Introduction

It’s always easy to find tons of information about how to make money, and it’s always easy to find tons of information on how to save money. But rarely do we find information that discusses the subtle relationship between these two. And the distinction is indeed quite important.

Have you ever felt that you’re making more money but somehow you’re not progressing. Or have you ever felt that you’re saving money but not building wealth. Have you ever felt that technically you’re middle class, but can’t seem to afford it?

A lot of this has got to do with this interplay between between saving money and making money, and quite honestly, this topic is much more complicated than we know.

What is money?

Back in university, I learned that money is:

  • a medium exchange;
  • a unit of account and;
  • a store of value.

Other definitions go into the properties of money being fungible, etc. Other definitions go into money having qualities of privacy associated with it. So there’s a ton of definitions as to what money is.

However, for this discussion, lets just consider money being fiat currency i.e. paper money issued by a government for example USD.


Making Money is Difficult

Our entire society is designed to teach us how to be a workers. From the onset of school, everything we’re taught is to inculcate us into the machinery of a work.

There is very little that we’re taught, that specifically trains us to be producers. There is very little that specifically teaches us how to make money. We never learn the exact steps of the process, rather we learn that we need to go to high school, then go to university, then get a job then hopefully we will start making money.

And even though we live in a time where there’s an abundance of money, it’s quite difficult to know how to get it.

Owning businesses and investing are great ways of getting money, but that requires as much effort if not more than working for someone else.

With a doubt making money, requires lots of effort, time an energy. It’s not easy. The difficulty is high.

Saving Money is Easy

Saving money is easy. However, it can be tricky as it requires a degree of discipline.

In our modern consumer based world, there is always something out there vying for our attention begging us to spend our money on it. There are always these temptations that will satisfy our craving if only we will part with our money. And it takes an enormous amount of discipline to say “No, I’m not going to waste my money” and it can indeed be hard. However, that’s really the extent of it.

To save money all we have to do is just say no to the stuff we don’t need and don’t want.

I find it useful having a very short prioritized list of what I need, and also a very short prioritized list of what I want. Everything that isn’t on the list I can do without.

Clear ideas of what we do want and what we want are critical to be able to save money.


The take away from this is that Making Money is a whole lot more difficult than Saving Money.

Value

When comes to Saving Money, there’s lots of things working against you. You’ve got inflation, you’ve got fees, you’ve got hidden fees, you’ve got poor exchange rates, you’ve negative interest rates, you’ve got government haircuts, etc, etc. From this perspective, saving money is not the greatest idea – there’s not a lot of value in saving money.

However when you try to make money, you learn amazing things that increases the breadth and scope of your experience and knowledge. You also learn to deal with risk.

If you open up a business because you saw an opportunity to exploit and you succeed, the next time you see an opportunity its that much easier to execute on it because you’ve got the basics covered. More over, you’ve learned something important about your level of comfort with risk. You’ve learned skills that will come in handy in the future. This is incredible valuable!

So from this perspective, making money is definitely more important than saving money.

So which is it?

Saving Money versus Making Money – which is better?

Personally this is what I think. For the vast majority of people including myself I think it’s neither, and I think it both.

I think that you first need to save money… then make money. The two require very different skills and aptitudes. But neither one will get you wealth. You need to be able to do both in that order.

I’ve seen many people make money and then lose it – These guys think that money comes easy, take it for granted, become insufferable twats and then lose it all just as fast. It makes for a great story, but it’s really quite silly if you think about it.

I’ve also seen even more people save money only to realize it’s not enough. These guys become complacent, thinking that their lifetime of 9 to 5 entitles them to comfort. They believe the status quo will always last and that their savings/pension is all they need. When some terrible black swan event happens, it obliterates their savings and they’re screwed.


Therefore you need to save money, and then make money. Alternatively said, you need to build capital and then make it self sustaining.

Knowing how to save money will give you the discipline to never take money for granted, and knowing how to make money which will teach you that its only a tool to achieve greater things.

The acquisition of money is a journey just like everything else. It is not the end goal. To acquire it requires discipline, study, hard work and risk – and that is actually where the reward lies.

Photo by Christine Roy on Unsplash