The Ugly, Untold Truth about Spending Less

Wait a Minute

Before we get started, let me say this: I'm not writing this to sh*t on the notion of saving money. This article is not about justifying mindless splurging. There is a place for extravagance and there is a place for prudence.

I used to spend money mindlessly before I had an awakening. You can read the origin story here. I didn't splurge on luxury items but I was definitely careless about how I spent my money (anyhow take cab la, buy random things I don't need la - you name it, I've probably done it).

You Cannot Get To Retirement Without Saving

So no, I do recognise that saving is important. You cannot spend a dollar for every dollar that you earn. That is a sure way to keep yourself working till the day you die. Or as we say in Singapore, "Sure die one." You cannot get to retirement without saving.

You Cannot Get To Retirement Just By Saving

But if someone tells you that saving is all you need for retirement, that's a lie. If someone says cut your expenses, because your retirement is at stake, that's not exactly true either. There's an excellent article here (shoutout Gavin!) on things we aren't told about wealth. The first thing he says is that simply cutting your expenses isn't going to make you wealthy.

Why?

Let me paint you a picture.

Scenario 1: you earn $2,000 a month and save $2,000 a month.

Scenario 2: you earn $10,000 a month and save $2,000 a month.

You save $2,000 in both scenarios! Ain't that great! The difference? One is compatible with life, and the other is not.

Let's Play A Game

I admit, the first illustration is alarmist and exaggerated. How about something that hits closer to home?

Close your eyes and think of your monthly expenses for a moment. Put a figure to it. Nobody's judging here. You spend however much you need to spend; it is what it is.

You have a figure in your mind yet? Remember that amount!

Okay now let's play a game. Do you think, with your current monthly expenses, that you can survive with a monthly income of:

$4,000 per month? Alright, most of us are definitely still comfortable here.

How about $2,000 per month? Okay la, if not much liability I'm sure you'll still be fine.

Now try $1,000 per month. Still surviving? No worries.

$500 per month? We're down to some heroes right here.

How about $250 per month? It's getting tight.

$100 per month? Really??

$50 per month? You are either lying or you are a primary school kid.

What's Your Point??

Thank you for indulging me in my silly game. The point I'm getting at here is that everyone has a minimum amount of money that we need to spend on expenses below which life is frankly, unlivable. It differs from person to person. You need $500, I need $1,000 - but everyone's different, so no point comparing. Fact is, we all have a bottom line.

If you spend more than that minimum amount you can still save some money. But what if you're only spending your minimum amount each month? It's obvious that you cannot save any more. Worse, what if you earn less than your minimum amount?

I'm catastrophising here but you get my point. There is a minimum income below which we cannot survive no matter how much we save.

Saving Is Not The Whole Answer

How then, do we get to retirement other than saving? We can't do it without saving, but saving alone, well, won't save us (pun fully intended).

The solution is this: we need to increase our income. There are many ways to do this, whether by attaining pay raises, side hustling for passive income, or growing our existing wealth through investment.

I don't believe in reinventing the wheel. There are many people who can teach you how to increase your income, much better than I can. But I will tell you that you must do it.

The article by Gavin I cited earlier explores some practical tips on building wealth. Please check it out.

Many of us are familiar with TWS. If you don't follow them on IG, I suggest you do. They are a great place to learn more about employability, increasing income and I quote, "Finding success on your own terms."

Conclusion

Saving is important. But saving and cutting expenses alone cannot get us to retirement, let alone FIRE. We need to holistically treat our personal finance. We need to increase our income so that we have spare cap to save, invest AND do the things we love. Focus your efforts in the right direction. Increase your income so that you don't have to stress about spending less.

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On a related note, for those of you who enjoy stories, here is one about three ways to financial freedom, involving a monk, a shaman and a wizard. The story is told differently, but the moral is the same.

Content is courtesy of @Bullythebear :)