Main Argument 3: Focus on Income, Not Spending (The Biggest Lie in Personal Finance)
After establishing a flexible and psychologically sound approach to saving with the “Save what you can” philosophy, the natural next question is: “How can I save more?” The answer to this question represents one of the most significant schisms in the personal finance community. One camp champions aggressive frugality, focusing on meticulously tracking and cutting expenses. The other camp advocates for focusing on income growth. In “Just Keep Buying,” Nick Maggiulli plants his flag firmly in the latter camp, arguing that the relentless focus on cutting spending is the biggest lie in personal finance. He contends that while prudent spending is important, it has a mathematical and practical floor. For the vast majority of people, the most effective and sustainable path to significantly increasing their savings potential lies not in depriving themselves of small joys, but in strategically growing their income.
This argument is a direct assault on the “latte factor” school of thought. To fully understand its depth and practicality, we must first examine the powerful analogy that frames the debate, then use the book’s data to dissect the inherent limitations of the “cut your spending” approach, explore the concept of diminishing marginal utility, and finally, delve into the actionable strategies the book proposes for increasing one’s income by converting human capital into financial capital.
The Diet vs. Exercise Analogy
To make the concept immediately relatable, Maggiulli draws a parallel to a similar debate in the world of public health: diet versus exercise for weight loss. The conventional wisdom for decades held that rising obesity was a two-pronged problem of poor diet and lack of exercise. The theory was that we were consuming more calories while burning fewer.
However, the book highlights fascinating anthropological research on the Hadza, a modern hunter-gatherer tribe in Tanzania. Despite their incredibly active lifestyles—hunting, foraging, and performing strenuous physical tasks daily—researchers found that, after controlling for body size, the Hadza burn roughly the same number of total calories per day as their sedentary counterparts in the U.S. and Europe. This points to a concept known as constrained total energy expenditure, where the human body adapts to increased physical activity by reducing energy spent on other metabolic processes. The implication, supported by numerous long-term studies, is that while exercise has countless health benefits, its direct impact on long-term weight loss is limited and often overestimated. The more powerful lever for managing weight is diet.
This is the exact framework Maggiulli applies to personal finance. Cutting spending is like exercise: it’s beneficial, it has a positive effect (especially in the short term), but it is ultimately constrained by a hard limit. You can only cut your spending down to zero (and realistically, only down to the level of your basic survival needs). Increasing income, on the other hand, is like diet: it is the far more powerful variable in the savings equation and, theoretically, has no upper limit. Just as one cannot outrun a bad diet, it is nearly impossible to “out-frugal” a low income.
Deconstructing the Myth: Why Cutting Spending Fails for Most
The core of Maggiulli’s argument is built not on opinion, but on a stark analysis of the U.S. Consumer Expenditure Survey. By breaking down households into income quintiles (five groups of 20%), he systematically demonstrates why the “just spend less” advice is not only ineffective but also condescending for a huge portion of the population.
Let’s examine the data presented in the book:
- The Bottom 20% of Earners: For this group, the math is brutal and undeniable. The book shows that their average spending on just the four necessities—food, housing, healthcare, and transportation—consistently exceeds 100% of their after-tax income. In 2019, these households had an average monthly take-home pay of about $1,020. Their spending on just these four essentials was nearly double that, at $1,947. To tell someone in this situation to “cut their spending” to save money is a cruel joke. To save even a single dollar, they would need to cut their spending on absolute necessities by half, an impossible task. Their problem is not one of profligacy; it is one of insufficient income.
- The Next 20% of Earners (20th-40th Percentile): While this group earns significantly more (an average of $32,945 after tax in 2019), the story is largely the same. The data shows that their spending on the same four necessities still consumes the vast majority of their paycheck. They have little to no discretionary income left to cut. For the bottom 40% of American households, the “cut your spending” mantra is a dead end.
This data analysis reveals a critical insight that underpins the entire argument: Increases in income are not followed by proportional increases in spending, especially on necessities.
The Law of the Stomach: Diminishing Marginal Utility
Why doesn’t spending scale perfectly with income? The book explains this through the economic concept of diminishing marginal utility, which Maggiulli personally dubs “the law of the stomach.” This principle states that each additional unit of consumption provides less benefit (or “utility”) than the one before it.
The pizza analogy used in the book is a perfect illustration. If you’re starving, the first slice of pizza is a transcendent experience, delivering immense satisfaction. The second slice is still very good, but not as life-changing as the first. By the fifth slice, it’s just okay. By the tenth, eating another slice would actually make you feel worse.
