Invert Investment
One BIGGEST reason you can't save money
InvertInvestment
Publish date: Sat, 18 Aug 2018, 10:42 AM
To understand the single biggest reason you can't save money, let me first introduce you one simple formula, it's actually so simple that it's common sense:
Income - Expense = Savings (hereafter called IES)
Clearly you can see from this IES formula that when your income is higher than expense, you have positive savings. However,when instead your expense is higher than income, you have negative savings. Got it? Okay, by establishing this formula, we can start our discussion.
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First let's be honest, most of us are working class and don't come from wealthy family. But do these facts stop us from saving money? The answer is a big fat NO. (If you're however making RM 2,000 and are the sole breadwinner of your family, then you're not having savings problem, but income problem! I suggest you should do whatever to get back to the game, e.g. learn higher-income skill, find part time jobs, etc.)
Why do a lot of my friends and people around me don't seem to be able to save money? Remember the IES formula we talked about earlier? The culprit is almost always the E component, i.e. Expense, and it's the single BIGGEST reason you can't save money. These days people are indulged in high consumerism, they like chasing the latest trends, they like having all sorts of entertainment and they are living in the present without any financial plan.
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The very core problem with people nowadays is that when they see stuff other people upload to social media, be it on Instagram, Facebook or Youtube, they immediately jump on the bandwagon, they want to own those stuff as soon as possible. Let me share with you the quote below:
If 40 million people say a foolish thing, it does not become a wise one.
- Somerset Maugham (British novelist, 1874-1965)
I would go as far to say "If 40 million people do a foolish thing, it does not become a wise one." Make sense? Why would a person with RM 3,000 monthly pay want to buy a RM1,699 Dyson hair dryer just to be... cool? Why would a person with RM 4,500 monthly pay get a RM 15 Starbucks daily (which amounts to RM 450 a month or 10% spent on drinks alone)? I guess maybe they like the atmosphere, status, air conditioner provided by Starbucks, and they are disgusted by the RM 2 drinks from kopitiam?
I've heard many excuses for unnecessary expenses, someday I would hear "This is once-in-a-lifetime concert, I have to buy the ticket even if it costs me RM688", another day I would hear "This is limited offer which is gonna end on tomorrow, I have to buy it now no matter what", etc etc. People have given all sorts of funny excuses to justify their expenses, but I would like you to think for a second: Have they ever given themselves a chance to save once? Just once.
I'm certainly not saying dont buy stuff. I'm also absolutely not asking you to live in a cage, I just mean spend wisely and be realistic of your financial status. Otherwise you will be like one of my friends who is earning SGD 6,000 now after working for 10 years but have zero savings, and...... you guess it right...... a lot of debts! All due to frivolous spending!
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It's funny when a friend of mine told me he's got this RM600+ earpiece one day, and I asked "why did you get this?". He replied, "well, my boss just gave me a RM300 raise staring from this month". I was totally floored because when your pay increases, your expense shouldn't increase as much (in this case, it's worse because the additional expense overshoots the pay raise).
If you can only remember one lesson from this post, take this one: Widen the gap between income and expense over time, don't shrink it! And the key to achieve that is to Live below your means (You can argue why don't we increase the income portion instead? Yes you can, in fact that's the better way, but still you have to live below your means. Otherwise what's the point of earning RM 15,000 per month, and then spend it all and save nothing? ).
It's only when you start living below your means that you can start saving money. Consequently, It's only when you have that surplus of savings that you can start investing and let the compounding effect do its magical work. So start living below your means for your own good.
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You can see my previous post on Acquirer's Multiple https://klse.i3investor.com/blogs/invertinvestment/169185.jsp
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18 Aug 2018
- InvertInvestment
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Discussions
1 person likes this. Showing 24 of 24 comments
Great article. This probably the real reason why people do not save and invest. People always complaining high cost of living, cant buy property and invest which I think is not true. Most likely is they over consume.
