Tuesday 16 July 2013

Earn more or Save more?

We all know the secret to having more money is either to earn more or save more. And doing both together is even better!

As a saver myself, it's not my intention to slap my own face or to belittle the savers. But we need to see things in context and have a proper perspective on which comes first.

The Chinese have a idiom for it:

开源节流  to broaden the sources of income and economize on expenditure

It's no coincidence in my previous post I put Earn More before Save More.

As investors, don't we prefer companies we own to secure their profits through top line revenue growth? Why? That's a sign of virility! The company is growing and gaining market share from it's competitors. It's or-yi-or Tarzan stuff!

But if the same profit is engineered through downsizing, rightsizing, outsourcing of non-core processes, will that comfort you? Does the image of a leaking ship - where everyone is busy jettisoning the dead-weights off the ship - comes to mind?

Saving is important. What's the point of earning $10,000 but you spend $11,000? 

A jolly good time? Eh! I never asked you! Keep quiet and sit down!!! 

Ahem, as I was saying... What is the maximum savings rate a person can achieve for his/her income?

100% of course. And it's possible!!!

That is if you are lucky enough to be still living off your parents as an adult. Or you have a high income earner spouse that you can sponge on. My mainland lady friends call it securing a long term meal ticket ;)

For most of us, a savings rate of 30% would be great. 50% would put you in awesome  category. And for those who can save 70% of their income, that's MONSTER kill!!!

That all and good in percentages.

There are 4 big chinks in the saver's armour:

1)  Your money saved cannot exceed your income - there's a cap. 

You cannot save $11,000 if you earn $10,000. Or?

2)  100% savings rate on zero income is still zero. 

Life is not a straight line extrapolation. You could be laid-off, fired, met with an accident or contract an illness. 

Ok, ok. Choy choy and spit spit. Touch wood touch wood. Why you touch my head? It's not wood ok?

3)  Growth is better than austerity.

If I earn $3,000 per month, to save $2,100, I need to save 70% of my income and make sacrifices on my lifestyle choices. 

But if I focus on broadening or increasing my sources of income, let's say I double my income to $6,000 per month, saving the same $2,100 income per month now represents 35% savings rate. Which is more sustainable?

It's a bit like evaluating income stocks. Do you prefer a stock with 90% dividend payout ratio that yields 5% or another stock with 45% dividend payout ratio that also yield 5%?

4)  Crossing over to the dark side

There's a fine line between being thrifty and stingy. Between financially prudent and simply being a scrooge.

Delayed gratification is good; but delayed gratification till the afterlife is over planning! Albeit hoarding cash is better than hoarding thrash; it's still the same psychological disorder. 

Just flip through the obituary pages once in a while. You may see quite a few who left for a better place at 55 or 65 years young.

When making beautiful plans like when I have XX amount at YY age; or when I retire then I will do this and that - do remember to include: What if tomorrow never comes?

In my next  post, I talk more about Earn More.


  1. i need to see a psychiatrist!

    1. What?

      Besides dyslexic, mildly autistic, you have another mental issue?

      Hey! Don't look at me!

  2. you talking about who ah? got examples or not?

    1. i guess you also needed one haha..

    2. now you know why children is important?! just in case you are a hoarder of cash or expansive watches or other valuable stuff and your times is up.

    3. AK,

      You're so vain! You probably think this song is about you. Don't you? Don't you? (Must sing along ok?)

      The idea for my series of posts on earning vs saving started with the "save $100,000 by age 30" article in the media.

      Even if we hit our goal through savings, what new skill sets have we acquired? Endrene said it best - saving is more a matter we want to or not. It's not a new skill set; it's more about personal discipline and lifestyle choices.

      But if the goal is to EARN $100,000 by age 30, then it will require new skill sets and thinking outside our comfort zones.

      And of course the emphasis is NOT everyone can achieve it. Something that everyone can achieve, what's the point of the goal in the first place again?

      P.S. I don't think people visit your blog to learn austerity from AK ;)


    4. Hi coconut,

      What has having children or not got to do with it? So cheem. I don't understand. Cham. I must go back to school.

      Hi SMOL,

      Sing along? Ok.. ahem.. Lalalalalal Lalalala... Pass or not? Karaoke lounges pay me not to go because when I sing, all other patrons leave liao. ;p

      People don't visit my blog to learn how to be frugal? Why am I blogging then? This is depressing. :(

    5. AK,

      Well, you know from the page views which of your posts have the highest readership ;)

      Posts on what stocks generate good passive income and which counters you are currently trading for capital gains perhaps? Just a wild guess!

