99 out of 100 people feel they do not have enough money. Talk to anyone on the street, good chances you’ll hear a variation of “I work my asses off everyday, but I barely make enough to make ends meet”.

Many blame the government or “the economy” when they do not have enough money. Some people actually do something about it. Doing something is more effective than sitting on your bum and pointing your finger at imaginary causes. No, you do not have enough money because some people in the government are corrupt (the percentage of money involved in even the largest corruption case is negligible compared to the size of our economy). Stop blaming others and repeat this to yourself seven times every night before you sleep: I do not have enough money because I screwed up.

Everybody mismanage his finances. Nobody really gives a shit about personal finance advice. Someone once asked me to start a personal finance blog, and even back then I did not think it was a good idea. I could see what will happen: people would visit my site and would thank me for my advice, but nobody would actually follow them. There are many personal finance blogs out there, but my observation is that people who frequent these blogs routinely mismanage their finances, no different from others who do not.

It is a great perk of a modern society that guarantees personal freedom and private property, that we can do whatever we like with our money. And many people simply choose to not manage their finances at all. This is perfectly fine. Everyone does it. But do not whine when you find that you suddenly run out of money in the middle of the month. It is totally your fault you did not manage your finances better. You must live with the consequences of your actions.

There are hundreds of advice that a finance expert can give to a lay person, on how to manage money, how much to save, how much to invest, yadda yadda. There are numerous books, e-books, and websites with detailed advice on how to save and spend. But even if I were to enumerate all of them, it would be a waste of time since nobody will follow any of them. Admit it. That is how bad we are when it comes to money.

There are two schools of thought when it comes to managing personal finances:

Penny Pinching

Penny pinchers compare prices on similar products, and choose the cheapest one, even if it is only 10 cents cheaper. They would drive an extra mile or wait in line for one hour if they can save money. They would go through the hassle and paperwork to transfer their whole savings into another bank which gives a 1% higher return on savings. They buy generic brands. For penny pinchers, a penny save is a penny earned, and the best way to get more out of a dollar is to squeeze just a little more out of it. Penny pinchers maintain the same lifestyle as before, while making small changes to their expenses which they believe will accumulate into something significant.

Lifestyle Change

This is the opposite of penny pinching. The lifestyle changers would cross out the big ticket items (cancel overseas vacations, cut shopping trips from two to one per month) rather than doing line-by-line analysis of their expenses. They make do without luxuries they cannot afford anymore, such as gym membership and magazine subscriptions. They eat out less, travel locally, and forgo designer items (or get Chinese knockoffs). These people believe that to make any substantial change at all, they have to change the way they live. The major difference between them and the penny-pinchers is that they do not care about minor things. They would rather buy quality brand name foodstuffs, rather than saving a few ringgits on generic brands. They look at the big picture, and trust that their sacrifice will pay off in the future.

Which is the better way to manage your finances?

(I’ll kick your gonads if you say “a bit of both” or “the middle road”.)