2018-08-18 12:48
Thats why raider always emphasis positive force savings beside just ordinary savings loh....!!
What are the positive force savings ??
1. Buying a house using bank loan.
2. Buying life insurance using cash instalment
3. Buying share using cash & margin
If u do that above, u r forcing yourself to force lowering your expenditure by increasing your force savings loh...!!
But never never increase your expenditure thru negative fixed cost spending, when u cannot really afford it loh:
1. Buying a new car
2. Using credit card to finance ur oversea holidays by instalment.
3. Buying expensive luxury designer goods like LV, Hermes, Prada etc.
4. Buying into expensive club membership thru instalment
5. Financing your children to expensive international schools that u can ill afford loh....!!
6. Taking up expensive Personal loan or deferred payment.
The above will worsen your financial health, and run u thru debts loh..!!
Once u realize u run into debt problem, start restructuring your finance loh.....!!
Only thru excess savings & investment...can make u rich loh....!!
2018-08-18 15:17
Also remember when u run into sustainable negative savings monthly, the solution for u beside to cut cost is to increase your income loh..!!
Solution on your income side
1. Get higher paying job.
2. Get 2nd income like multi level mkt, grab driver, give tuition, sell part time burger, do part time booking, be a property broker, insurance agent etc loh...!!
3. Get a part time job loh...!!
If u have 2 to 4 type of other source of income, it will help u to build up your finance & paydown your debts loh...!!
Do not stop the momentum of savings accumulation once u had paydown ur debt loh....!!
2018-08-18 15:28
@calvin
With the savings he should invest early in good Appreciating Assets like Real Estate or Shares of Good Companies.
calvin bro, next week here got auction double storey house RM90k only. want on?
2018-08-18 17:10
aiya, nowadays...the standard for fresh graduate is double storey house + vios…. how can save?
ok la, downgrade a bit, condo + myvi…. fuiyo...no gst/sst, must cepat beli~
2018-08-18 17:12
stockraider sifu ah, I scare leh, I dun dare take loan.
maybe im 100% chinaman hehe. keep save save save~ no loan
car is cash money~
2018-08-18 17:13
It is ok....if u don take loan loh....!!
Just keep up with the traditional savings, where your income is more than expenses loh....!!
The productive loan like house and shares are just force savings for those who do not know how to save & thus solution is use force savings mah.....!!
Posted by Alex™ > Aug 18, 2018 05:13 PM | Report Abuse
stockraider sifu ah, I scare leh, I dun dare take loan.
maybe im 100% chinaman hehe. keep save save save~ no loan
car is cash money~
2018-08-18 17:51
Being a very strong saver, i would rather other people spend.
Someone needs to support the economy. If everyone was like me, will turn into Japan and stagflation forever.
They support the economy and enjoy life more, while i get to buy more stocks that appreciate in value due to their support of the economy.
“The less you eat, drink, buy books, go to the theatre or to balls, or to the pub, and the less you think, love, theorize, sing, paint, fence, etc., the more you will be able to save and the greater will become your treasure which neither moth nor rust will corrupt—your capital. The less you are, the less you express your life, the more you have, the greater is your alienated life and the greater is the saving of your alienated being.”
― Karl Marx
2018-08-19 05:05
Two stories stuck with me...
A boss who's a self made multi millionaire worked 18 hour days, never skipped a day, saved up, sacrificed his all to acquire assets... When he died, his wife married the long time driver employee and they both enjoyed the fruits of the ex husband's labour... The driver realised that instead of him working for the boss, the boss had in fact been working all his life for him (the driver) instead
You saw that BMW, your dream car, could afford it but chose to slug it out with your old jap.. The next day after your funeral, your son made a deposit for a new BMW
you only have one life and the reason you exist in this physical form is for you to experience joy espoused by your 5 senses... What does all those dollars in your assets mean when you leave this world one day?
