Better Money Habits Matter More Than Income. Here's Why

If you are struggling with debt and hoping for debt relief, you may be focused on just making more money. Many people think earning a bigger paycheck will solve their financial troubles. After all, if you bring more money in, you have more money to save and spend.

In reality, though, that's not necessarily the case. Even high earners can struggle with money. That's because income is only one piece of the puzzle—your money habits can make or break your finances regardless of your paycheck. 

In fact, money habits may actually matter more than income in many situations. Here's why that's the case. 

Your Money Habits Determine How Much Income You Keep

While your income makes it possible to save, invest, and grow your wealth, your spending habits ultimately determine whether you actually do these things or not.

There are plenty of people who don't make a lot of money who end up wealthy. That's because they live within their means and use their money to improve their financial situation. They invest in assets that increase their net worth and eventually make them financially independent. For example, they might buy stocks or bonds that earn returns. 

There are also plenty of people who make a lot of money and don't end up wealthy. This can happen if they spend most or all of what they make. In fact, some people with very high incomes still spend more than they earn.

If you make $400,000 per year, but you spend $450,000 per year on fancy restaurants, clothes, or other expenses that don't add to your wealth over the long haul, it doesn't matter that you are earning a lot. You still end up in debt.

Your money habits are ultimately what will determine if you end up with emergency savings, money in the bank, and investments that can help to make you financially independent one day.

There's No Ceiling on Lifestyle Inflation 

There's also another reason why your money habits can matter more than your income. The reality is, there is no upper limit on the lifestyle changes you can make when you start earning more.

If you increase your spending every time you get a raise, it will become really hard to get ahead. For example, if you get a bonus at work and immediately go and spend it at the mall, then the bonus doesn't do anything to improve your finances over the long term—and many people do tend to spend any extra windfalls or raises that come their way.

If you don't create a budget, it's really easy to just let your costs climb along with your income. In fact, fighting this kind of lifestyle inflation can be harder than it seems because, as you start to earn more, you often come into contact with people whose salary may be even higher than your own. If you upgrade your lifestyle to keep up, then you won't break the cycle of spending.

You Need to Commit to Using Money as a Tool

If you want to develop the kind of habits that allow you to save more money and build wealth, regardless of income, you should try to commit to using money as a tool.

This means that you should make a smart plan for how your earnings can improve your overall financial picture. For example, you may want to use your income to:

• Pay off debt

• Invest in assets that will grow in value over time

Of course, you are going to use your money for some fun things. Very few people save every dollar they earn with no room for spending on things they enjoy. But you should be strategic about using your money so your fun spending doesn't outpace your other financial goals.

Making a budget could help you do that. You can decide how much to spend on different expenses and get in the habit of sticking to your spending limits. 

You should also get in the habit of paying off your credit cards in full every month. And once you have your debt under control, consider automating your savings and investing so you're depositing at least a little bit of money into retirement and savings accounts every month.

If you can adopt good money habits, you'll be on the path to success. Your income will affect the time it takes to get there, but you should still be on the right road to reach the destination of financial freedom eventually, as long as you stick with it.