      When was the last time you posted on the $XX amount you've saved? People are enthralled by the $100,000 amount you have earned passively! I still remember that eye catching post :)

      Honestly, do people need to be told how to save money?

      It's like smoking, drinking, gambling. Those that listen, we are preaching to the choir. Those that don't listen, we are talking to the wall.

      People change when they are ready to change.

    6. AK!!!

      to know the answer why, you got to have children of your own, i can't tell you why.

    7. Hi SMOL,

      OK, here is the list of the top 3 blog posts in the last 1 month:




      You are right! Nothing about being frugal! 1st spot went to Hello Kitty. 2nd spot went to buying N95 Masks. 3rd spot went to which stocks have I been accumulating. Sob, sob.... :(

    8. Hi coconut,

      That is a trick! I am not going to fall for that. I not stupid. ;p

    9. AK,

      LOL! We both lose to Hello Kitty!?

      OK, I think I switch to writing about the purpose of life is to complete our Hello Kitty collections ;)

      Maybe I should make a trip to Yiwu in China and order some Hello Kitty paraphernalia to sell on-line?

    10. AK!

      I fell for your charm again!

      You very de smart use the opportunity to promote your 3 top posts!!!

      I don't care. You make another phone call to the Children Charity.

    11. Hi SMOL,

      Yes, yes? Thought I heard my name somewhere?!? :P

      开源节流 is my pet phrase! And yes, we also ought to be mindful not to end up 人在天堂,钱在银行!

      Sometimes we need to live life with more than a bout of optimism. To get overly concerned whether we can retire with at least $10k passive income each month is plain tiring. *Yawn*Yawn* Sorry...I've fallen sick again. Groggy after medication. :P

      Sometimes I tend to subscribe to a lazy excuse - 命里有时终须有。。。you can continue to rest, circling your head as you narrate!



    12. Hi SMOL,

      I protest! I am innocent! Now, the 4th and the 5th most popular blog posts are.... ;p

      Now, I must go find higher ranking blogs to spam. This is hardly making a dent. ouch. Hahahahaha... ROFL.

    13. Endrene,

      You get well now.

      The song 滄海一聲笑 is now playing in my head ;)


    14. AK,

      One phone call only.



  3. Hi SMOL

    I used to debate this a lot with my friends and myself (myself really???), using the context of soccer.

    Which in your opinion is more important if you have to choose the two: Defending or attacking?

    When you defend all you might, the best and worse score you can get is a draw. While the other proposition might say that attacking can either win you or lose you games.

    1. B,

      A triumph for youth!

      There are those who play not to lose.

      Then there are those that play to win.

      A lot of interview techniques and tests are designed to tell who from whom ;)

      Many of those that play to win can be found in what I call "Hunter" professions. I will elaborate more in my next post ;)

  4. Hi SMOL,

    Totally agree. I always say that earning more is better than savings more. In the pursuit of more money, likely you'll also have less time, so you'll automatically save more too.

    1. LP,

      And I am greatly inspired with your: Growing bigger than your problem post.


      My post is similar in vain. Earning more is growin bigger.
      Saving is solving your problem.

  5. Earning more by working longer and longer hours will turn them into rats at mid-night.

    1. CW,

      It's interesting that you automatically associate earning more as working longer. And that is natural as you were a corporate man.

      Yes, working longer is one way of earning more. I'll expand more in my next post. Stay tune.

    2. have you guys heard of machines, tick tock tick tock...

    3. automated machine, last time i work in production line, the machine runs 24 hours non stop! so poor thing, me, i just sit there and watch, sometime fall asleep if i'm on mid night shift.

    4. Well,

      You got a great gig! Getting paid while you sleep...

      I guess my only similar experience is sleeping during guard duty at field camps.

    5. talk about getting paid when you sleep, army is the champion. but we always make full use of our "sleeping time" and playing "games".

  6. Refering to this --> In the pursuit of more money, likely you'll also have less time, so you'll automatically save more too.


    1. Opps!


      Must give greetings and salutations mah!

      So you were "poking" LP! LOL!

      For a moment, I was thinking about your 10 baggers and multiple rounds of trading around a core holding. That didn't require long hours what?

      Now I crystal.

      Sorli sorli! (Face redder than ang ku khuey)

  7. One way to monetize our free time as Singapore Citizens? Get taxi driving licence?


  8. Hi SMOL,

    Wah, these days your blog posts are like BTO..must build up demand then can have sequel is it? So how, BTO fully subscribed liao, when is your next post coming? ;)

    1. LP,

      It's call strip-tease (I'm going through hormonal change phase now. Give chance).

      I think I'll take up pole-dancing next! Or belly-dancing?

      If tomorrow weather good I'll finish my next post. Maybe.


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