{"id":26786,"date":"2016-11-03T15:58:44","date_gmt":"2016-11-03T07:58:44","guid":{"rendered":"https:\/\/www.imoney.my\/articles\/?p=26786"},"modified":"2018-09-25T10:07:01","modified_gmt":"2018-09-25T02:07:01","slug":"earn-more-or-save-more-which-is-better-for-you","status":"publish","type":"post","link":"https:\/\/www.imoney.my\/articles\/earn-more-or-save-more-which-is-better-for-you","title":{"rendered":"Earn More Or Save More: Which Is Better For You?"},"content":{"rendered":"

Should you focus on earning more money or saving more money?<\/p>\n

If you ask gurus of the personal finance world, most say that focusing on earning\u00a0is\u00a0more\u00a0<\/em>powerful than saving more money.<\/p>\n

“If you want to be rich, I encourage you to change your mindset about money \u2014 and start focusing on\u00a0earning<\/strong>,” says\u00a0Robert Kiyosaki<\/a>, author of the bestselling classic “Rich Dad, Poor Dad.”<\/p>\n

Steve Siebold<\/a>, author of “How Rich People Think” agrees: “Rich people focus on earning, while average people focus on saving.”<\/p>\n

I can’t disagree — but while earning more money is useful, I think saving money is seriously\u00a0underrated. Crucial to financial success for everyone — rich, poor and middle-class\u00a0— but underrated and misunderstood.<\/p>\n

Of course, there needs to be a healthy mix\u00a0of both. But\u00a0depending on your personal situation, you can\u00a0adapt your focus to either saving more or making more.<\/p>\n

Why and how?<\/p>\n

<\/span>Why saving money is so important<\/strong><\/span><\/h2>\n

Saving money is important because most people don’t have savings. They’re one emergency away from debt\u00a0— or being unable to pay the bills. Scary statistics from the\u00a0EPF<\/a>\u00a0back this up:<\/p>\n

“98% of rural households have zero savings, while 86% of those in urban households do not have savings…\u00a0one in three Malaysians does not have a savings account.”<\/em><\/p>\n

It’s not that saving\u00a0small amounts<\/a>\u00a0of money will make you rich.\u00a0It won’t<\/em>. Investing small amounts of money won’t either — unless maybe\u00a0you’re lucky like this\u00a0guy<\/a>.<\/p>\n

But saving money gives you security. It gives you a secure base to start growing your money. And peace of mind to handle emergencies. It also prepares you to handle larger and larger sums of money.<\/p>\n

If making more money is like driving a Ferrari, learning to save money is like taking up driving lessons in a small Proton. Yes, you can go super-fast\u00a0in a Ferrari — but you’ll crash if you don’t master\u00a0the basic driving skills first.<\/p>\n

<\/span>When is saving more money not the best approach?<\/strong><\/span><\/h2>\n

1.\u00a0When you could be spending your time and energy better elsewhere<\/strong><\/p>\n

Trying to squeeze more money isn’t the best approach when you’re already financially stable. For example, if you’ve already got one year of monthly expenses in the bank.\u00a0No credit card debt.\u00a0And 25% of your salary automatically invests itself in fixed deposits.<\/p>\n

In other words, you’re already in great financial shape.<\/p>\n

Would it then be useful for you to check fixed deposit rates from the\u00a0banks every day? If your RM20,000 (US$4,760) in fixed deposit is getting 3.60% in Bank A, and Bank B has a promotion for 3.80% — should you take the trouble to go to the banks and switch? Yes, the difference is RM40 per year — but\u00a0is it really the best use of your time and energy?<\/p>\n

There’s a difference between being frugal and miserly. And while I hope you’re careful with your money — I don’t want you to spend your life trying to\u00a0squeeze\u00a020\u00a0cents\u00a0more out of every single situation either. That won’t make you rich;\u00a0it’d make your quality of life much poorer.<\/p>\n

Instead, if you’re already financially secure — the\u00a0way to more financial freedom isn’t in trying to save more of what you currently make. It’s in finding better ways to earn more money.<\/p>\n

2.\u00a0When you really can\u2019t save any more<\/strong><\/p>\n

On the flip side, let’s take the other extreme.\u00a0Let’s say you’re dirt poor and have a family of six to feed.\u00a0You’re already extremely frugal with your money: you don’t eat at restaurants, you use a motorcycle to work, and you sweat yourself to sleep every night because you don’t have an air-conditioner.<\/p>\n

Yes, more savings would be great for you. It would give you security. But where are you going to save more money from? You’re already saving everything you can. The advice to “live frugal and save more money” here is borderline useless. In fact,\u00a0it’s\u00a0offensive.<\/p>\n

(Word of caution: If you come from a privileged background, don’t ever tell poor people that “Saving money is easy; all you need to do is…” I’ll smack you myself.)<\/p>\n

When you’re poor, trying to squeeze more money out of small earnings doesn’t help much. To improve your quality of life,\u00a0you’re really going to have to make\u00a0more money.<\/p>\n

\"bora<\/a>

No, saving 10% of my salary isn’t going to get me to Bora Bora. Image from Pexels.<\/a><\/p><\/div>\n

<\/span>Why earning more money is so important<\/strong><\/span><\/h2>\n

There’s a saying in corporate circles that goes like this:<\/p>\n

“Revenue covers a lot of sins.”<\/em><\/p>\n

It means that when a company is\u00a0making lots of sales (and profits), people care less about the company’s costs. But when the company doesn’t have good\u00a0sales to cover its expenses, that’s when people start scrutinising the business for flaws. That’s when employee benefits get cut, and people get laid off.<\/p>\n

The same principle applies to personal finance. Consider the two situations below:<\/p>\n