Common Financial Mistake: Thinking It’s Reasonable to Spend Whatever You Earn

Is it really reasonable to spend everything you make?

Many people believe that “spending whatever you earn” is a reasonable way to live because at least they get to enjoy the fruits of their labor. But in reality, this is a dangerous financial mistake that traps you in an endless cycle of income and expenses, preventing you from building long-term stability.

According to a VnExpress survey, up to 63% of young Vietnamese have no specific financial plan, leading to the situation where they go broke right after payday. A study by Nielsen further revealed that nearly 70% of Vietnamese people do not have any emergency savings. This means that just one unexpected event—like job loss or illness—can push many individuals straight into debt.

Living with the mindset of “spend it all” also prevents people from ever accumulating assets or seizing long-term investment opportunities. World Bank data shows that the household savings rate in Vietnam is only about 20% of income, much lower than in more developed countries in the region such as China (nearly 40%). This gap highlights a short-term financial mindset—one of the most common mistakes among young people today.

Even more concerning, a report from the State Bank of Vietnam revealed that more than 40% of Vietnamese adults do not have any official savings or investment accounts, relying entirely on monthly income. This approach leaves personal finances fragile and makes it nearly impossible to achieve financial independence.

Why Is “Spending Whatever You Earn” a Financial Mistake?

1. No Emergency Fund
When all your income is spent, you have nothing left to handle unexpected risks such as illness, unemployment, or accidents. According to a World Bank report, nearly 50% of Vietnamese people do not have an emergency fund covering at least three months of living expenses. This means that even a small shock can easily force you into borrowing or falling into debt. An emergency fund serves as a financial “safety cushion” that helps you maintain stability even when your income is disrupted.

2. Missing Investment Opportunities
Without savings, you have no capital to participate in personal investment channels such as savings accounts, stocks, real estate, or even small-scale profitable investments. In reality, bank deposit rates currently range from 4–6% per year, and with consistent contributions, you can build a steady source of income.

Beyond savings, other channels like mutual funds, ETFs, or online micro-investments also provide opportunities to grow your wealth. Failing to allocate at least 10–20% of your income to investments is a financial mistake that keeps you from getting richer, no matter how hard you work.

3. The “Live for Today, Worry Tomorrow” Mentality

This mindset may seem harmless, but it creates a pattern of uncontrolled spending. A Visa 2023 survey revealed that more than 60% of young Vietnamese overspend their monthly income, mainly on shopping, dining, and entertainment. Over time, this habit turns you into a “slave to your paycheck”—living just to wait for the next payday, too afraid to quit, switch jobs, or invest in yourself. In the long run, this financial mistake strips you of the chance to build independence and true financial freedom.

The Consequences of Financial Spending Mistake

You can never achieve financial freedom if you constantly spend all your income. This is a common financial mistake, as many people believe that as long as they have money, they should spend it freely. In reality, freedom only comes when passive income is greater than or equal to monthly expenses. If your savings and investments always remain at zero, financial independence will forever be just a distant dream.

Debt accumulation is another inevitable outcome of this financial mistake. Many people turn to loans or credit cards to fill the gap, but this only deepens the debt spiral. With high interest rates, debts grow larger and increasingly harder to manage.

Even a small incident such as illness, job loss, or an accident can cause your personal finances to collapse if you lack an emergency fund. Without this “safety cushion,” you are forced to borrow, creating long-term instability and dependency.

Living without a financial backup also breeds constant anxiety. Many people worry about money all the time, afraid to quit or change jobs, or to take new opportunities. They become chained to their paycheck, unable to make life-changing decisions for fear of losing their only source of income.

Other Common Financial Mistake

Not tracking expenses leaves you unaware of where your money is “leaking.” Many people admit that they spend 2–3 million VND each month on small items like coffee, milk tea, entertainment apps, or online subscriptions without even noticing. When accumulated over a year, these seemingly minor costs can reach 30–40 million VND—equivalent to a solid investment or a meaningful emergency fund.

