Being Broke is Expensive

Not having any money sucks. Have you ever been to the point where you’ve run out of money? It’s not very fun. In fact, when you don’t have any money, difficult challenges are compounded by the fact that all emergencies also become financial emergencies. Living from crisis to crisis is both painful and expensive. You may know someone like this. It may be you, your friend, or a family member. Someone who is stuck trying to break the cycle of impecuniousness. And what you’ll find is that financial fitness often has surprisingly very little to do with income. The irony is that life is actually more expensive when you don’t have any money. When you don’t have money: debt becomes more expensive, margin is gone, planning is difficult, risk mitigation is expensive and even your stress and your time management are affected. When you have money you can relax. You can plan. You can develop margin and efficiency. You can develop a life that is much less expensive to maintain. The goal here is to begin the process to break the cycle of broke. To create a little buffer that leads to more relaxation, financial peace, and ironically, money to spare.

broke is expensiveSo, what do you do? Well, the first step is pretty simple. In fact, it is so simple it is often overlooked. The first step is simply to decide. To make the choice if you want to be broke or not. It really is a choice. There is someone else out there who makes half of what you do and has plenty of money to spare. It doesn’t even start with earning lots of money or crushing your expenses. It starts with the decision to start. To begin the process. To make the choice that your life can look completely different a year from now. Continue reading Being Broke is Expensive

Luxury Is A Drug

We’ve all tried drugs at some point in our life. It may be tylenol. It may be caffeine. It may be alcohol, tobacco, or even something a little bit more experimental. But we’ve all had drugs. And drugs are pretty amazing objects. They have the ability to completely change the way our body operates, heal us when we are sick, and even feel no pain under extreme distress. They can make us grow, make us lose weight, keep us from having babies, or even see things that do not even exist. Drugs are pretty amazing.

Cruise ShipDrugs are pretty powerful. They can be good, bad, or indifferent. But we all know they contain power. Drugs can often be both mentally or physically addictive. They can be entertaining or depressing. They can make us feel great. And they can make us feel awful. The consistent thing we notice across almost all different types of drug classes is the amazing ability of our body to adapt to the drug. We have the ability to become tolerant of even the most powerful substances. At the first dose, just a small amount of a drug affected our body. But after repeated doses, we began to adapt. In fact, there are plenty of times when we can take a small amount of a drug, even one that originally had a great effect, and not even notice. It takes incrementally more drug to produce the same level of satisfaction. It is easy to see with alcohol, pain medicine or caffeine; but luxury is a new class of drug whose addictive properties are much subtler but impressively powerful.
Continue reading Luxury Is A Drug

The Simple Economist’s Guide To Investing

Investing does not need to be complicated. In fact, after reading this post, you will have enough information to get started and invest more efficiently than almost every other casual investor. For basic investing, simple index funds will give you broad diversification and returns that will match the overall market. In addition, low fees and low turnover minimize taxes and expenses that can decrease your gains over time.

investingIn the long term, economic theory suggests individuals will not beat the market when risk is considered. This idea stems from academic research developed at Princeton and MIT and is often referred to as efficient market theory. In addition, past performance does not predict future performance. Take a look at the companies who debuted on the S&P and see how many still exist. Broad based index funds take into consideration the rise and fall of individual companies, and position themselves to mimic the entire economy as a whole.

If you really want detailed guidance you can read the single best book on investing: A Random Walk Down Wall Street by Malkiel. The book is quite old but is updated every few years. Buy an older copy because the investing principles do not change. It can be a bit tedious, especially to non-investors, but the concepts are timeless and backed by more actual academic research than any other popular investment book. Continue reading The Simple Economist’s Guide To Investing

Live an Efficient Life: A Life Without Waste

What is an efficient life? What is efficiency for that matter? We’ll start with defining our term. Efficiency is any system designed to achieve maximum productivity with minimal waste or expense. And this has truly become the thesis for Simple Economist. An efficient life is one lived without wasted time, money, or resources. It is a life where the unnecessary has been removed and only the useful remains. It is a life in which we understand what brings us true satisfaction and we are actively pursuing it. It is about knowledge, self control and behavior. By applying the principles defined in economics, we can leverage efficiency to live a fulfilling, productive, relaxing, and awesome life.

bohol, ph

The post is designed to be an evergreen post with further reading in almost every category. I’ve listed 9 practical areas in our lives where inefficiency tends to creep in over time. Areas where we end up wasting time, energy, money, or resources due to disorganization and poor planning. I’ll be the first to admit that I am not always productive as I wish. I still waste more than I should. I’m only slowly becoming aware of when I’m being efficient and when I’m not. And we must be careful because inefficiency is quite profitable for others. McDonald’s and Visa know this. Marketers are fully aware that we live inefficient lives and are often there to fill in the gaps. If we take the time, we can utilize the knowledge and resources we have developed to live awesome, exciting, efficient, waste free lives. Continue reading Live an Efficient Life: A Life Without Waste