Which one is your personal finance equation?

Is there any difference between the two equations above?

I was discussing with an Engineer on his personal finance two months back. He told me there is NO difference, because when he moves around the equation, he will get back the same thing.

What do you think about his argument?

The difference lies on your PRIORITY in managing money.

In equation 1, you prioritise SAVING before spending.

In equation 2, you prioritise SPENDING before saving. Eventually, you might end up saving nothing.

In fact, those who accumulated wealth prioritised saving consistently. SAVING here refers to save and invest to grow your money. There is really no magic in accumulating wealth. It is all about spending below your means, save and invest your money, keep repeating it even with pay raise. Discipline & consistency is the key to massive wealth accumulation.

However, why are people prone to spend first than to save first? We are influenced much by social media marketing. Each of our decision and behaviour is well manipulated via social media marketing, without us realising it.

I bet you can related to the following scenarios.

  1. When the latest technology gadget is launched, you are magnetised to purchase it to stay cool among your peers.
  2. After viewing your friend’s Instagram story, you might make impulsive decision to book a flight ticket for vacation.
  3. You are spending, dressing, behaving in certain ways to impress others.

Actually, you are spending more money merely for SOCIAL VALIDATION.

Undeniably, we are social animals and we will do whatever it takes to belong to a social group. Therefore, you are willing to spend your hard earned money just to stay on trend and stay updated among your peers. But, does it worth your wealth to impress others who might actually have no genuine interest in your life? Realising your worth is more than your social appearance will definitely break your social validation pattern. Sit down and think about who are you, really. What defines you? Once you are clear of yourself, you will behave in a better way.

Remember, no one has the best interest in you, other than yourself. Do something today, so that your older self will thank you for.

Choose your personal finance equation correctly.

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