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Wednesday, 18 October 2017

Herzberg's Motivation and Hygiene Theory as applied to Save More and Earn More

Remember those management theories we learnt in school or at work?

Can still remember the hygiene and motivation factors?

Those forget or never took business courses can google first to refresh your memory before reading further.

When we talk about financial literacy, its a HUGE topic.

That's why if you alert, you can spot 2 main camps to catering to the needs of the SAVE MORE and the EARN MORE readers.

Hygiene and Save More

This would be the Suze Orman of the world talking about consumer debt like credit cards, housing loans, insurance policies, different bank account types, CPF; emergency funds, clipping coupons; etc.

In some cases, it may look like "earn more", but its not.

For eg, it we switch to this so and so bank account, we can "earn" an extra 1% in annual interest if we can make ourselves jump through hoops...

Or if we accumulate XXXX miles, we can travel for free!

The saddest example must be for the minority who thinks life insurance is a sort of "investment".  Especially those who bought life insurance policies for their child. This is the equivalent of believing the Earth is flat...

Don't get me wrong. Save more is important!

When a person can't manage the hygiene factors well - like having out of control credit card debts, over insured themselves with junk policies, little to no savings which means living hand to mouth - there is no foundation to speak of. 

So if anyone wants to embark on their jouneys towards financial freedom, this is where to start first:

Clean your own backyard!

Motivation and Earn More

To some, there's no need to focus on Earn More. 

This is especially if you are risk averse; and the mere thought of losing just $10K will give you ulcers and sleepless nights...

Look, if you can save $50K per year, in 20 years you will be be a millionaire!

And that's with ZERO tailwind support as in interest rate yield! And ZERO risk of capital loss. OK, purchasing power that's another story... (where got free lunch one?)

Although it will be over my dead body before I make any voluntary contributions to CPF, I can perfectly empathise with those who do. 

However, when we mention financial freedom, the majority legion out there will readily admit the first thing that comes to mind is to EARN MORE money!

That's where tons of ever so helpful "Samaritans" out there are ever so eager to share their wisdom with you, and to help you get rich like them!  (But if they not rich themselves...)

Different snake-oils peddling their own poison of choice. 

Be it properties, equities, options, CFDs, forex, and what not! 

Even helping you to be your own boss/entrepreneur to be an internet marketer. Tip: smarter students of such courses will in turn market their own courses on how to make money from internet marketing... That's how you make money from internet marketing! LOL!

Remember when companies were still using the classifieds for job recruitments in the 90s? Saw those insurance and property agents recruitment ads that promise to help you be a millionaire if you join them? Now you know why your agent is so interested in your financial well being! 

Why the proliferation of "help"? And why do most people gravitate towards these "help"?

That's because anyone with a few years of investing experience knows:

Investing is not saving


  1. Earn more and save more and no invest more is healthy motivation?

    1. CW,

      Earn More from career/business and Save More but no Invest More - the Motivation is Loss Avoidance.

      Blessed is the person who knows himself and acts accordingly.

      I've got a colleague who lost just $5K in shares and he swore to chop fingers!? The pain of losing hard-earned money was too much to bear for him... Its bank savings from henceforth ;)

      The trouble is that blur sotong newbies mistake Savings vehicles with Investing vehicles - buy REITs or junk bonds and feel very smug earning 6% in yield over fixed deposits and CPF savings...

      That's until they had their first capital loss! Then they'll find out the hard way what are the differences...

  2. Hoho ... this was infamous theory much abused by senior management in the 1980s & 1990s to de-emphasise extrinsic monetary rewards for intrinsic factors like high-sounding job titles, designations, "interesting" job responsibilities, leading of projects, best employee awards, family day, D&D, etc etc.

    That was also the time when civil service discontinued the practice of "selling" your unused leave -- old birds could have almost 60 days accumulated each year -- they would take 30 days & sell the other 30 for an extra 1-month "bonus" hohoho!!!

    In practical real-world sense, both saving & earning are important. But saving is more important. Too many cases of multi-millionaire pop stars, actors, singers, sports stars getting into financial problems because of poor savings & bad spending. That's why many lottery winners lose most of their winnings after a few years --- arguably more people who are bad at savings in the 1st place are the ones most likely to buy lottery & gamble ... Not all horr :)

    Investing is separate discipline & skill from saving and earning. Even if you turn your investing prowess into a profession, there are many other skills & factors required besides investing. ;)

    1. Spur,

      Title inflation is especially prevalent in sales. Everyone is a manager. Everyone is a vice-president! LOL!

      This trick is not fooling anyone. Call bus drivers captains will not work; give higher salary people will come ;)

      If you advertise a toilet cleaner position but pays $10K per month, see if anyone will come! LOL!

      Its show me the MONEY!

      Ah! Good to see we have a difference in opinion ;)

      Of course save more and earn more are BOTH important!

      But there is a reason why our 5,000 years of Chinese wisdom says its: 开源节流 and not 节流开源.

      And why when we invest in a company, we focus a lot on topline revenue growth first. If a company is not growing, that means...

      Of course dividends and profits may still grow (accounting magic) when revenue is declining. But whether its sustainable or not, that's another question.

      I am guessing you worked for big daddy. Surely you know big daddy's fetish with GDP growth? Politics is precarious... No growth may mean regime change...

      Too many cases of multi-millionaire pop stars, actors, etc?

      How many people can EARN multi-millions in the first place?

      But I know a lot of middle-class earners who can save 50% or even 70% of their earnings ;)

      Save more "just need" discipline (OK, some don't have it)

      Earn more requires talent, competence, acumen, and loads of luck!


    2. SMOL,

      "Save more just need discipline"

      "Earn more requires talent, competence, acumen and loads of luck"

      That's why I feel more important to be master of savings first ... easier to save 30% of salary than achieving $1M/year or even $300K salary .... heheh! :)

      You're right ... my civil service old bird seniors managed to accumulate multi-million nest eggs just by savings in FDs & bank accounts. Not that they had very high salaries --- most peaked at under $10K/mth ... but they had high savings rate plus long iron rice bowl careers.

      The more adventurous ones bought investment properties when prices were low. They didn't believe in stocks! Hohoho!!!

    3. Spur,

      We are in agreement when it comes to cleaning our backyard first ;)

      For those who are high earners, they don't really have to "invest" if they don't have the "motivation" to enjoy the process/craft of investing.

      Most people say they enjoy investing.

      What they are really saying is they like it when they make money, don't have to take responsibility for losses, and no need to spend any time, and even better if its - Look ma! No brains needed!

      That's why Buy-and-Hold, Income Investing, and Passive Indexing are so enticing vehicles!

      But they are not Fixed Deposits and CPF...

  3. i say people like you or me earnings peanuts then must think of investment like mad - "Boh Mei Boh Jit".


    1. Golden Rabbit,

      That's why telling O' levels like me to SAVE MORE is disingenuous.

      The best of us become Business Owners.

      Next popular is to do snake-oil commission based sales jobs.

      Or to climb higher at corporate ladder by running circles around mediocre graduates ;)

      Then there's investing to escape...

      Which is different from investing to achieve...

  4. When the tide goes out and people are 40% underwater, you can see who's not wearing their trunks.

    1. Early Retirement SG,

      Investing is not easy.

      Its a lot easier if we can add $50-100K as cash injections into our portfolios every year though ;)

      Its a "hidden" sort of dollar cost average for the well capitalised - those doing well in their careers or have their own business.

      The biggest risk is when we lose our day job or our business failed. Without the yearly cash injections to dilute out the losses, it ain't fun no more :(


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