The same is true for spending. The first $40,000 of income is life-altering; it provides shelter, food, and basic security. The next $40,000 improves your life significantly—a safer neighborhood, healthier food, reliable transportation. But the jump from an income of $200,000 to $240,000, while still a $40,000 increase, does not provide the same leap in well-being. You can’t eat ten times more food or live in ten different houses at once. While the quality of your consumption increases, the cost does not scale linearly.
This is precisely why higher-income households can save so much more as a percentage of their income. The top 20% of earners might have an income that is 14 times higher than the bottom 20%, but their spending on necessities is only about 3.3 times higher. They are physically and practically constrained by the law of the stomach. This creates a massive surplus that can be directed towards savings and investments.
This reality exposes what Maggiulli calls “the biggest lie in personal finance”: the idea that anyone can get rich simply by being more frugal. Financial media perpetuates this lie with stories about people who retired at 35 by reusing dental floss or making their own dish soap. These are presented as proof that discipline is all that matters, when in reality, these are extreme outliers whose stories often obscure either an unusually high income or an absurdly low (and often unsustainable) level of spending. The more consistent, reliable path to wealth is to increase the income side of the ledger.
Actionable Strategies: How to Increase Your Income
Recognizing that “earn more” is much easier said than done, the book dedicates a significant portion of the chapter to outlining five practical methods for converting your human capital—the economic value of your skills, knowledge, and time—into financial capital.
- Sell Your Time/Expertise: This is the most straightforward method. It involves finding ways to directly exchange your hours for money, such as tutoring, consulting, or taking on extra shifts.
- Pros: It’s easy to start and has a low barrier to entry.
- Cons: It doesn’t scale. One hour of work will always equal one hour of pay. Your income is capped by the number of hours in a day. It’s a good starting point, but not a long-term wealth engine.
- Sell a Skill/Service: This is a step up from selling time. It involves developing a marketable skill—like graphic design, photography, writing, or coding—and selling the output through platforms like Upwork or directly to clients.
- Pros: You can command higher pay than for unskilled time. It allows you to build a personal brand and reputation, which can lead to more and better work.
- Cons: It requires an initial investment of time to develop the skill. Like selling time, it doesn’t scale easily on its own; each project requires your direct labor.
- Teach People: This is where the potential for scalable income begins. You can package your knowledge and teach it to others through platforms like YouTube, Teachable, or by running live, cohort-based online classes.
- Pros: This is highly scalable. A pre-recorded course can be created once and sold an infinite number of times with near-zero marginal cost.
- Cons: The market for online education is crowded. You face a lot of competition and need to invest significant effort in marketing and building an audience to attract students.
- Sell a Product: This involves creating a physical or digital product that solves a problem for a customer. This could be anything from an e-book or a software tool to a handcrafted item sold on Etsy.
- Pros: Like teaching, this is scalable. You create the product once and can sell it repeatedly. Digital products are particularly attractive due to their scalability.
- Cons: This often requires a large upfront investment of time and/or money to develop and build the product. Marketing and distribution are ongoing challenges.
- Climb the Corporate Ladder: The book makes a crucial point to defend the most common, and often most maligned, path to higher income. Contrary to the “hustle culture” narrative that glorifies entrepreneurship, a traditional 9-to-5 job is still the most reliable way for most people to build wealth. The book cites data from The Millionaire Next Door showing that the majority of millionaires are well-educated professionals like doctors and lawyers who followed a traditional career path. It also notes that the typical self-made millionaire takes over 30 years to achieve that status, and the average age of a successful entrepreneur is 40. Why? Because a traditional career provides two things a 22-year-old typically lacks: experience and capital. Working for someone else is often the best training ground for eventually working for yourself.
The End Goal: Thinking Like an Owner
Crucially, the book frames all these income-generating activities not as an end in themselves, but as a means to an end. The ultimate goal is not just to earn more from your labor, but to use that additional income to acquire income-producing assets. This is the transition from thinking like a worker to thinking like an owner.
The story of Jerry Richardson, the only NFL player to become a billionaire, serves as the chapter’s capstone. He didn’t make his fortune from his salary as a football player (his labor). He made it by owning assets: first, a chain of Hardee’s fast-food franchises, and later, the Carolina Panthers NFL team. His labor income was the seed capital he used to become an owner.
This is the final, vital connection in the argument. The reason to focus on increasing your income is to accelerate the rate at which you can convert your finite human capital into durable, productive financial capital. This is how you build a system where your money starts working for you, eventually replacing the need for your own labor. It completes the journey from saving more, to earning more, to finally, owning more.