Living below our means:pros and cons

  • Business
  • Saturday, 25 Jan 2003


EVEN the most basic financial truism, that it is wise to live below your means, is subject to a pros and cons analysis. 

The opinions of two very different – yet equally successful – men illustrate these diametrically opposed positions. On the side of the “cons”, we have automotive legend Henry Ford: “Old men are always advising young men to save money. That is bad advice. Don’t save every nickel. Invest in yourself. I never saved a dollar until I was forty years old.” 

On the side of the pros, consider the thoughts of investment giant Warren Buffett, expressed in the introduction he wrote to Alan C. Greenberg’s book Memos from the Chairman. In Greenberg’s book, a fictional character, colourfully named Haimchinkel Malintz Anaynikal, spoke out against wasting resources. Buffett observed, “Haimchinkel is my kind of guy – cheap, smart, opinionated. I just wish I’d met him earlier in life, when, in the foolishness of my youth, I used to discard paper clips. But it’s never too late, and I now slavishly follow and preach his principles.” In the last Forbes’ ranking, Buffett was named America’s 2nd richest person.  

Looking at both the pros and cons of an issue is a holdover from my days as a journalist. I was trained to see things from both sides of any ideological, political or corporate divide.  

On the minus side of living below your means, which boils down to saying delayed gratification is not a great idea, consider this pertinent point brought up by a seminar attendee in PJ a couple of years ago. This sophisticated employee of the computer applications company I was speaking for related the true story of a family member. He had been a youngish man who believed deeply in delayed gratification. He deferred enjoying any of the good things in life as he scrimped and saved to pay off his housing loan as fast as possible. He then proceeded to die prematurely! 

Another con of living below your means is the enhanced possibility you will crystallise into a small-minded miser who does not know how to relax and have a good time. A shocking quote I came across recently describes this situation perfectly. Gabriel Garcia Marquez noted, “I am not rich. I am a poor man with money, which is not the same thing.”  

In “A Christmas Carol”, Charles Dickens wrote of Ebenezer Scrooge, a man with money, but who was so shrivelled up inside that a poverty mentality was imprinted upon his psyche. It takes a series of ghostly encounters to change him – for the better. 

On the plus side of exercising delayed gratification, lies the awesome power of compound interest working in your favour. My favourite observation in this regard is made by Buffett’s partner, one-time attorney Charlie Munger, now a billionaire investor in his own right. In Roger Lowenstein’s Buffett – The Making of an American Capitalist, which I think is the best written Buffett book, Munger is quoted saying, “Like Warren, I had a considerable pass-ion to get rich. Not because I wanted Ferraris – I wanted the independence. I desperately wanted it. I thought it was undignified to have to send invoices to other people. I don’t know where I got that notion from, but I had it. I had lived way under my income for years, saving money.” 

When I worked as a journalist, I often only needed to present both sides of an issue. I left it to the reader to make up his own mind about the matter. Nowadays, however, I have to make a stand one way or another. 

So, just as I will “vote” for the pro or “potential” side of financial planning in my impending Malacca talk, I decided a long time ago to throw my lot in with those who believe exercising delayed gratification – living today way, way, way below current means – is the way to go. 

Yes, there is always the risk of dying early, before the fruits of decades of saving and investing can be reaped. But I reckon that is a calculated risk I am willing to take; and that is why this approach is embedded into the structure of my financial planning practice. You see, in the simplest of terms, my practice is centred on just two principles: Diversification and, of course, delayed gratification. 

In your own life, you need to figure out which approach makes better sense. Neither I nor anyone else has the right to tell you whether opting for the pro or con side of this issue is correct. Much of life boils down to a weighing of relative strengths and weaknesses. How and when you spend your money is no different. 

But since you now know where I stand on this matter, next week we’ll look dispassionately at seven steps to successfully living below our means. 


  • Rajen Devadason is a certified financial planner and CEO of financial planning firm RD WealthCreation Sdn Bhd, which specialises in retirement planning for 30- to 45-year-olds. He invites feedback at  

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