Know your limits, then break them

You know that I've always been saying that saving can be achieved by two means - either through an increase in income or by decreasing one's expenses. But till recently, I've never put a thought to which method is gives the least resistance. In other words, I didn't take into account the mind's resistance to new changes. I think based on your personality, you might find it easier to increase your income, but another person might find it much easier to just reduce expenses. Ultimately, the success of each method depends on how well suited you are to the method and how far you have to stretch out of your comfort zone.




This epiphany came as I analyzed the weight loss equation. There are two ways to lose weight - either to increase your energy through exercising more or by eating less calorific food. I know myself, I'm not a very sporty person so asking me to go out to exercise more is definitely harder than to simply eat less. I know another person who is better suited for losing weight through exercise because food is simply too tempting to avoid. I guess thr method you choose really have to suit your lifestyle to make the journey easier, because you do not have to step too far out of your comfort zone. Isn't this the same as the financial analysis versus technical analysis divide too? Some are better suited for the swashbuckling trading way rather than the more studious and research based investing. It's hard for someone with a personality for trading to switch to investing and vice versa. It's not that it can't be done, it's just that it might not be the easiest path.

Back to savings, I think it's easier for me to save more by reducing expenses. Some people might find it hard but for me, I think it just comes naturally. In fact, to spend more money requires quite an effort from me and that always amazes my wife. I find it quite a curse to be so tightly bound to my money habits (I'm trying to change it and my friends told me I'm much better now). That being said, the easier method might not be the better method in terms of accomplishing your goals. The pursuit of comfort might hinder the pursuit of goals because you tend to do things that doesn't stretch your comfort zone too much, never mind whether it achieves your end point or not. So, since I'm better at reducing expenses, I should not just concentrate on reducing expenses because that's easily done. I should explore options to increase my income because that is truly the limiting factor in the savings equation; You are limited by what you cannot do well, not by what you can do well.




For that somebody who finds it easier to lose weight by exercising more, she can try eating lesser as well as continuing her normal exercise routine. For those who are naturally suited to financial analysis as a way to view the stock market, he can take up a bit of charting. For those who are good in charting, she can pick up fundamental analysis to push her skills to another level. And finally, for those who are good at increasing income to save money, he can try reducing his expenses.




In summary, what do I advocate? Know your strengths and choose the method that suits your personality. Once you start on whatever goals you desired, maybe you should look at the limiting factor that stunts your journey, take a dab at that, try it out. If things don't work out, no problem because the risk of failure is low since you've already have something working. If it works out well, then your limit is expanded. And that is always a good thing, yes?



*This article is contributed to IM$avvy financial portal, which is managed by Central Provident Fund Board and supported by MoneySense. This site has a noble aim of promoting financial literacy to the general population.