Greece voted no. It’s not really clear what it means, but there’s lessons here for waging war on a poverty mindset.
I once walked past a queue of people outside a cinema.
As I got towards the front of the queue I asked a woman what was going on.
She told me that there was a travelling film festival. As a special promotion that were offering the films for free that day. But you had to queue up to get your free ticket.
I asked how long she’d been waiting and she said, ‘oh, about 4 hours’.
4-hours! To save 20 bucks on a movie ticket?!?
This taught me an important lesson.
1. People are idiots.
2. People lose their minds over free stuff.
3. People have a hard time understanding the opportunity cost of their time.
Four hours is half a day’s work. Even on minimum wage that’s like what, 100 bucks?
So that woman had effectively spent 100 bucks to save 20. (Though maybe she wasn’t working and had nothing better to do with her time.)
But it’s worth more than that. Because rewards-to-effort are often exponential. The more you work, the more you’re able to contribute, and the higher your salary goes.
Anyway, the point is that there’s two sides to the ‘having enough money’ coin. There’s saving enough and earning enough.
And if you think about those two sides, you can see that the first has limited by the second.
That is, the most you can ever save is 100% of what you earn. You can’t save 110% of what you earn. And so savings power is necessarily limited.
But earning power is potentially unlimited. There’s no upside limit to what you could earn. You could earn 2x your current wage next year. 3x the year after. 110x 10 years down the track.
Earning power is unlimited.
So if saving power is limited, and earning power is unlimited, which one does it make sense to give the most attention to?
I remember when I first started out I was trying to scrape together every cent I could to get my investments off the ground.
And so I made a choice to drink cheap beer. I won’t name names, but it was a local beer. Not one of those shmancy imported beers. Anyway, it wasn’t my beer of choice, but it was ok, and I was happy because I was saving like 10 bucks a carton.
But then that year I turned a deal that had a 70 grand profit. Profit. After expenses.
I went to the fridge and got myself a celebratory beer. As I looked at that crappy beer I thought about how much I had saved on beer that year… $300 bucks tops. Absolute upper limit.
$300 bucks. On a day where I made $70,000 it just seemed like a miserly insult to my taste buds. It seemed totally pointless.
Since that day, I haven’t stressed too much about saving. (I don’t mean accumulating savings – I’m all about that. I mean hunting out discounts.)
Because it seemed like there was only ever going to be so much reward to effort, and that reward wasn’t much.
However, my earning power was unlimited. If I could earn $70 grand in a day, what could I earn in a year?
If I had energy to invest, this is where it needed to be invested – in finding better ways to make more money.
… not pouring over shopper-dockets to save 30c on fish fingers.
Your earning power is unlimited. This is where you need to be focused.
I’m thinking about all this because I’m now in Greece, where Greek people have effectively voted to stop saving like a nanny on pension day.
Or at least that’s what people are kind of taking from Sunday’s referendum. Technically, the referendum was on whether or not to accept a deal with Greece’s creditors – a deal that, as it happens, is no longer on the table.
Seems there’s a bit of confusion. One woman I spoke to thought it was a referendum on whether or not Greece wanted to stay in the Euro. A vote well spent.
So no one’s really sure what it means. Everyone’s just waiting to see what happens when the market and the banks open or Monday. If they do… There are rumours here that the banks only have enough cash to last a couple of days…
But the clear message is that the Greek people have had enough of saving. Greece has been labouring under an austerity regime for 5 years, and it just hasn’t worked. The Greek economy is still going backwards.
And you know, I’m a big believer in living within your means, but it’s not the number one priority. Because saving is limited.
The focus has got to be on earning power. Because earning power is unlimited.
And if saving measures are to be enforced (and there’s some good ideas) it needs to be about laying the groundwork for a stronger Greek economy. The people need to know it’s about putting things in place to earn more tomorrow.
Not about scratching together enough cents to pay off the creditors.
The people I know are happy to make sacrifices today to build a better future. But there’s no belief that that’s happening. Even after 5 years, all they see is endless sacrifice, not in the name of the future, but in the name of the government’s creditors.
In fact they see their future being scrapped to pay off the creditors today.
And that’s the idea that was rejected on Sunday.
But what that ‘No’ vote means in practice is anybody’s guess. Watch this space.
Is it right for individuals to focus on earning power? Is it right for nations?
victorshengli says
You have reconfirmed some of my beliefs that i had been ignoring – thank you.
DC says
Jon, After reading your Blog, i realise that I must have a poor persons mindset, I earn over 100k per year & between the bank & myself own more than half a dozen investment properties but I still look for a bargain & use the shopper dockets for fuel.
On the other hand my wife will be happy to know that she gets paid $2 / hour more than your minimum wage as a contractor in an office with no holiday pay sickies ect. They call her in when they want her and she travels an hour to get to work & she thinks she is paid reasonably well.
Ian wilson says
DC: You don’t have a poor person’s mindset, you are just doing what you should and everyone else does and that is making your money go as far as you can. I knew a Diamond in AMWAY once who took me shopping. Despite her vast diamond income, she still bought the cheapest brands. When I asked her about this, she replied that if you look after the pennies the dollars will look after themselves, that although they had a big income, it was often never enough. Enjoy your shopper dockets, DC.
