Why saying Y.E.S. is key to attracting more wealth

- November 2, 2022 4 MIN READ

How much of your wealth ‘sticks’, and how much of it slips through your fingers? You are likely to earn a literal fortune over the course of your working life, yet without good money habits, you’re also likely to spend a fortune too. And in the end, how much you’ve earned won’t matter; it’s what you’ve been able to keep that’ll count.

The most important rule of wealth creation is to spend less than you earn and invest the surplus. The better you become at doing this, the more powerful your money magnetism will be.

That is, to become a better money magnet, you first have to become a better money manager.

Earning and spending

One way to attract more wealth is to earn more money. This is difficult though, because in order to earn more, you usually have to work harder and you’ll also be taxed more.

There is another option: spending less. When you spend less, you get taxed less because there is no income tax on money saved. You also won’t be paying any GST (since you’re not buying anything).

Sadly, spending less is the antithesis of the modern instant gratification lifestyle. The wisdom of our parents and grandparents is dismissed as ‘old hat’ and replaced with programs that keep us poor by rewarding us for spending our savings (or worse, spending money we don’t have).

If you do what everyone else does, then you’ll get what everyone else has – money problems!

If you’ve never been shown the basics of money management, or if you’ve forgotten them, here’s a quick recap.

Young plants growing out of stacks of coins

Using the Y-E=S formula

Most people don’t have an earning problem, they have a spending problem. That is, they have grown accustomed to a lifestyle where they consume all (and sometimes more than all) of the money they make, and so find it hard to save.

Keeping afloat financially requires that you learn and master the most important money skill that exists: to spend less than you earn.

This skill is illustrated with my Y-E=S. formula:

  • Y is your income
  • E is your expenses
  • S is your savings

Simple! As long as your income is higher than your expenses, you’ll accumulate savings and remain financially afloat.

Examples of the Y-E=S. formula

Let’s look at an example using kindergarten maths. Meet Bernadette. She earns $20 and has $10 worth of expenses; therefore, she saves $10. Bernadette’s formula is this: Y (20) – E (10) = S (10).

Bernadette can then invest her savings ($10) to earn income that is independent of her job. The more independent income she has, the less reliant she is on her job.

What I’ve described here is the concept of transitioning from financial slavery (having to work for money), to financial freedom (having money work so you don’t have to).

However, if your expenses are equal to or more than your employment income, then you’ll never accumulate wealth. How will you survive when you can’t work as hard or as long, or if you don’t get paid as much?

Consider John. He earns $50, but his expenses are $75. John’s formula is this: Y (50) – E (75) = S (-25).

John is spending more than his income; therefore, his negative savings number is depleting his savings reserves.

Wise people lower their living standards when they’re younger and accumulate wealth to invest. The rest are left to lower their living standards when they’ve retired and lack the income or wealth to sustain the lifestyle they enjoyed when they worked.

Listen to Steve McKnight on the Flying Solo podcast:


What happens if your expenses are greater than your income and you don’t have any savings to draw down upon? You go into debt. Borrowing is taking tomorrow’s income and spending it now. The more tomorrows you owe, the stronger the bonds of financial slavery.

Here’s an example. Sandra earns $18 and spends $24. She has a deficit of $6 and no savings. As Sandra has no savings, she must borrow $6, meaning she is reaching into tomorrow to access $6 of her future income to spend now. That is one-third of her income, which in simple terms equates to four months of work time she owes.

When you get into debt you’re spending tomorrow’s pay today. How many tomorrows do you owe to repay yesterday’s spending? Spending income you haven’t yet earned is the surest and strongest way to repel wealth.

Earn more, or spend less?

How can you increase your savings? It’s not rocket science. You can either increase your income or decrease your spending. You want to increase your income without permanently working harder, and at the same time, manage your spending so that you’re not haemorrhaging money, and invest rather than consume your extra income.

The Y-E=S formula works in all contexts, irrespective of whether the sums of money are large or small, or the scenario is simple or complex. If someone or something is failing financially, the root cause will always be because their expenses are higher than their income.

Staying financially afloat is the cornerstone of all wealth creation. The wealth-building principle of Y-E=S is easily forgotten or dismissed as too simple, resulting in all kinds of financial mismanagement and misfortune.

Just remember this: having more income than expenses will result in savings. If you aren’t saving, you must be overspending relative to your income.

This is an edited extract from Steve McKnight’s Money Magnet: How to Attract and Keep a Fortune that Counts (Wiley $32.95), available at all leading retailers.

Want more? Get our newsletter delivered straight to your inbox! Follow Kochie’s Business Builders on FacebookTwitter, Instagram, and LinkedIn.

Now read this: 

10 ways to earn and maintain your wealth