The gratification of wealth is not found in mere possession or in lavish expenditure, but in its wise application.
Miguel de Cervantes
1547 – 1616
What’s your ratio of spending versus investing? Have you ever stopped to think about it? Most people never do. But I believe it’s worth taking a few minutes to consider.
First, let me clarify the terms. I consider spending to be the use of a resource on something that only gives short-term benefits, while investing is the use of a resource on something that primarily yields long-term benefits.
When I pose this question, most people immediately think of money: how much of their earnings goes to spending rather than investing. More often than not, the ratio is strongly skewed toward spending. In today’s society, with its emphasis on possessions and instant gratification, we often spend most of what we earn. We do a very poor job of allocating earnings to savings.
Most people claim to want more money. One of the sure-fire ways of getting rich is to improve your investing ratio: save more and spend less. If you study people who have become very wealthy, one of the common characteristics is that their investment ratio is much higher than that of people who barely squeak by. When I advise people to improve their investing ratio, I usually get the same answer: “If I had more income, I’d invest more.” But I’m not sure that’s true. I think people who are financially secure have made it a lifelong practice to spend less and invest more, and that’s why they’re wealthy today.
When we talk about money, it’s easy to see how investing more and spending less translates into financial gain. But there’s another area where I believe people do an even worse job of dividing their resources between spending and investing: time. What’s your ratio of time spent versus time invested? (For the purpose of this discussion, I’m referring to your discretionary time.) How much time do you spend on activities that have only short-term value, like watching TV, surfing the Internet, or playing games on Facebook? How much time do you invest in your future? Investment activities could include reading non-fiction books for self improvement or personal development, taking classes or attending seminars, listening to educational audio programs, or doing physical exercise or meditation.
If you want a richer, more fulfilling life, I suggest you examine your ratio of spending versus investing. The more time and money you invest in the future, the brighter your future will be.
Let him who would enjoy a good future waste none of his present.
Roger Babson
1875 – 1967
Copyright © 2013 by John Chancellor