Money Rules
To live by, that is. I thought the title would get some attention:o) Excerpts from this article:In the latest research by Jumpstart Coalition, a nonprofit that promotes personal finance education, the average high school student correctly answered just 52.4% of the questions covering money basics. That's down from 57.3% in the 1998 survey and up from 50.2% in 2002, but it hardly matters. Anything less than 60% counts as an "F."
1. The difference between needs and wants
Our actual needs are pretty limited: food, shelter, clothing, companionship. Just about everything else is a "want," and our wants are essentially endless.
2. Scarcity makes your choices for you
It's lovely to believe in a world of endless abundance, but the reality is that at any given point in time our resources have limits. Their refusal to make the sometimes-hard choices needed to responsibly manage money means that they will have even fewer choices in the future.
3. The pointlessness of the hedonic treadmill
This means we quickly adjust to improved circumstances. A raise at work or a new possession may make us happy for a little while, but we soon take our situation for granted. Our expectations continue to rise: if only I could get another raise, or a better car, or a bigger house.
4. The miracle of compound interest
This is a concept best illustrated by example. Let's say I give you a penny today, and promise to double the amount every day for a full month. How much money would I be giving you on the 31st day?
The answer: $10.7 million. Check out the chart at the middle of this page.
Of course, no one's going to double your money every day. But this concept explains how people who save relatively small amounts over the years can build rather substantial nest eggs.
This also illustrates how debts can quickly balloon out of control. If you're paying interest and you're not diligent about paying off the finance charges in full every month, the unpaid amount will incur additional interest charges, increasing the total amount that you owe. This is why so many families who incur credit card debt eventually find themselves in trouble as the amounts they owe explode past their ability to pay.
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Proverbs 22:7 states, The rich rule over the poor. The borrower is servant to the lender. Wow, an ancient text that has so much revelence!
posted by Mercy Now @ 8:53 PM
4 Comments:
A penny saved is a penny earned.
Go figure that as we ignore the rules of economics in politics and personal life, we forget what they are, especially inasmuch as we entrust the teaching of economics to those whose personal interest lies in us ignoring those economic realities.
Then again, I took the survey and there were definitely some things I'd at least quibble with.
I recommend tracking every penny (or yen in my case) that you spend.
I record all my purchases each day in a spreadsheet and total up, average, and analyze my spending at the end of the month.
This allows you to watch what you're spending and to make necessary adjustments.
Rabenstrange, that's awesome that you are doing that. It's like keeping account of what you take in and what you shell out, something our govt and most people can learn.
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