Tuesday, May 03, 2011

Outgrow your problems

Everyone knows that to save more money, you need to reduce your expenditure. However, not many talked about saving money by earning more money. The equation is this: Savings = Earnings - Expenditure. From here, we know that to increase savings, you can either decrease your expenditure or increase your earnings. Nobody is going to stop you if you do both too.

If you've read T.Harv's book titled "Secret of the Millionaire mind", you'll read about growing bigger than your problems. He mentioned that "Rich men grows bigger than their problems. Poor men tries to solve their problems". Now, of course that is a general sweeping statement, but if you would just stop and think through it, it is actually quite a good paradigm shift in thinking about personal finance. No longer do we have to cut on our wants in order to reduce expenditure, but we can have both our wants and save more at the same time. But how do we do so?

Simply increase your earnings!

If you are so much bigger than your problems, then you can not only solve them, you actually outgrow them.

That is easier said than done, or simply impossible to some. Impossible is something that people try to reason to themselves in order for the status quo to remain the same. If you're always feeling comfortable and secure, then you are not growing. Most jobs do not require you to work over the weekends, so that's your best shot at monetising your private time. If you enjoy teaching, you can take some students for tuition. If you enjoy swimming, you can teach children how to swim. There's bound to be certain things that you enjoy doing over the weekends but can earn you an extra bit over and above your main salary. Most of the mid-career switch to being self-employed actually begins like this. A stressed up lawyer might do some baking over the weekends, but is so good at his craft that people will pay for them, so he quits his job and starts a bakery shop, thus earning way above his lawyer's pay but working in something that he likes very much. Not everyone will have this fairy tale ending, but if you don't try, you'll definitely not have it!

To grow bigger than your problems is to increase your earnings to such an extent that the problems shrink to something insignificant. I remembered fondly of the times that me and my classmates would pool money to buy MacDonalds in our JC days. In those times, having a decent meal for an outing is a trip to the golden arches. Even coming up with the few dollars needed to share a meal at MacDonalds is a strain on my financial resources, because the only 'earnings' that I have is the pocket money that is given to me by my parents. After I started working and my salary increases many fold, the few dollars seem insignificant now. That is the magic of growing bigger than your problems - the problems that plagued you in the past suddenly doesn't seem so daunting anymore because you've outgrown it. I'm sure there are people who can buy Mercedes without batting their eyes at all because their income is so high that the price of a Mercedes is just a Happy Meal to them. Price is a relative thing.

Here's a suggestion on how to both increase your savings and to satisfy the wants. This method works for me, so it might also work for you. If you want to get something that cost $500, try to earn $1000 above what you normally earn. The reason for this is that I try to keep my savings ratio above 50% of what I take home per month, so if I earn $1000, I have the 'right' to spend $500 without affecting my savings ratio. If you can earn that $1000, that you will get rewarded for getting that unnecessary but ultimately fulfilling want. In the event that you can't earn that extra $1000, you carry on as long as necessary, until the desire to get that want is just diminished (it's just too much work) or you've worked extra hard over the next few months to earn it (so you are rewarded).

You can tweak the percentage as you deem fit, but the basic underlying concept still applies. You always spend less than what you earn. If you want something that is not a need, you earn your right to buy it by earning more than the cost of that want. In this way, you can save more and get your craving satisfied. Don't always talk about fulfilling your needs and suppressing your wants. Needs sustain you but it's the wants that colours your life. You don't merely want to survive life right? You want to live life with as rich an experience as you could ever have.

*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.


Singapore Man of Leisure said...

This chinese saying encapsulates your post: "kai yuan jie liu"

(Explore new resources and stamp the loss)

Saving is more about "forgoing" something else. A little more passive.

But if we focus on increasing new revenue, we tap on the creativity of the mind. It's a more active way to "solve" our money problems.

However, the path is not laid out as nicely as the savings route. Sometimes we need to braze a path ourselves....

Anonymous said...

Hi LP,
"As a man thinketh in his heart, so is he" :- Proverb.
So we have to beware and becareful how we:- "Nurture your thoughts for you can not rise higher than your thoughts"

Look at me! Do you know how I started in investing in "SGX EX"? I observed what the hack?(Sorry for my langauge). When the world's economy prospered, many in businesses and investing in "SGX EX" prospered. Me, what did I get? Nothing much, only maybe my job was more secured and a little bit more bonus and pay increment. Even then it was maybe.
Now, what happened when the economy was bad? I felt my job threatened, no increment and of course no bonus. Of course I had experienced no job-Retrenched that was. More than once O. K.
With God blessings(for non-believer will be luck or personal's skill) I have been surviving in the "SGX EX" for 23+ already.
But remember how I got started?
It's nothing but a thought in my mind.
Everyone of us is human. So how or why you got started in investing will be a thought in your mind. And you keep on going in that direction until you achieve some good out of your thought.
"As a man thinketh in his heart, so is he."

CreateWealth8888 said...

Ways to increase your money:

1. Enhance your human asset value e.g. requiring new skills, upgrading etc.

2. Work longer hours e.g. overtime or monetize your private time.

3. Sell your human asset and skills to the massess e.g. conduct courses for masses, group tuitions, etc.

4. Make your money works harder for you.

Learn the fine art and science of investing and made your money works harder for you; then you no need to monetize your private time for more money. It is a skill that lasts you really a long time.

May be I am naturally too lazy to monetize my private time so I spent it loosely in the stock market.

la papillion said...


Haha, I'm thinking along the same lines as you :) It's impt to solve our problems both passively and actively. It might not be easy, but it sure can be done.

Hi temperament,

Have u read the book 'As a man thinketh'? It's a great read :)

As the going get tough, the tough gets going ;)

Hi bro8888,

I think you're an inspiration to a lot of people because you're not one to be confined by your office job only. Goes to show that if one is really willing to earn that extra money, he can find his means and ways to do it.

Most imptly, spend less time talking and more time doing, lol!