The way we manage money is influenced by how we value money. Generally, there are three main attitudes:
- Savers value money for its security and peace of mind. They save compulsively for emergencies or their plans.
- Spenders believe that money is meant to be spent for them to enjoy themselves. They like to indulge themselves while they still can, even if it causes them to incur a lot of debt.
- Monks believe that money is below them and will avoid dealing with money whenever possible. There are rich monks too (e.g. those who are born or marry into wealth and have no need to worry about money).
As a saver, I used to focus on saving every single penny. I could spend half an hour calculating the shortest bus route to save 20 cents for a one-off journey. However, I lost much money making ill-advised large ticket items such as useless electronic gadgets.
I have found that this attitude of being penny smart but pound foolish did not serve me. Saving for a rainy day may be good advice, but it is also not making good use of the stockpile of money that is slowly eroded by inflation. The spenders’ idea of indulgence did not appeal to me. I tried being a monk but found that I only exchanged one problem for another – I have freedom with my time but lived with the constant stress of needing to find the money for my daily expenses and projects.
In the end, I decided to remain a saver but implement new policies to cover the weaknesses in my strategy:
1) Whenever I wish to spend money, I consider its value in terms of the amount of work I need to do to afford it. If I earn $40 per hour and the vacation will cost me $4,000, then I consider if it is worth working for 100 hours for that vacation. This helped to control all my big-ticket purchases.
2) I invest part of my extra cash flow in research and self-improvement. The investment must provide a long-term recurring benefit and be value for money. I favour tangible objects like supplements and eyeglasses since they convey a tangible benefit. Intangible objects like memory techniques learned from workshops tend to be forgotten unless these are for skills or certifications that can increase my income or advance my life work.
3) Whenever I have to choose to decide between spending more money or more time, I choose the alternative that gives me the most value for money. For instance, if I can spend a few dollars more per day to save an hour of travel time, but can earn a few times that amount in an hour, I will do so.
4) I do my research and invest in undervalued shares of businesses with good management, cash flow and a conservative policy of non-borrowing whenever possible. I steer clear of speculation such as in dubious penny shares and Bitcoin. It took much time and school fees for me to discipline myself not to speculate.
5) There was much hype about the idea of paying for experiences instead of material goods, but I consider that another ‘spender’ mentality. Working hard for hundreds of hours just for a short holiday of artificially sculpted tourist experiences does not appeal to me. The only experiences worth spending money on are to give good, sincere people a chance to escape poverty and better their lives.
6) The concept of manifesting wealth through positive thinking is a materialistic wolf in spiritual sheep’s clothing. It treats the universe as a genie for fulfilling everyone’s material wishes. Financial and business education has always been the foundation for those who get rich and stay rich, not a shortcut based upon pseudoscience. To increasing my wealth in the long-term, I am developing my strengths and talents into new niche areas with little competition and which most people are unable to compete with me.