That sounds pretty good doesn’t it? Productive money, but how can we make our money productive? When we talk about money management, the two extremes are the frugal mindset and the mindset of abundance. Both ideas appeal to me, but they seem contradictory. Frugality takes limited availability of money as the basis, whereas abundance is about the unlimited availability of it.
Efficiency is about doing things right. If we translate this to money, it’s putting your money to good use. Effectiveness is about doing the right things. Translated to money again, this is using your money to achieve what you want. They look similar, but they’re not.
Productivity in the frugal mindset
In the frugal mindset both aspects are used to look at money. When we ask ourselves whether the things we do and cost us money are necessary, we ask the question of effectiveness. Does our money bring us what we want? Or do we want what we pay for? If the answer is no, cut it out of your life and stop wasting money on it.
When we ask ourselves if there are cheaper ways of doing what we are doing, we are asking the efficiency question. Is this the best way to get what I want? Is there a better value for money deal out there?
Productivity in this mindset is first cutting stuff out of our life (effectiveness), then finding ways of getting better value for money (efficiency). And since we cut the non-productive stuff out of our budget, we have money extra to go for better value for money deals, even when they require more money!
Productivity in the mindset of abundance
In this mindset the main focus is on effectiveness. Abundance says that there is enough to go around, and if you set your mind to getting what you want, you will find the means necessary to accomplish it.
Focusing on what you do want is very important; this is the core of effectiveness. However to make our money productive, we should not forget to be efficient with our money as well. So to be compliant with this mindset, we will not say: ‘I don’t want to spend money on things I don’t want’ (double negative), but we will say ‘I want to spend my money exclusively in things I do want’
Productivity in this mindset is first setting your mind to what you do want (effectiveness) and add to that a statement about what you do want concerning the efficiency of your money. I think it’s important to add the second line as well, it is often forgotten in the positive focus of abundance.
Frugality versus abundance
So what is the best mindset, you might think. It’s up to you. You should go with what works for you. If you feel uncomfortable with the idea of abundance, it will hold you back in achieving what you want. The same goes for frugality.
Frugality is more a bottom-up approach, start with what you have and work your way up to what you want. Abundance is the top-down approach, start with what you want and then work your way down to how you can get there.
You can take advantage of both approaches by combining them. Frugality has the most actionable items for saving money, and abundance has the most practical items for determining what you want.
This is a guest post by Lodewijk van den Broek of How to be an Original and is part of the Mastering Productivity series.
This series consists of the following articles:
* Mastering Productivity (series) at How to be an Original
* Mastering Productivity – Time at Zen Habits
* Mastering Productivity – Energy at Life Dev