his family was dirt poor. Growing up, I thought this admission was so profound. We were so poor there was never much money. But the money that was there, it always quickly disappeared. You got used to this idea that money is scarce and never sticks around. So whenever I got money as a kid, it was like, spend it now or you might not get another chance to Spend it. Boom. And I had a big list of things I wanted to spend money on. It's like a perfect storm. So now I just want to spend everything, save nothing. I don't trust saving because I've never actually seen it work. End quote. Here's a guy making millions, but his financial foundation was only inches deep, not nearly strong enough to support a large income. Our brains work against us. This is a foundational lesson from behavioral economics. We criticize others for overspending, but find ways to justify our own similar behavior. We say, if I earned another 20%, then I'd start saving more money. But when the 20% comes, we buy clothes that are 20% softer, houses that are 20% bigger, or meals that are 20% more organic. The slope remains slippery all the way down. If you're a global touring music star partying at the club, you justify a $10,000 bottle of champagne. If you're the heavyweight champion of the world, you justify owning a tiger. We all struggle to say, enough. No way. You say, I just don't get it. I'd never own a tiger. You're not alone. I don't get it either. I'm with you. But a few weeks ago, Kelly and I spent $125 on a dinner for two. A nice treat, right? But a big part of the US Population would look at our dinner and say, no way. I just don't get it. That's a full week of groceries or a month of gas. I'd never spend that on one meal. A smaller segment of the population would say, you call $125 a nice dinner. How quaint. My point is, overspending and comparison happen to all people at all income levels. We all spend money and all judge others on what they spend. Most of all, we all look at people richer than us and think, if I were them, I'd be all set, because I'd never spend money like they do on that thing. Getting back to foundational fundamentals, I don't care what people spend money on. Meals, cars, tigers. Though I'm not sure there's an ethical way to own a tiger, because the key is spending less than you earn, preferably spending much less than you earn. I ensure I'm doing this through my budget and net worth tracking. In my experience, most people, including myself, at times pay lip service to spend less than you earn. Don't worry, you're only human. But if you want financial success, you'll eventually have to back up that lip service with real action. You'll need to Dig deep and build a financial foundation that supports your current and future life. On the spending front, remind yourself of this simple truth. Advertisers convince you that buying stuff will make you happy. Actual psychological research provides no such evidence. It might in fact make you unhappy. You want to spend less? Remind yourself that you've probably been brain hacked by advertising. I know I have into thinking that more spending equals more happiness. I don't like that I've been brain hacked. I resent it. So out of spite towards advertisers, I actively fight my impulse to spend. It's a struggle. I have to dig deep. Just like digging a foundation. But if you want to build a strong financial life, that's where it starts. A strong foundation. Spend less than you earn. You just listened to the post titled the Golden Rule of Personal Finance by Jesse Kramer of BestInterest Blog.

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[Jesse Kramer]

I completely agree with this golden rule. But I would add just one little thing to the end. Spend less than you earn and invest the difference. Our wealth is built in the gap between our income and our expenses. But we have to put that gap to work. Our money can work way harder than we can at making us more money through the power of compound interest and our assets appreciating over time. But in order for that to happen, we need to buy income generating assets like stocks, bonds and real estate. I love that Jesse acknowledges how we all tell ourselves we'll behave differently with our money once we're making more of it. I certainly used to tell myself that I didn't save, invest or worry about my debt in my 20s because I was convinced that I'd be making millions one day and it wouldn't matter. Well, my income isn't close to a million, but my net worth is halfway there. It's important to remember that having more money doesn't magically increase your level of financial literacy. If you can't manage $1,000, then you definitely can't manage a million dollars. And this golden rule of spending less than you earn applies, no matter how much money you do or don't have. And that will do it for today. Have a happy rest of your day, and I'll see you on the Friday show tomorrow, where your optimal life awaits.