Tom says
Wow Jon,
Even while on holiday overseas you manage to shake us out of our lethargy!
From what I have gleaned from various commentators, it seems that the Greek economy suffers from the same malaise as ours here in Oz – the unwillingness of the Government to make sure that everyone pays their rightful share of tax.
Maybe do away with all the concessions and loopholes and charge a low flat tax on ALL income.
My God! There’d be plenty of complaining when people had to pay their fair share!
And all the accounting businesses would go to the wall.
It seems the lower 50% in Greece are the only ones being forced to suffer, while the wealthy get away with murder – almost literally, when the social implications are taken into account.
We wish your people all the best and hope they are able to stand up for their rights against the greedy, heartless bankers who put them into their current position.
erdosh says
Thank you Jon for sharing “your pearls of wisdom”. Well done. I agree with you about saving and earning, however as you would know, the situation in Greece is SURVIVAL. This may affect people and their attitude too.
Peter says
Jon, Normally I love your columns but this one is way off the mark. Greece has borrowed billions from other people to fund their lifestyle and now that the lenders want their money back the Greeks are complaining how hard done by they are. They are behaving like spoilt brats. They’ve partied on other peoples money, so now they can suffer for their mismanagement!
Una says
Thanks Jon. I feel for the people thou and I’m sure that some of them would be confused and don’t know much about what’s going. It’s not their fault that their government gamble away their future. There’s a saying in the bible that says, ‘What you sow you will reap”. We can only pray that something good will come out of this.
Melanie says
Very interesting article–translatable to so many aspects of life. Time is a limited commodity and it needs to be savoured not squandered.
Peter says
So, it’s OK for the Creditors to simply lose their money ? Where is Greece going to find investors to
help build a stronger economy if they’ve burnt their bridges with just about every creditor interested
in their cause ?
Mischa Arnold says
It as much smoke, mirrors, numbers and irresponsible lenders Peter. read up on it 🙂
Mischa Arnold says
Greece has just asked Germany to repay money extracted by the Nazis during their occupation of Greece. Some 279 billion euro. Its still relevant. So have a think about that before everyone condemns Greece and her people as wastrels. Short memories. http://www.independent.co.uk/news/world/europe/greece-wants-germany-to-repay-279bn-it-was-forced-to-loan-the-nazi-authorities-during-wwii-10159738.html
Rudiger Kintzel says
First things first: Greece had already settled this issue in an agreement made many years ago.
Second: Germans today, paying massively (per taxpayer more than $1400 already) had nothing to do with Nazi history. People love to swing the Nazi cudgel if they have NO real and valid argument to contribute.
Third: How far back into history is it okay to lay such claims on the devastation that warring hordes always leave on the suffering people invaded. Check your own history Greeks. As far back as Alexander?
Fourth ;What have the Greeks done to create a functioning state, not permanently living of OPM (Other People’s Moneys), since those massive, cheap funds were borrowed from other democratically elected countries in the EU zone and international fund givers?
Fifth: when do you start holding your own Governments and their corruptions and mismanagement to account instead of seeking the fault for your problems elsewhere.
Sixth: It is often quoted that little of the moneys borrowed had gone to the people but to the banks instead. Well, where did the governments and the people get the moneys they borrowed from in the first place? And where would you get the moneys you need from if your banks are bankrupt because of unpaid borrowings?
Seventh: Certainly Germany (their taxpayers) is and has been the biggest money giver in this sorry saga, but overall the amount given to Greece comes from 18 other EU members.
KatMD says
Great opportunity for Russia to help, seeing they share the Orthodox Christian faith. Good riddance to atheist West European creditors – don’t hold your breath, God will repay…
Rudiger says
The truth for governments is more or less the same as it is for private individuals : If the debts from your borrowings are crushing you there are essentially only two options: 1) cut your spending, particularly on consumer items),
2) increase your income.
1) is the easiest to begin with immediately. 2) is more difficult, takes more time and good planning.
Greeks, you have to begin with realizing that at the bottom of each calamity or prosperity is YOUR OWN SIGNATURE.
Tiana Nairn says
Another view around Greece’s circumstances that I came across on this issue for your interest: http://www.theguardian.com/sustainable-business/2015/jul/07/this-endless-quest-for-growth-will-see-greece-self-destruct
Mummabear says
I was in Greece last year, I think they have it pretty good, especially if you are willing to work. Beautiful country, property is relatively cheap. Plenty of young people have the option to fly over to London and work or go to school for a few years and come back to Greece and start some great businesses.
Instead in the resturants I saw fitouts from the 70’s comprising of living room furniture and the same menu in every restaurant you walk past. Talk about boring! Its interesting how people in Greece say Albanians are coming in droves to work, they get them to do the boring jobs that they don’t feel like doing for cheap. If I wanted more money I would be doing those jobs myself.
Where is the effort and the drive to do something great instead of good enough? It is such a beautiful country and if it were taken care of a bit more could be amazing. My inlaws are from Greece and all they care about is getting their pension even though they own 2 houses outright worth 4.5mill “because they have worked hard in Australia and paid tax”. its an interesting mentality that I don’t have. We have set ourselves up to have financial freedom in the next 3 years as I would never never want to rely on a pension of $400 a week regardless of how much tax I have paid throughout my life.