At the beginning of the semester we were told that we are all economist making economic decision on a daily basis to which I agree. We then went on to study and discuss a great many economic terms, concepts and applications. Some of which were interesting while others bored me to tears. Yet after all is said and done how much of what we have learned will we be able to apply to our real world?
And in doing so will it be more than just a recantation of those terms, concepts and applications in a dinner conversation to appear learned to those not as versed or in the same league as those who come to the table with equal or greater knowledge on the matters of economics. Will we use it to better understand the world economic situation, as it becomes a hot topic for our aspiring political leaders in their race for office? Or will we simply use the knowledge gain here as tool to help us in making our own future economic decisions.
My agenda for how best to use this information is to blend it with the economic logic I apply in my daily living and with that being said I offer the following. I my world economics can be broken down into two categories of four parts each. The two categories being businesses and consumers and the four parts are income, expenses, assets and liabilities. Understanding each is key to anyone s success in all economic endeavors. Be it apparent or not we have been, will be and will continue to be faced with economic challenges. How we handle those challenges dictate the failure or success our personal economies.
For me being successful meant determining which category I fell under and working the system for that vantage point. As a business, the first category, the goal is to make money plain and simple. If this is not the goal the business it is not a business but rather a charitable organization or volunteer center, which have their place but should not be confused with a business. Businesses rely heavily on consumers in many ways and one of the major ways is to provide the money they are trying to make. Its pure one-sided supply and demand in that they supply the product then demand that you pay them.
They come out on top as they have attained their primary goal to make money. As a consumer, the second category, the goal is to be able to live comfortably with the means attained. The problem is the means are rarely satisfied and you become another rat in the race. This is okay as long as you realize and accept what lies ahead for you as a consumer. Unaware of what lies beneath you take a trip to your local Best Buy, which happens to be my favorite store. You are generally treated with respect, you can fill the desire to spend your money on that certain something you ve just gotta have and you end up with a new asset so you think.
What has really happened is you have just further embedded yourself in the vicious cycle known as the rat race, which will be explained later. So again I say this is okay if you are willing to accept what it means to be a consumer, My current economic category is a consumer working to be a business but most of my life has been spent as a consumer blinded by the sty that had most of us believing that we would be successful as long as we obtained a quality education and secured a quality position with a well-established company. All of which I had yet my personal economy was in an uproar.
The more money I made the deeper in debt I grew. This meant I had to work harder to obtain a better position for better pay to cover my new bills. Once they were covered I would go out and acquire more debt which meant and thus began the vicious cycle know as the rat race. However, I ve always had voices in my head saying this is not going to work. Regardless to how much money you make you always find yourself in same predicament. The voice would tell me you must do something to your change your situation or accept it and accepting it is out of the question because I refuse to live in such turmoil.
Over time I came to realize the voices in my head were right and I began to explore and implement avenues that would bring about the necessary change. What I found was the two categories and four parts which have been the guiding light in my economic recovery. This how they work for me: Income fairly self-explanatory but often misused. Income usually entered my bank account and stayed there long enough for me to pay bills my and spend the rest on the latest gadget I happen to like. Another point I will mention now and explain its relevance in greater detail later is that my income came from a single source.
Currently I use my income totally different the first thing I do pay myself set amount which has my money working for me after which I pay bills and then if anything is left over which is rare and I keep as reserve of sorts. I reduced my expense by first understanding the nature of the expense and separating expenses from liabilities. I then incorporated the true expenses into a positive to my advantage such as a tax right off (taxes being the greatest of them all, mortgage, utilities, insurance) and ridded myself of or classed them as liabilities as many as possible.
Understanding that I will always have expenses and learning how to work with them to my advantage gives my expenses the appearance of operating cost, which is mentally a more positive image and easier to control. I assessed my liabilities, which is anything that takes money but is not an expense and stopped investing in them gradually (credit card debt, car payments, long term mortgages, unnecessary spending) until they can be legitimate expenses carrying the same benefits of my current expenses.
Although I have listed assets last, assets being anything that generates income, they are second only to my income. I stated earlier I at one time had a single source of income but since identifying assets and investing in them my once single source income comes from several avenues. I doing so this has afforded me the ability to look further into my personal economy and not concern myself with the rat race of old. The ultimate goal of my personal economy is to do more than just provide a safe financial future but rather one in which I have total financial freedom.
More specifically my assets produce the greater part of my income, which is then disbursed through the same cycle in the same manner as disclosed earlier. I eventually know longer work for my money my money works for me. This is just a brief overview of what is working for me and may not be for everyone but taking stock of your own personal economy can be a very liberating experience in itself. Should one decide to take advantage of the lessons that be learned from such an evaluation the opportunities are boundless.