Since 2:30 AM is the perfect time to be up and reading my feed on steem, I came across this post by @getonthetrain:

4 Basic Tips For Growing Your Personal Wealth

in which the 4th tip is

To spend less than you earn, you need to be happy with what you have.

If you read a lot in personal finance, you'll find a lot of people agree with this sentiment.

The basic idea is that by limiting your spending you will have more to save and invest. The more you are willing to enjoy the things you already have (and not buy new things), the more you will be able to create that saving and investing differential with your income.

My Disagreement

It does make sense, but I disagree with both parts of the supposition. I disagree with the focus on spending and I disagree with the motivation.

Do you need to spend less than you make in order to save and invest the difference?

For most people, yes. If you are pretty advanced you can create investment income without saving and investing anything, but the vast majority of people won't be able to do that. So let's focus on that saving and investing part.

The key to creating investment wealth for most is the amount invested, not the yield or returns on that investment. I detailed the math of that in my post on Parkinson's Law. So yes, you do have to maximize that difference between income and expense. But obviously there are two parts to that: income and expense.

Offense vs. Defense

I like to think of them as offense and defense.

Controlling and cutting your spending focuses on defense.

Controlling and increasing your income is offense.

How well you play the game of money is determined by your ability to play offense while keeping your defense reasonable.

The problem with focusing on just defense is that you can only go to zero. If you make 30k fiat units a year, the absolute most you can save and invest is 30k. And let's be real here: shelter, food, transportation, etc all cost quite a bit of money. the average American saves something like 2% of income, which would amount to 600 USD on a 30k income. If you go the super-frugal route you might be able to cut your expenses down to 10k, creating a 20k savings/investing spread.

To me, it's much easier to focus on offense. It's actually easier to increase income from 30k to 100k while your spending increases from 10k to 40k. Now you're differential is 60k, three times as much as super defense and your lifestyle is higher than ever.

Motivation

If you follow the math you might make the argument that if you are spending more then you have to invest more to eventually cover that spending level. And that is true. But here's the second point of my disagreement: it's still easier because of the motivations of the whole thing.

Giving things up, forgoing opportunities, and just spending less for long stretches of time is one of the most difficult things a person can do. It's why very few are successful at it. The reward for the behavior is so far off in the distance that it's hard to maintain. It's just human nature.

Increasing Your Means

Growing your income isn't easy. But it's easier than cutting expenses forever. Growing your income is mainly a result of your network and your skills. Both of those compound over time and can be actively improved pretty easily.

The more people you know, especially higher income people, the more opportunities you will find to make more income just by being around them. With a bigger and better network you will learn more about what people need. And satisfying those needs by serving others is the basis of the market economy. Beyond that, just being around more people will expose you to more ideas and more ways of looking at the world.

And it has never been easier in the history of humanity to build, acquire, and improve skills. You can learn just about anything on the internet. Just look at yourself reading this! The more you are able to do, the more you can satisfy those needs you discovered through your network.

So while you do need to live within your means, it's far more effective to me to expand your means and keep your spending to a reasonable ratio.

Whatever your income is, it's how much you keep that is important. Athletes are famous for making huge incomes and spending it all and keeping none of it. But making nothing isn't any better since you can't keep anything.

You have to make a lot before you can keep a lot. Just make sure you keep it.

A Personal Example

I'll give you a quick example demonstrating all of this and then I'll stop my rambling.

About two weeks ago I called up a friend of mine that I know through a mastermind group. He and his wife sold off the majority of their business last year and are pretty much set for the foreseeable future. That I know him at all is directly due to my networking efforts bringing me in contact with him and others.

I told him about my latest business idea, knowing that the details of the idea were in areas of interest to my friend. Having known each other for about 3 years now, he also knows that my idea is well within my skillset to pull off (skill development).

We went over the numbers, and he agreed to loan me 100k. All in all, it took maybe 2 hours of my time to raise the money (plus a few years of growing my network and skills). The wire hit my account last week, and now it's time to get to work.

Over the next year, my idea should generate somewhere in the neighborhood of 30k in profits and over the next three years, 150k or so. All the while my friend will be receiving some nice interest payments and gets to be involved in something new and fun, which satisfies his needs.

If I were focusing on defense, what would I have had to cut in order to create an extra 30k/yr in my savings and investing? Honestly at the moment I don't see how that could be done in my life while maintaining my income. Maybe someone frugal-er than me could figure it out, but it would be hard to live that hypothetical lifestyle while also keeping my motivation high.

But by focusing on offense, I get to do fun new things, increase my personal cash flow, and use some of that for fun lifestyle things.