See the Value

One of the ways to gain control of your spending is to select where you place value. To find value in the plentiful rather than in the scarce. Spending is often a team sport, and changing your habits can be incredibly difficult. 

Like trying to become more vegetarian in a South African meat-eating culture. It is painless to change habits if the tweak feels better. If it is simple to make vegetarian food, and you enjoy how it tastes, it will be a smoother transition to eating less meat. If you feel like you are punishing yourself and being a martyr because everyone else is eating what you want, and you don’t like what is on your plate, it is going to be incredibly difficult. We get a quota of self-discipline, and if you use it all up in one area, it can explode in another. “Everything in moderation, including moderation”. 

Build changes to behaviour realistically, gradually, and sustainably. Planning is not about epiphanies. Break-through-weekends are followed by Monday alarm clocks and deep soaked patterns. To make real change, see the value in things that you did not before. Tweak your drivers and incentives. Deep, slow, conscious re-programming. The self-imposed limits stop feeling like chains because you experience the world differently. 

“Save more later” is an approach where the goal is not to adjust your spending up if your income goes up, or you get an unexpected boost. Where you snap the sense that life is better if you spend more, and spoil yourself because “you are worth it”. Reward yourself with the abundant. Put your money to work.

Changing Habits

Under Pressure

You can get into a situation where you do have a stable, decent, income, and yet are still not able to still the waves of money anxiety. Trapped with a big portion of that income servicing past consumption. Where you are not paying enough to get the hovering debt to shrink. Struggling for scraps to feed the beast. Cornered there, it is difficult to get to the point where “your money is making money”. 

Finding stillness requires both a source of income and control of spending. External forces make that difficult. The goal is shifting that challenge internally. Where you are the one creating the discipline. Limits don’t disappear, but you want their form to be your conscious choice. Where the boundaries are not “there is no money” or “I owe someone money” or “you must do this for money”. 

Where your money is available and working, and you can choose not to harass it or have it harass you. Where your money is capable of absorbing your shocks and stress in bad times. Where you are capable of repairing and building your capital in good times. Getting to this point, even with a job or stable business, can be difficult if you are under spending pressure from your own behaviour or your chosen community. You need to gain control of the collisions in your container.

Pressure through Collisions in a Closed Container

Borrowing to Spend

Nothing, is a powerful disciplinarian. A floor to how low you can go. Saying “spend less than you earn” seems ridiculous without the dangerous helping hand of borrowing. If we can borrow, we can borrow to spend. Interest is the salary paid to money that is borrowed. Salaries are a commitment. The wage bill comes whether or not the customers turn up. The interest is due with no concern to what was done with the money. 

It is one thing to borrow money and put it to work productively. Where it creates more than the salary it is paid. There may even be a gap between when the money is earned and when the salary is paid... so the salary is an advance of expected/known/hoped-for (but distant) pay-back. 

It is a completely different thing if we borrow to spend. If we sink into a swamp of debt-financed consumption. Some have no choice. They pay ridiculous interest rates (because they are “high risk”) for short term emergency loans. Ironically, the lowest salary for money gets paid to those who have the most proof they do not need the support. 

Most lending is income-based. The obvious one is mortgages (3-4.5x salary) where you borrow a multiple of your formal income (the lender is trusting the employer’s commitment). Then people end up borrowing as much as they can to buy as big a house as they can. The demand goes up. The prices go up... not because of value creation, but because of the hot air.

Property Prices: An International Balloon Festival

Within Your Means

Spend less than you earn. Easier said than done. Unless you have outside sources of support, the only way to create space is to “live within your means”. The only way to build an outside source of support, is to live *aggressively* within your means. That completely changes your relationship with money. 

Money is not something you spend. It is not even something you save... for something. It is something you put to work. The real engine behind capitalism is not simply profit. It is reinvestment. Solving a problem for less than the demanded price, and putting the difference back to work. This snaps the connection between wealth and conspicuous consumption. Those living large are not putting their money to work. They are firing it. 

Conspicuous consumption is a stupidity tax. You do not build wealth by getting more stuff and bigger things. You build wealth by severing the connection between what you need and what you earn through hand-to-mouth income. Wealth is not what you spend. Wealth is your capacity to make your own decisions. To choose how to respond. 

What you spend conspicuously can be the opposite of building wealth if it is fed through debt. Then the interest payments gradually grow until your labour feeds someone else's consumption. Building wealth is not about how much you earn. 

Building wealth is about a sustainable gap between what you earn and what you spend. 

