this post was submitted on 25 Dec 2023
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An interesting realization was that "saving money" and "reducing waste" are often competing optimums. I live in the developing world where there people waste a lifetime sitting at home doing nothing to save money. I am one of two or three people in my neighborhood with a job -- the rest "save tons more money than I do" but don't have jobs so their real income after inflation is negative.
Anyway, I figure out what my time is worth (based on what I estimate I could earn by grabbing extra contract work). Then I don't spend my time saving money unless it saves something at least comparable to my hourly rate, or it's in a context where working would be impossible, or there's a nontangible element (e.g. repairing a thing I like a lot).
I prioritize not wasting my time first (it's the only resource I can't buy more of), and spend most of my spare effort finding ways to make more money (I regularly cram-study 2-3 hours per day for this purpose, usually tech). Then with the extra money I make, I can save 80% of my income on a good month.
When I started this habit, I made about 135 USD per month and had zero savings. Even if I saved 100% of my earnings, it still amounts to essentially nothing -- so it became obvious that the best way to save more money, was to earn more money. When I had a little money, I didn't put it in the bank -- I invested it in myself by buying tools to learn more things and provide more services to accelerate my gains.
Anyway it's not the right advice for everyone, I'm just another fool like the rest of us, but I hope it's maybe useful to someone out there.
This comment generally only applies if you are earlier in your career or don't have much to spend (earning will result in more money than saving). If you're already making a middle to above average income, you're likely better off reducing spending and increasing investments โ 99.99% of rich people (including the minority born poor) don't get rich through their labor (wage); they get rich through assets, whether through owning and building a business, or buying and holding shares in them.
I agree to a large extent! There are some interesting caveats though (mainly that I'm not in the USA). Six years ago I had a Vietnamese company license and 0$. I'm only very recently anything like "middle class" so I don't have much experience with it.
The company license was key (as you say), but not due to growing it as an asset -- it was more accurately an instrument to extract remuneration based on the value I deliver, instead of just the amount of time I spend. It also gave me control of how I spend my time. That meant that early on, I could only tackle low-value work and times were tough... but eventually I could solve more expensive problems and demand far more than I could as an employee. Selling solutions as a contractor (especially to foreign companies) made a ton more money than selling my labor as an employee.
In other words, my company is not worth much money as an asset, because without me, it's non-functional. I also work with a lot of foreign VCs and am convinced that private equity inflates valuations pre-IPO by enough that there's a lot less upside to capture than there used to be. Gone are the days when a private investor could buy e.g. Microsoft shares and see a 30x upside. Also, I'm in Vietnam -- we do have a functional stock market, but the volume is much lower and stock ownership less attractive overall. Anyway, overall it would be hard to sell my company.
So there is a decent argument that my optimal path really is though labor -- but definitely not through "wages". Working for wages was always a mess where I only got paid half the time, and had to work all the time. Also it means my visa status depends on my employer, which has always lead to flagrant abuse. With my own company, I get more stable visa status.
I've also been offered equity for my work. However, I have said no 100% of the time and this has never been a mistake so far. One day maybe, but equity is a weirder prospect here than in the USA.
So I focus on selling the solutions to the most expensive problems I can solve. That's put me on track to a home + modest retirement for my wife and I. That's "enough money" for me and I will likely go back to academia and volunteer work ASAP. I have no desire for millions of dollars -- even if I can maybe see a possible path to it.
I wish you and your family the best in that endeavour.
Can I ask what job/s you did starting off?
Ah, I was foolish enough to do web development in the developing world. It seemed like a good idea at the time -- as the economy grew, I reasoned businesses would need websites -- so I started a company to do this. In truth, it was really hard to bring client expectations in line with reality, most businesses were rent-seekers and did not want to invest even a small amount in their future, and I had stiff competition from undocumented migrant workers from the West that did not have any overhead. I barely scraped by at the time, and now platforms like Wix / Facebook / Grab / Lazada capture nearly all of that market anyhow.
Those were the early days of running my company. Later, I got into prototyping, which was a vertically-integrated margin business instead of a horizontal volume one (the former is much easier to run in Asia!). There is very little competition in my niche, but pivoting was brutally hard due to my low income at the time. I also got into writing about the things I was working on, which helped pay the bills. In many ways, my time spent here is an experiment in reflecting on some of the lessons I've learned.
Before that, I managed a branch of an Australian advertising company. That was my first job in Vietnam. I replaced seven or eight people. I received my salary less than half the time -- but what can you do when your visa depends on your employer? Those years were quite bad too.
Prior to immigrating, I worked in medical research, and before that I was a scientist. Those years were pretty easy (even if they did not seem so at the time), but also around then I became acutely aware that I had no future in my home country. Looking back, I'm grateful for that -- I had no right to see that far ahead, or with such clarity. It was pure luck that I had all the right ideas in my mind at the same time.
Did you have to do a lot of study to acquire those positions?
Medical research and science? Yeah. 3 years undergrad and 2 grad school, at a research university. One year between them, where I taught myself advanced statistics, experimental design, and Linux system administration. Undergrad was just a blur of studying and exams, but after that it was a bit better.
Long story short, medical research is a surprisingly complicated way to be poor. Salaries are way lower than I thought. I could have earned more money just working in retail, and the hours were worse (e.g. the clinic was always open during a clinical trial).
I also co-founded a tool sharing nonprofit and taught myself electronic engineering and some software, starting in grad school but continuing until I emigrated. After I got here, I just sort of took the first job I could get, so no initial studying for that one. I started studying software engineering more seriously starting around then.
I study around 2-3 hours per day.
This comment did not go where I thought it was going but very interesting. You're clearly making the right call for your personal finances.
I assumed you were going to say something about like expensive composting equipment or aluminum straws.
Haha oh goodness no. Things I actually bought to save money (when I could afford to) were an efficient A/C unit with an inverter (better sleep = faster learning = more money), and a new motorcycle. Not having reliable transit was costing me a lot of money in wasted time so that was a big one to fix. It's more fuel-efficient too, I use 2-2.5L of petrol a week. I also moved somewhere safer, where the building hadn't literally collapsed on me before.
Poverty is complicated, there's no simple way out of it, and the people who say there is... have generally never really been poor (although some have, there are few universal truths here). Saving money is rarely a useful solution -- it's more important to bootstrap yourself to better opportunities, which is really hard without any financial security. The way to do this is super specific to the exact circumstances -- and there's probably not always a way out. If you have money, of course you can afford to take time to study a new skill and so on. If you don't, perhaps you'll pay for it with a part of yourself that you're not going to get back.
Saving money is not entirely useless, it's a really effective strategy if you already have made some money, and are about to have a sharp reduction in income. It lets you protect your gains better than other people with wealth, so you inch ahead of them every time the market corrects (you don't have to invest to be affected). The inverse strategy (look for ways to spend) you have to do earlier, to inch ahead again. Your timing has to be better than the market, and it has more information than you, because you don't have the money or connections to have better information. So again, you're going to have to pay in the currencies of the desperate -- cut out those kinder parts of your mind that betray you to mediocre financial decisions. Then you can perhaps (very slowly) convert modest sums of money into more life-changing sums of money, and eventually land ownership.
Health is a problem too. It's hard to cram-study engineering if you're busy dying of cholera. Not my fondest memory, but perhaps an instructive one. I learned that I don't fear death, only failure.
I guess escaping poverty wasn't some glorious victory I feel proud of. It was more accurately a series of sad, Faustian bargains. Where at each step, you can end up receiving nothing. Even the devils of our fictions are kinder than the market, and less hungry.