2018-08-19 08:41
Saving, to me, is one of the most overrated financial planning advice... Don't talk about enjoying retirement when you can't even enjoy life now despite the fact that you could afford it..
You sacrificed health in order to gain wealth only to have to eventually sacrifice your wealth to regain your health
And the paradox of money is that, it seems to come to you more easily and effortlessly, if you allow it than you don't
2018-08-19 08:43
Ok la... Everyone want yolo ma... Like that cash out all stock, quit job, swipe credit card, and live good life... Hehe...
If loan Installment catching up, then just swipe another loan to cover.
2018-08-19 09:04
But if u save because u want to provide for your family, to eat your own bread, and to support the charitable cause, then maybe can raise the saving rating up a bit.
If not, just spend lar~? Fresh grad straight loan myvi extreme
2018-08-19 09:05
Some ppl like to buy experience , some people like to see the money that they have. Nothing wrong buying BMW and pay installment or buy 2nd hand cash.
2018-08-19 11:07
U should budget yourself the savings, that can support your lifestyle independently until u reach 100 yrs old mah....!!
It is very unfortunate...if u run out of monies when u r 63 yrs old...after u retire loh...!!
Ask yourself what u r going to do as old man suffering at a later year for the rest of your life without monies leh ??
2018-08-19 12:56
Kesian... Old man old age and without money... But maybe still can live in dignity gua... Honest work honest money...
2018-08-19 13:09
BUT WHAT IF UR HEALTH DO NOT PERMIT U TO WORK LEH ??
Posted by Alex™ > Aug 19, 2018 01:09 PM | Report Abuse
Kesian... Old man old age and without money... But maybe still can live in dignity gua... Honest work honest money...
2018-08-19 13:14
> Ayoyo
Thanks for sharing.
All in, I believe it’s about finding the sweet point, you don’t want to live in a cage, neither do you want to max out your credit. Nobody should sacrifice his/her health excessively for wealth, if you have to do so, you have bigger problem than savings.
2018-08-19 14:51
> Jon Choivo
I used to think a lot like you, the rest of world can consume as much as they like (as most of them only care about their shopping carts in Taobao and Amazon) while I buy all sorts of value appreciating assets.
Now I would be very happy if there’s even one person who is willing to take action after reading this article.
2018-08-19 22:01
Thanks for a good article. If everybody got positive saving and get $ be your servant earning more $ for you, it will be no bankruptcy..financial planning is the way to go. Happy trading.
2018-08-19 22:48
The reason I can't save money because I been conned into buying limit down shares. And I'll avoid buying BJFood shares cause all the Starbucks lovers will quit drinking after reading this article:)
2018-08-20 08:22
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(((would go as far to say "If 40 million people do a foolish thing, it does not become a wise one." Make sense? Why would a person with RM 3,000 monthly pay want to buy a RM1,699 Dyson hair dryer just to be... cool? Why would a person with RM 4,500 monthly pay get a RM 15 Starbucks daily (which amounts to RM 450 a month or 10% spent on drinks alone)? I guess maybe they like the atmosphere, status, air conditioner provided by Starbucks, and they are disgusted by the RM 2 drinks from kopitiam?
I've heard many excuses for unnecessary expenses, someday I would hear "This is once-in-a-lifetime concert, I have to buy the ticket even if it costs me RM688", another day I would hear "This is limited offer which is gonna end on tomorrow, I have to buy it now no matter what", etc etc. People have given all sorts of funny excuses to justify their expenses, but I would like you to think for a second: Have they ever given themselves a chance to save once? Just once.)))
To be successful one must Earn more and spend less.
With the savings he should invest early in good Appreciating Assets like Real Estate or Shares of Good Companies.
So in order to save we must curb desires and gratifications or postpone them.
Highly successful people like Warren Buffet, Walter Schloss & Igvar Kamprad (Ikea founder) lived on very little. Save much & invest a lot
That is the reason why they are so successful.
2018-08-18 11:41