The quote in the title above is often attributed to Luther. Those particular words are not in the commentary section I read, but the basic idea is very prominent. Luther again shows how balanced and pastoral he is in his thoughts on a passage that Paul begins (and summarizes) by saying, "For you were called to freedom, brothers. Only do not use your freedom as an opportunity for the flesh, but through love serve one another. For the whole law is fulfilled in one word: 'You shall love your neighbor as yourself'" (vv. 13-14).
Luther captures the point of the passage (and the saying above) in the following quotes...
Christians are glad to hear and obey this teaching of love. When others hear about this Christian liberty of ours they at once infer, "If I am free, I may do what I like. If salvation is not a matter of doing why should we do anything for the poor?" In this crude manner they turn the liberty of the spirit into wantonness and licentiousness. We want them to know, however, that if they use their lives and possessions after their own pleasure, if they do not help the poor, if they cheat their fellow-men in business and snatch and scrape by hook and by crook everything they can lay their hands on, we want to tell them that they are not free, no matter how much they think they are, but they are the dirty slaves of the devil, and are seven times worse than they ever were as the slaves of the Pope.
The Apostle exhorts all Christians to practice good works after they have embraced the pure doctrine of faith, because even though they have been justified they still have the old flesh to refrain them from doing good. Therefore it becomes necessary that sincere preachers cultivate the doctrine of good works as diligently as the doctrine of faith, for Satan is a deadly enemy of both. Nevertheless faith must come first because without faith it is impossible to know what a God-pleasing deed is.
So the great Reformer (like the great Apostle before him) knows that it is important to emphasize the role of good works (especially love) as an evidence of true faith. But in his later comments we see Luther's pastoral and practical concern that this emphasis can sometimes cause true believers to fear for their souls because our works never seem to be good enough and our sinful flesh never seems to go away. (To understand what the "flesh" is according to Scripture, see this post.) Luther says,
Do not despair if you feel the flesh battling against the Spirit or if you cannot make it behave. For you to follow the guidance of the Spirit in all things without interference on the part of the flesh is impossible. You are doing all you can if you resist the flesh and do not fulfill its demands.
When I was a monk I thought I was lost forever whenever I felt an evil emotion, carnal lust, wrath, hatred, or envy. I tried to quiet my conscience in many ways, but it did not work, because lust would always come back and give me no rest. I told myself: "You have permitted this and that sin, envy, impatience, and the like. Your joining this holy order has been in vain, and all your good works are good for nothing." If at that time I had understood this passage, "The flesh lusteth against the Spirit, and the Spirit against the flesh," I could have spared myself many a day of self- torment. I would have said to myself: "Martin, you will never be without sin, for you have flesh. Despair not, but resist the flesh."
I remember how Doctor Staupitz used to say to me: "I have promised God a thousand times that I would become a better man, but I never kept my promise. From now on I am not going to make any more vows. Experience has taught me that I cannot keep them. Unless God is merciful to me for Christ's sake and grants unto me a blessed departure, I shall not be able to stand before Him." His was a God-pleasing despair. No true believer trusts in his own righteousness, but says with David, "Enter not into judgment with thy servant; for in thy sight shall no man living be justified." (Ps. 143:2) Again, "If thou, Lord, shouldest mark iniquities, O Lord, who shall stand?" (Ps. 130:3.)
No man is to despair of salvation just because he is aware of the lust of the flesh. Let him be aware of it so long as he does not yield to it. The passion of lust, wrath, and other vices may shake him, but they are not to get him down. Sin may assail him, but he is not to welcome it. Yes, the better Christian a man is, the more he will experience the heat of the conflict. This explains the many expressions of regret in the Psalms and in the entire Bible. Everybody is to determine his peculiar weakness and guard against it. Watch and wrestle in spirit against your weakness. Even if you cannot completely overcome it, at least you ought to fight against it.
According to this description a saint is not one who is made of wood and never feels any lusts or desires of the flesh. A true saint confesses his righteousness and prays that his sins may be forgiven.