Know Your Economy
I am not equipped to talk about countries other than the United States of America, which is where I live. However, wherever you live, you need to learn how the economy works in your home country.
At the least, learn what works for you at the local level for income opportunities. After all, you need income to fully expand your mindset for money!
Currency Is Money
You will exchange goods and time for money. Depending on your country, the currency is the money you will utilize. I do not want to sound too simple in this description. However, money is not the only means of value exchange.
Barter Can Be Harder
Some have learned to barter. To give some perspective, bartering can be similar to some old-world markets where a farmer might bring sacks of grain or potatoes to exchange for meat or a new shirt.
Keep track of your assets, including things in the garage or basement. Things you do not use anymore may suit someone who has something they do not use that you want. Timing is important, as well as advertising.
Although there are exchanges, most bartering is done with offering something in exchange for something else. Perhaps, though, you may have to settle on an agreed amount of currency!
Consider the Principles of Economics
I believe the study of economics should be taken up by all majors, not just by business majors.
Economics is the study of human behavior based on scarcity of resources. If we all had a basic understanding of the following ten principles of economics, we might all have a better mindset for money and time management:
- People face tradeoffs. (Give to get)
Income, time, opportunity, etc.
- The cost of something is what you give up.
Opportunity costs
Time versus the next best alternative
- People respond to incentives.
Economic incentives. (Value)
Social incentives. (Desires and fears)
Moral incentives. (Right or wrong)
- People think at the margin.
Plan versus changes.
Marginal benefit is greater than the marginal cost. (Alternative action)
- Trade can make everyone better off.
Individual through international.
Concept “Zero sum game”—your gain, my loss.
“Trade”— “Positive sum game”—We both benefit.
- Free Markets are the best way to organize economic activities.
Within the bounds of the law.
Sellers and consumers.
“Planned Markets” are government-controlled Socialism and Communism.
- Government can sometimes improve the “free market” outcome.
- A country’s standard of living depends on its ability to produce things other people want to buy. Also, skills others want to pay for.
- Prices rise when government prints too much money. (Inflation)
- Government works in the short run to control the tradeoff of Inflation versus Unemployment, which move in opposite directions.
My thanks to DrAzevedoEcon on YouTube for the above information.
Why Do Prices Vary?
Recently, there have been a lot of good examples of the old “supply versus demand” theory. With the invasion of Ukraine by Russia and the global reaction, there was a sudden change in oil supplies. I know you know when you went to fill your gas tank.
That is not the only current force taking place. With the increase of people having to work from home and spending less on travel, there was a lot more focus on home improvements. Hence, there was greater demand than usual for building supplies, especially lumber. More demand, few supplies available, higher prices would be paid!
The opposite does occur. I saw it in 2008 and 2009 when the housing market was flooded with foreclosures. Prices dropped. Few could qualify for loans. Too many houses and too few buyers. Contractors slowed on building new homes since they would sit too long to get the return on their investment. So, they reverted to remodeling.
Now, the housing market is rising because fewer houses are available to sell, and more people can qualify for mortgage loans. The change happened too fast for the building contractors to keep pace with demand. Too many buyers and not enough houses available to buy has pressed prices up.
If we go into a recession period, where financing is limited and foreclosures are allowed to happen, we could see the prices of houses go down again.
However, if enough of you can prepare your finances for enduring such times with a better mindset for money, then, the foreclosures will be fewer!
When Is a Deal a Deal?
A deal is when the purchase is worth it to you. I bought a used truck at an inflated price, last year, because my trade-in truck was valued more than I expected it would be. So, the deal was worth it to me, since trucks were in short supply, and I needed one to pull my RV. And the extended warranty I added to the purchase has already paid for itself!
Have a Mindset for Money
To build a mindset for money, you need to understand some economics. The study of economics relates to how we live, how markets work, how government affects markets through money supply and taxation, and the effects of the changing value of money.
You recently heard of increasing minimum wage rates. However, prices are going up. So, before you fall for all the hype related to better pay and the ability to buy a new car, you had best do some calculations.
I have lived long enough to know the spending power of money has changed a lot. Back in 1969, I bought a new, very basic pickup for $2,100. I rented an apartment for $125 per month. I was living off a job that was paying me $3.50 per hour. And milk was $.40 per gallon.
If you go to a car dealership, a property manager, or the grocery store, today, you will find that prices are about ten times what they were in 1969!
Learn to use the laws of economics as you make long-term decisions about your money.
With a good mindset for money, you can learn to use the effects of time, both good and bad, to grow your assets over time.
Economics can be a boring subject. I know, I had a hard time staying awake during my 9 a.m. class! However, if it helps you to accumulate and grow your assets, then, it will be worth it!