In addition, very few people apply the 50/30/20 rule (50% needs, 30% wants, 20% savings/investments). A PwC 2022 survey showed that as many as 65% of workers worldwide live paycheck to paycheck without any structured spending plan. Without proper budgeting, it’s easy to overspend in one area and fall short in another, ultimately leaving you broke by the end of the month regardless of income.

Another widespread financial mistake is believing that simply saving money in the bank is enough. In reality, Vietnam’s inflation rate averages 3–4% per year, while bank savings rates hover around 4–6% per year. If you only save without investing, your real asset value barely grows—or worse, gets eroded by inflation. This mistake explains why many people save diligently yet see their wealth stagnate over time.

A significant portion of young people have also never read a book on personal finance or used a financial management app or even a simple Excel spreadsheet. Instead, they rely on memory or gut feeling, which often leads to the situation of “not knowing where the money went.” Spending just 10–15 minutes a day recording expenses or using a financial app can help you track cash flow, identify harmful habits, and make timely adjustments—avoiding recurring financial mistakes before they spiral out of control.

Solutions: Fixing Financial Mistakes and Managing Money Effectively

An emergency fund equal to 3–6 months of living expenses is the minimum everyone should have. For example, if your average monthly expenses are 10 million VND, then your emergency fund should be between 30–60 million VND. A study by HSBC showed that those with an emergency fund covering at least three months of expenses reduce their risk of falling into debt by 40% when faced with unexpected events. This fund serves as a vital “safety cushion” to keep you from being trapped in a borrowing spiral.

Alongside this, tracking and managing daily expenses is a fundamental step in controlling cash flow. Many people rely on memory alone, which leads to confusion at the end of the month about where the money has gone. Using a spending notebook, Excel spreadsheet, or finance management apps such as Money Lover, Timo, or MISA allows you to clearly see every expense—from a morning coffee to large utility bills.

According to a Nielsen survey, people who regularly track their spending can save an additional 15–20% of their income compared to those who don’t. This habit may seem simple but has a significant impact on reshaping spending patterns and building financial discipline.

One effective way to allocate income is by applying the 50/30/20 rule: 50% for essential needs such as food, housing, and transportation; 30% for wants such as shopping, dining, or entertainment; and 20% for savings and investments.

For example, with a monthly income of 15 million VND, you should allocate 7.5 million for essentials, 4.5 million for personal wants, and at least 3 million for savings or investments. If you maintain this discipline for five years, you could accumulate more than 180 million VND, not including interest or investment growth. This is a simple but sustainable formula to break free from the cycle of “spending everything you earn.”

Small but consistent investments are also the key to growing wealth. You don’t need a large amount of capital—starting with just a few hundred thousand to one million VND per month is enough. Safe options include online savings accounts with 4–6% annual interest, mutual funds, or ETFs if you have little time, and even basic stock market investments if you are willing to learn.

One of the most common financial mistakes is thinking that investing is only for the wealthy. In reality, it is the small but steady investments that build sustainable financial habits and long-term capital growth.

Above all, cultivating a long-term financial mindset is essential. Instead of thinking, “I’ll just spend whatever I make this month,” set clear goals for each stage. After one year, you should have at least three months of expenses saved in your emergency fund. After three years, you should have a basic investment account generating consistent returns. And after five years, your accumulated capital should be sufficient for major goals such as buying a home, purchasing a car, or achieving partial financial independence. This mindset frees you from recurring financial mistakes and opens the path to a more secure and proactive future.

Conclusion: Don’t Let Mistakes Repeat Themselves

“The biggest financial mistake isn’t earning too little—it’s not knowing how to keep your money.” Spending everything you earn may feel reasonable, but in reality, it locks you into a cycle of scarcity and dependency.

Start small: track your expenses, build an emergency fund, and learn how to make small but profitable investments. By making changes today, you can break free from the most common financial mistakes and steadily move toward financial freedom.