Pieter Brueghel

Holding Good Ideas

Unless you start from within a container of opportunity, and with capital, finding an income has to be the point of departure. The reality is that there are not enough jobs available. “Full Employment” is the situation where there is no one willing and able to work, who cannot find it because no one wants, needs, or can afford their labour. That is what wealthy countries (the containers in which we manage work and government and social security) aim for. 

South Africa has structural Great Depression levels of unemployment. US unemployment rose to 23% in the 1930s. South Africa's unemployment rate reached 33% in 2021. The lowest it has been since 1994 was briefly 22% in 2008. 

“You have to be creative” is the standard hollow advice, but I am very aware that I have never been an entrepreneur. I took the formal route. I did formal in-demand qualifications and I got one of the scarce jobs. That is how I built my engine. The reality is an engine allows you the freedom to think creatively. When I needed to top up and repair my engine, it became obvious that entrepreneurship (without a big cushion) is not my skillset. I would need to adjust my skills or accommodate different ways of finding an income. 

Good ideas are not enough. Not every good idea is a good business idea. Good business ideas exist within structured containers with sustainable capital. 

Once you do have an income, you are in a fortunate position to take on the challenge of spending less than you earn. To build capital. To build a container. To hold your good ideas.

United States Unemployment

Inspirational Humanity

We celebrate outliers. Record-breaking and extremes of human achievement. Those being celebrated have a combination of barriers to entry the vast majority cannot possibly overcome, and hopefully... a smidgen of humanity we can relate to. Traits we can learn from. We can recognise the pain etched sharply in the face of a lone cyclist being pursued relentlessly by the peloton. With what we are given, we can apply these lessons and make the most of it.

I like the tough love concept of accepting responsibility and avoiding blame. I also get that part of white, english-speaking, male privilege is that I get treated as an individual and have no one to blame. I am not part of any category of people that is massively disadvantaged. So I have to take responsibility, but only from a strong foundation. That is empowering. If I succeed, I am acknowledged... not my category. If I fail, it is my fault... not my category. I get seen. 

It is true that massive groups of people have disadvantages that swallow their inspirational humanity. We are grappling with how to overcome those structural barriers and see people. How do you see the humanity and potential within people who aren’t breaking records? How do we avoid and unwind the disadvantages of a category becoming so engrained, that the shadows and scars remain even when walls fall and doors open? 

Austrian Mathematician wins Gold

Understanding your Constraints

A competitive advantage is not the thing you are good at. It is the barrier that stops other people from being good at it. A competitive advantage is not the value. It is the container. It is a given that you need skills and knowledge, but you get paid for the box. 

You get paid because of the limits of supply. You do not get paid for things that are plentiful. The barrier is what makes it hard to do. It may be some intrinsic ability that only a few people have. They won the lottery of birth. Whether genetic, geographic, or familial. It does not matter if I want to run as fast as Wayde van Niekerk. It does not matter how hard I train in that attempt. It will not happen. 

It is not true that you can do anything you put your mind to (unless you just want to do it in your mind). We are born with constraints. You need to understand those limits, and how the world works. Then push them. Shift them. Break them. Or find your meaning within them. Not everyone can be Roger Federer, Simone Biles, or Caster Semenya. Not everyone can be you.

World Class Athlete

Space for Choice

Barriers are how people stop other people from providing certain skills. We all need to eat. Our livelihoods, dreams, responsibilities, and view of ourselves are often wrapped in the “lifestyle to which we are accustomed”. The respect. The security. If you are lucky, the love of what you actually do every day. 

Creative Destruction is when someone comes up with a better way to solve the problem. The “Porter 5 Forces” talks about the intensity of competitive rivalry, the threat of new entrants, the threat of substitutes (alternative ways of solving the problem), the bargaining power of suppliers (the costs of solving the problem for clients), and the bargaining power of buyers (how empowered and willing are they). If who we are is tied to how we get paid, we are going to be very anxious. 

In Life Insurance and Pensions, the theory marries Assets (that make money) to Liabilities (the money that needs paying)… effectively institutionalizing hand-to-mouth living. The idea being that the smaller the assets needed (capital requirement) the higher the return. The problem is the work the capital can do gets defined by the nature of the liabilities. The same is true for individuals. If you don’t build a buffer or capital, then what you can do gets defined by what you must do. That sounds like an unhappy marriage to me. 

Choice comes from space. Choice comes with the ability to adapt as creation genuinely solves problems. Choice comes from us not relying on the problems to remain unsolved in order to feed ourselves.

Space for Choice, Space for Creativity