Sunday, 14 November 2010

Spend Less vs Earn More

In this blog I speak a lot about investing and personal finance. Investing is not a precise science as there are so many market uncertainties. For example, it's hard to tell if the US dollar is going to keep going down or whether it will strenghten in the fiture. These uncertainties are what I love about investing.

I consider investing to be a hobby. I do it in my spare time and I find that it is a lot of fun. Someone once said to me, "Dude, why do you spend so much time studying investments. You should be spending time increasing your income instead." My friend, in my opinion, believed that work and investing is a trade-off. If you do more of one thing you must do less of another. I think this is wrong. My response to his comment is that I do spend time increasing my income. I do try to do the work I need to do at work to the best of my abilities. I don't study investing at work. Investing to me is leisure, so I do it at home after work or during the weekends. It does not interfere with work. If I weren't studying investments at home, I'd probably be doing some other leisure activity, e.g. watching reruns of Survivor or Shaytards.

Some people argue that saving money, investing and so forth is a waste of time because you should be focusing on improving your career, getting promotions, and so forth. Everyone has his own preferences but personally I find saving money and investing to be a lot of fun. The investing is certainly more fun than saving money, but saving money and investing as a whole is more fun and certainly more easy than working hard.

Working hard actually involves hard work! If you listen to all the career gurus, they will tell you that doing well in your career requires major analysis on office politics. You've got to do all sorts of difficult things like networking and watching what you say, making sure that give good impressions to others, and so forth. Some people are naturally good at this. I am not. You can call me old fashioned but I believe that you go ot work to simply do the work you're given. If you are given X then you do X to the best of your ability. There is no need to go beyond that. There is no need to stay back at the office just to show off to the boss. There is no need to set up coffee with every single person in your division to expand your network. There is no need to walk around the office and volunteer to do everything and find that with so much work to do you are overloaded and cannot cope. Like I said, for some increasing your income is easily, but for me it is difficult. Furthermore, because I work for the government, our pay structure does not include bonuses and other complex incentives structures that reward you for hard work--nor should it be because working in government is not really about hitting certain KPIs, as what is good for the organization is public welfare, not something measurable like profit or stock price appreciation.

Saving money and investing is simple. In fact, saving money is very simple because you don't do anything. If you want to advance in your career you usually have to do something, e.g. impress your boss. To save money you have to not do anything. The less you do, the more you save. If you spend your free time going to bars, pubs, casinos, movies, nightclubs, and so forth, then you will pay big. But if you don't do any of these things, you don't pay anything and you save money. Some people are what I call active savings in that they save money by aggressively trying to find hihg-value goods. These are the people who will not buy a coffee because $3 for a cup of coffee is not good value because you can make your own coffee for 50 cents. These are the people who are happy that they spent $5000 on their wedding because the average price for a wedding is $30,000. Active savers spend a lot but whenever they spend they save a lot of money. This is not me. I am a passive saver, which means that the way I end up saving money is simply by not buying things. The active saver will be happy if he spends $5000 on a wedding rather than $30,000. A passive saver will not get married and ends up paying nothing. I am not saying that I don't value marriage or leisure. I am just lazy, but this laziness has its benefits.

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