💰 Wealth Rule #3: Limit Lifestyle Debt

Stop. Limit lifestyle debt. Image from @richwilliamsmith on Unsplash.

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“Don’t Dig the Hole — Live by Allocation.”

“If you buy things you do not need, soon you will have to sell things you need.”— Warren Buffett

🔗 Connecting the Rules

In Wealth Rule #1, you learned to keep your base low — to avoid overspending on housing and major expenses. Wealth Rule #2 taught you to pay yourself first, using the Habit of 10 % to ensure you come before the bills.

Now comes Rule #3 — Limit Lifestyle Debt: Even as income rises, keep lifestyle steady. Protect your gains by living within clear allocations. This rule transforms the security you built in #2 into long-term freedom.

🧩 The Rule

As your income grows, your expenses will always try to grow too. That’s Parkinson’s Law in action — spending expands to match income.

With every raise, new “needs” appear: a nicer car, a better home, upgraded everything. You start to feel entitled to them — but that’s lifestyle inflation disguised as progress.

Ask yourself:👉 Do I want to be rich, or just look rich?

Those who “look” rich often live on the edge of debt. The truly wealthy live below their means, even as income climbs.

If your household earns $10 000 net per month but spends $12 500, you’re not building wealth — you’re borrowing from your future. You'll need to make up that difference, e.g., through savings or taking on lifestyle debt like credit cards. Living above your means is trading tomorrow’s peace for today’s image.

🪣 The Habit: Don’t Dig the Hole

Every debt begins with one small decision: “I’ll just pay it later.”

The Habit of Not Digging the Hole protects you from that trap. If you can’t pay cash, pause.

Ask:

1. 💬 Do I truly need this right now?

2. 💬 Is this building my life or my liabilities?

3. 💬 Would future-me thank me or curse me?

   
   

Debt for consumption digs holes. Debt for investment builds ladders.

Keep debt for growth — assets, business, or education — never for image.

🧭 The Habit of Allocation

Wealth begins when you decide where money goes before it arrives. This is the Habit of Allocation, the bridge between discipline and abundance. You allocate the money based on your budget and plans.

Follow the 10-20-70 Plan:

• 💸 10 % — Pay Yourself First (savings and emergency fund)

• 💰 20 % — Financial Security & Growth (First debt payoff, then investments)

• 🏡 70 % — Living Expenses (your lifestyle cap)

When income rises, keep ratios constant. Every raise should lift your wealth, not inflate your wants.

💼 Profit First for Life

Businesses use Profit First so profit isn’t what’s left — it’s what’s planned. Personally, do the same: allocate profit to your future self before spending.

Live fully, but live within your means. Joy today should never cost peace tomorrow.

📊 Why It Matters

The average U.S. credit-card annual percentage rate (APR) is nearly 24% — the highest in decades, accurate as of August 2025 (Woolsey, 2025). At that rate, a $5 000 balance doubles in less than four years. Lifestyle debt is not just expensive — it’s destructive. You can’t build wealth while carrying yesterday’s purchases into tomorrow.

To your success.

🔗 Series Connections

• Wealth Rule #1: Keep Your Base Low (30 % Housing Rule)

• Wealth Rule #2: Pay Yourself First | Habit of 10 %

• You are here → Rule #3: Limit Lifestyle Debt

• Next Up: Wealth Rule #4 : Build an Emergency Fund (3–6 Months)