I have lived a few years on welfare.According to most people’s standards I was extremely poor. At that time learned the real definition of being rich (although it took a few years to understand it)
Rich people spend less money than they earn.
In my last year on welfare I was able to save 20 euro a month. Although that was less than 10%, according to my definition I was rich.
The first year I worked, I bought a car, television, computer and a house … I did not save any money, I actually had to borrow extra money when someone crashed my car.
Allison: Nice story Yves, what does it have to do with the agile mindset?
Yves: Good question. For me it makes sense to continue to spend money on agile projects if the value they create is more then what we spend to create it.
In that sense you can easily evaluate the risk/reward profile of your project: you know what a sprint costs, at the demo you look at what the sprint gave you. And if it was more than you spend, the project is helping you be rich. If not, then you might want to stop asking for features.
Another reason to deliver quickly into production is that you get real money (cash on cash return on investment) and you don’t have to guess the value of what you deliver.
People at Flickr are doing A/B testing out in the open: they see the difference in speed and server load of two options based on real use.
I think Facebook goes even a step further; the features that get the most attention from its users, get the most attention from the developers. By deploying frequently Facebook can learn what is valuable to its users.
I stress this, because I know that companies that want to spend less then they earn have trouble figuring out the value their teams are producing.
The crowd funding initiative Sonic Angel uses the same principles to fund music bands. The bands can go to the studio once they have convinced enough people to invest in them.
Update:
Some of my friends used this idea to have a quality life traveling the world.
Agile practices that support “Spend less then what you earn”:
- Continuous deployment
- Emerging Design
- Refactoring
- PairProgramming
- YAGNI
Books:
- Rich Dad, poor dad
- Your Money or your life
- Four Hour work week
Update: Thank you JB for re-editing this piece.
10 comments on “Fast way to be rich: spend less then you earn.”
I appreciate this article, Yves. I don’t use the term “rich” this way: I define “rich” as “money is never my bottleneck”. Still, I strongly believe in spending less than you earn as a key to financial happiness. We started by looking at what we valued, and spending only on those things. There’s definitely a project management analogy there.
Thanks J.B.
I like your definition of rich. It’s more in sync with what people think about being rich.
My definition of rich was more in the context of being financial independant. I think you can be financial independant and still have money as a bottleneck. (F ex money would be a bottleneck for me if I wanted to do a space trip. (//www.virgingalactic.com/)
By choosing low cost destinations during our one-year trip and opting for slow travel we indeed were rich for one year 🙂
Doing the same thing as a vacation with holiday spots on holiday prices (short stays cost triple what long stays cost, slow travel often allows you to find the best prices, and sofort)
We did stuff while we saw people thinking ‘how can they afford that’.
Which is a mind trick. Once you start thinking outside of the box, most of what you think is possible.
The new movement of living with max 50 things is definitely one of those things: do we need more? Isn’t everything in the cloud now, things that were materialized before -music, books, information-
We sold half of our house and didn’t miss anything…
We cut costs by finding cheap deals (booking.com, //www.butikk.nu) saving often a bunch of money, and we bargained ourself into splendid hotels and houses.
In the end, we spent a whole lot of money. More than backpackers do, but we just did it differently.
Most backpackers travel like: cheap dirty spots, but they eat quite expensive and spend money on nothing. We noticed this while traveling with friends: we had a good deal on our hotelroom, still a lot more expensive than they had, but we ate cheaper in local spots, didn’t spend the money on souvenir or stuff we didn’t need, because: we didn’t want to be overloaded in the suitcases, so we didn’t have to pay overweight in cheap airlinefares.
In the end we probably spend as much.
We lived rich. Because we created more while doing it.
Hi Ine,
You spend more then you planned. Yet I assume still less then while living in Belgium. Is that a correct assumtion?
And you had a totally different experience, for me that is also part of living rich.
y
Hi Yves,
I was thinking about posting an article that goes like thin “Buy a Kindle vs a new house means I’m poor or I’m wise?” Starting from the fact that either I can afford a new library for all the books I want to read, that means a new room dedicated to the library so a new house, either I keep my house and buy books on kindle. As buying a new house is an not achievable goal , I may focus on affordable actions that meat my initial purpose.
I wanted this as a a metaphor about the importance to identify simplest, “cheapest” actions that can meet our goal in the organization/project world. That would keep us away from over-spending our energy in overwhelming goals and allow us stay loaded with potential energy for other actions.
This seem to me pretty similar to the “rich people spend less than they earn”, as (again) a metaphor of saving energy for all the actions that matters.
What do you think?
Oana
@Oana:
yes, a lot of people when they think about solutions, only think about the blue sky scenario. The best solution. Only because they can not achieve the best solution, they do nothing.
I have a blog post about this comming up in the near future. (It’s already written, but needs some editing and polishing. I might actually add your metaphor.)
Y
@Yves… To answer the question you asked Ine: everything in total, we spent about as much as we would have done in Belgium, but we got a whole lot more in return. It all depends on the amount of “tourist travels” you do and where exactly you live – Thailand is a lot cheaper than Argentina for example.
Overall we noticed we really started thinking in ‘value for money’ – we didn’t try to live as cheap as possible, but we always tried to get the best value for money we possibly could. Sometimes that meant sleeping in a brilliant design hotel and paying the price, sometimes it meant eating streetfood for no money at all.
Yep, Catherine your story is very much in sync with what JB & Sarah are doing.
And actually when I think about it, also what agile customers do.
Yes agile projects might go over budget (just as you girls did) but it is a conscious decision from the customers.
y