The Micawber Principle: Living the Fundamental Law of Personal Finance

Who Was Micawber and What is His Principle?

In the book David Copperfield, written in 1850 by Charles Dickens, the orphaned title character is sent to work in a factory in another town.  Arrangements are made for young David to rent a room in the home of Wilkins Micawber.  Mr. Micawber is fond of offering advice to David and not long after he moves in Mr. Micawber confidently states: 

Annual income twenty pounds, annual expenditure nineteen, nineteen and six, result happiness.  Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.

Although impressed with this sound financial advice it soon becomes obvious to David that Mr. Micawber is completely unable to follow it, as he faces one financial crisis after another.  Mr. Micawber becomes a father figure to David (it is widely thought the character is based on Dickens’ own father, who also had severe financial troubles) and David is able to observe firsthand the negative consequences of living beyond your means.  Mr. Micawber’s financial advice, in spite of his inability to live it, has resonated over the years and has come to be known as The Micawber Principle.

There you have it.  In two short, simple sentences Charles Dickens stated the fundamental law of personal finance in an unforgettable way.  Spending less than you earn – consistently, over time – will lead to at least some degree of financial success.  Spending more than you earn will lead to financial misery, which is likely to negatively affect other areas of your life.  It really is that simple.  If you can’t live The Micawber Principle no other financial advice matters.  It is the foundation of personal financial success. 

Of course, we need to acknowledge that while the principle is simple, putting it in practice, as Wilkins Micawber illustrates, is difficult.  That is because it requires disciplining ourselves, which is never an easy thing to do.

What We Learn from the Micawber Principle

Although The Micawber Principle is short and simple it communicates several important truths about personal finance.  Among these are:

  • Spending is More Important than Income – The difference between financial happiness and misery isn’t how much you make (annual income is twenty pounds in both scenarios) but in spending less than you make.  I think we can all agree that more income is better than less, but if we use our income as an excuse for not living the Micawber Principle we will likely find we cannot live it no matter how much we make.  The key is to discipline ourselves to live within our means now and then widen the gap between income and spending as we make more.    
  • Little Things Matter – The difference between financial success and financial difficulty is often small in the short term, but is magnified over time.  This leads to the inescapable conclusion that to win we have to keep score.  If we don’t know whether we are winning or losing we are more likely to let questionable financial decisions become habits, and before we know it we are in real trouble.      
  • Direction is More Important than Speed – The Micawber Principle could be described as a Get Rich Slow Scheme.  Small financial wins give us hope and build momentum for greater wins in the future. 
  • There are Consequences to Financial Decisions – The Micawber Principle clearly illustrates the universal law that there are consequences to our actions.  We can choose our actions, but not the consequences.    

What Becomes of Wilkins Micawber?

When we left Mr. Micawber he was bumbling through life completely unable to follow his own financial advice.  At the end of the story Mr. Micawber and his family emigrate from England to Australia.  Mr. Micawber makes the most of his fresh start and becomes a respected lawyer, achieves financial success, and continues teaching the principle that bears his name (now both by word and example).  The happy ending should give all of us hope that, regardless of the past, it is never too late to change our financial habits and fortunes.  Your new beginning starts now, and you don’t even have to move to Australia.

  15 comments for “The Micawber Principle: Living the Fundamental Law of Personal Finance

  1. January 15, 2013 at 4:22 pm

    Yes, this is a very simple law of finance, but like you stated…not so easy to follow! 🙂

    Great post.

  2. Tawni
    January 16, 2013 at 7:51 pm

    A great place to start. I look forward to learning more.

  3. Brent Esplin
    January 17, 2013 at 4:23 pm

    Thanks for the comments, guys. I hope you check back often and find the information useful in progressing financially.

  4. Tonya
    January 23, 2013 at 2:10 pm

    I’m always eager to read successes of the everyday common person. This philosphy makes it very simple and not so intimidating, however I still am not sure of my own self-discipline to follow through. This is a great thing, looking forward to reading more!

  5. Brent Esplin
    January 24, 2013 at 4:51 pm

    Great to hear from you, Tonya. Don’t underestimate your abilities. Start out making small committments and following through, and you will gain confidence. I hope you come back here often, and the things I write will help.

  6. Jan Esplin
    February 8, 2013 at 9:43 pm

    You’re site is fantastic!! Never too old to learn something new. Thank you for sharing all your insights. Keep them coming !!

    • Brent Esplin
      February 8, 2013 at 10:14 pm

      Thanks, Jan. I had to do something during all those lonely evenings when I was traveling. I hope you come back often and find the information useful.

  7. March 24, 2013 at 10:53 am

    I prefer to think in terms of expanding my means so that they are always greater than my expenses. Regardless great advice. In this day and age though the rate at which a person expands their means does make a difference because if your means expand slower than inflation then eventually either lifestyle will suffer or worse yet expenses will out pace income.

    • Brent Esplin
      March 29, 2013 at 3:22 pm

      I agree that expanding your income is the preferred method to living the Micawber Principle, but if you wait until you earn more to live within your means you will likely find that you will never be able to live it. I think is vital to commit to live the principle immediately, while at the same time planning on how you can expand your means. There a lot of people making a lot of money, but still spending more than they earn, so the place to start should be figuring out how to live within your current means. Then when you do expand your means you will know how to handle the excess.

  8. crin
    March 17, 2014 at 6:40 am

    This use of the term Micawber Principle from the 19th century, in reference to the shaky stock of the New York City area railroad, seems like a pejorative meaning to fool oneself or others regarding a financial matter.

    The Sun (New York), August 20, 1876, Page 3, re: the shaky prospects for the stock of the New Jersey Central Railroad, “But they chose a bad time to spread out in business. Mr. Johnston [president, NJCRR] has been going ahead too fast, and has gone too far. They are paying dividends that they have not earned. Their report says they expect to go ahead and pay the same dividends out of the profits of the current year. They had no right to say anything of the kind. There is no prospect of their paying legitimate dividends for years to come. They haven’t been doing it, and if the legitimate expenses were charged to the expense account, that fact would appear. If they can keep the road out of the hands of receiver, they will be lucky. The road has been run on the Micawber principle of giving a little piece of paper to pay a debt, and regarding it as settled.”

    • Brent Esplin
      April 24, 2014 at 6:53 am

      Interesting. I had never heard of the Micawber Principle being used in this way before but I can certainly understand why, since Wilkens Micawber seemed to ignore his principle for much of his life. This caused him no end to trouble, which just reinforces the core truthfulness of the principle. Thanks for sharing.

  9. June 29, 2017 at 6:53 pm


    Great blog; love the Dickens reference. Mrs. Wease and I just watched one of the BBC productions of David Copperfield, and liked the Micawber character’s advice, especially against the backdrop of his actions!

    • Brent Esplin
      June 29, 2017 at 8:23 pm

      I have read the book but never seen the movie. I would love to see the movie as well. Wilkins Macawber is a great character in the book and I have always loved his financial advice even if he couldn’t follow it himself. Thanks for the comment.

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