So I was at Walmart the other day with a friend, picking up some groceries and household supplies to tidy up my apartment (you know, get it smelling all fresh and what not). When we hit the paper towel isle, my friend took the biggest package of toilet paper I had ever seen off the shelf and put it into his cart. “It’s a good deal, and it will last me for months”, he said.


Naturally, when I grabbed only one roll of moderately-low priced paper towels and put it into my cart, he persuasively mentioned how much better of a deal he was getting than me. Thinking back, this same scenario has happened to me, oh.. about 543,657 times in the last few years. When I choose to go with smaller quantities of more expensive things (per item), I get a hard time from my co-shoppers. Am I really as big of an idiot as my family and friends think I am?

Why Dollar per Item Means Squat

Well, as it turns out, I am actually a financial genius (compared to most people) and my friend’s focus, which is on dollars per item, just happens to be completely irrelevant. It’s like Ricky asking Lucy “Lucy, what did you buy?”, and her responding with “Well… I saved a bunch of money…”.

What I’ve managed to figure out is that personal finance is ONLY about money in versus money out, over the long term. That’s all. Nothing in that sentence mentions how “you gotta’ get a good deal on stuff” in order to be successful financially.

The truth is, how much you spend per item just doesn’t matter and here’s why:

It has nothing to do with how much money is coming in versus how much is going out.

Let’s Use Me, 5 Years Ago, as an Example

So let’s make fun of 24 year-old Kraig for a second. Here was my financial picture 5 years ago, back in February 2009:

Income: $30,000 after taxes

Expenses: $28,000

Assets: a college education, a couple grand in the bank and a car worth $14,000 (private party value)

Liabilities (Debt): $17,000 (Car loan: $12,500, Student loan: $5,500)

My financial picture was quite typical of the American middle class back then. I had an average income, an average level of spending (although many might categorize it as poverty level), and an average level of debt (a car loan and a student loan).

But here’s the deal:

My financial situation back then was an ABSOLUTE DISASTER!

Here I was earning a decent income and then turning around and spending 93% of it. Where did the money go to? Well, let’s look to see if I had anything to show for it:

Adding up my assets (my bank account and my car, totaling $16,000), and then subtracting my liabilities (my debt, totaling $17,000), amounted to -$1,000. My total net worth was negative $1,000.

And my net income (income minus expenses) for the year prior was $2,000.

With over 4 years left to pay on my car loan and close to 9 years left to pay on my measly $5,500 student loan, I was at best 4 years or so away from paying off my debt, which would have been February, 2013.

But, then an odd thing happened. I learned how to actually manage my money and in the same period of time, 4 years, I was able to not only get out of debt, but also save close to 5 years of living expenses.

What the heck gives?

Why Total Dollars Going Out Is the Only Thing That Matters

Let’s talk about what DOES matter when it comes to managing your money, which is the TOTAL DOLLARS GOING OUT.

In the summer of 2009, I discovered the single most awesome thing available to us financial independence seekers, Here was a free online program that gathered all your accounts and transactions into one place and easily allowed you to track your income and your spending every month. It was game changing for me.

So, what did I do? I found this section called trends, where it allowed me to see how much I was spending each month.

O… M… G… (as I used to say to poke fun of a pretty great dude named Tony I used to work with). Seeing what I spent every month changed the game for me. Twenty-four hundred dollars a month????? Holy C*A*, I thought.

And I started focusing on nothing but lowering that number each month. I lowered my expenses way down over the course of the next year, to a level of about $20,000/year.

As I got my expenses taken care of, I started making more money (weird how that happened). So naturally, I saved it, since I was only focused on the spending side of things.

The Difference Between Bankruptcy and Financial Independence is in the Spending

As one of the greatest discoveries of the 21st century (right up there with the fact that Pluto isn’t a planet), I’m happy to announce to you today that spending is the only thing that matters in personal finance.

If you want to get the heck out of debt, frickin’ stop spending money. Period.

And don’t tell me that you got a good deal on that crap you bought yesterday. I don’t care how cheap per item it was. The fact is, you spent more money than you needed to. More money came out of your bank account than was necessary.

If you’re in debt and you don’t mind calling your creditors master, then great, go ahead and keep yourself broke by telling yourself you’re getting a good deal. But, if you want to join those of us who don’t need next week’s paycheck and can pay our bills regardless of whether a paycheck comes in at all, then start focusing on what matters… Your spending.