Joe's problem is not that he earns too little money but spending it foolishly.
parallel

nonparallel

balanced
I think it's nonparallel because he could of just used the word "spends"

Yes, it is non-parallel.  The correct form should be “SPENDS” and not “SPENDING”  

Explanation:

Parallel structure or parallelism is a literary device in which the elements in a sentence are similar in their grammatical form.  Parallelism makes the sentence consistent and balanced.

Example:  if an idea is expressed in simple past tense, then to maintain the consistency, all ideas expressed should be in simple past tense .

For Example:  

CORRECT:  He came, he saw, and he conquered

CAME, SAW, and CONQUERED are all forms of simple past tense

INCORRECT:  He CAME, he SAW, and he IS CONQUERING

The above example makes the sentence inconsistent as it used both simple past tense and progressive tense.  

Parallel structures can be used  

1.  With coordinating conjunctions

2.With Correlative Conjunctions

3.With phrases and clauses of comparison  

4.With Items in a list

where exactly is the sentence