Have you ever thought about the concept of your own personal economy? I have always been fascinated with the subject of the economy. Growing up in the United States, it it so interesting to see the economic engine of the country yield its influence around the globe. Watching the impact of technology and automation develop over the decades further adds to my intrigue. It’s one of the many reasons I chose to become a financial professional.
“Economy does not lie in sparing money, but in spending it wisely” – Thomas Huxley
The National Economy Versus Your Personal Economy
The national economy gets so much attention in the media. I remember as a young child, the economy was often the topic of lead stories on television and in the newspaper. There was always a graphic that showed how the markets performed that day and how the US dollar was performing against other currencies. It seemed as if everyone’s financial success was at the mercy at the swings of the external economy, the rate of unemployment, or consumer sentiment.
As I became more interested in my own financial success, I began to appreciate the concept of my own personal economy. This was also the time where the financial media exploded onto the scene. No longer did the economy get a brief mention on the nightly news. Now we have 24 hour news networks and countless websites that bombard us with financial data and a variety of opinions. Much of the content tends to focus on negative economic news and warnings of the next downturn.
Embracing the Concept of Your Personal Economy
The very word “economy” has a very interesting origin. Like much of our English language, it is rooted in Greek. ECO comes from the Greek word “oikos”, which refers to a family unit. NOMY comes from the Greek word “nomos” means management, law, or principle. Therefore, the very origin of the word refers to the earliest form of economics – the management and financial well-being of the family! I bet you didn’t realize you are an economist, right?
Taking full ownership of your personal economy is one of the most important financial decisions you will ever make. It involves looking at all facets of your life and deciding what you want your money to do for you. What is truly important to you? Have you set financial goals for yourself and your loved ones? What are your feelings about money? How does money align with the rest of the values you hold sacred and dear?
Steps to Boost Your Economic Success
You can see that the concept of personal economy goes way beyond simple dollars and cents. It also includes how you spend your time, what priorities are important to you, and what you envision the future. Money is a tool that we need to manage properly. I always liken it to a hammer. If we use it properly, we can construct so many beneficial things in our lives. On the other hand, it can also be a very destructive tool if we misuse it. If you have ever done demolition work, you know a hammer can do a lot of damage in a short amount of time!
I believe the foundation of financial success begins with accountability and organization. Just like the national economy uses data and tracking to regularly monitor progress, you should do the same. Too many people have a “junk drawer” mentality towards their important financial information. When it comes to your money, “out of sight, out of mind” is not an effective management strategy.
Everyone that I know who is successful with money carefully tracks their expenses. This only makes sense! You have to know everything going on in your personal economy to make sure you are on the road to success. Economic opportunity is identified through data. When you track every dollar you spend, you are constantly monitoring and looking for opportunity! If you have more cash flowing out of your economy than coming in, that means you have an imbalance that needs to be addressed.
Standing Out Economically
Your personal economic success starts with your ability to earn an income. People are often surprised when we talk about their earning power over the course of a lifetime. If you earn $100,000 a year for 40 years, you are looking at $4,000,000. It sounds like such a huge amount of money, but spread over many years, it helps you realize how much it takes to make a living! It also helps further drive home the point that you have to manage your personal economy throughout your lifetime.
If you aren’t bringing enough money into your personal economy right now, are you working towards improving it? Sometimes a simple examination of spending habits helps to identify opportunity to retain more money. We’re surrounded by temptation and opportunities to spend every day. Regardless of your level of wealth, everyone has to carefully examine how they spend their money. Even people with a very high standard of living have to guard against frivolous spending that could jeopardize their future success.
One of my favorite quotes is from Benjamin Franklin. “There are two ways of being happy : We may either diminish our wants or augment our means– either will do- the result in the same; and it is for each man to decide for himself, and do that which happens to be the easiest.”
This is good food for thought when discussing the pressure around balancing money. We may have to diminish our wants by holding off spending and delaying gratification for certain items. On the other hand, we might decide to augment our means. That would include increasing our income in order to comfortably achieve a certain level of spending. It’s up to each of us to personally decide which is right for us.
Setting Proper Economic Expectations
One last point I want to mention is the shift that we have seen in recent years about economic security in the United States. Years ago, a person could get a job with a company and expect a nice pension along with Social Security. If they had done a good job of managing their personal economy, they had a high likelihood of a financially secure retirement. There wasn’t as much of a need to plan strategically for the future.
Those days are no longer around. The traditional pension is on the way to extinction, and has been replaced by the 401K and other savings mechanisms. The responsibility for an employee’s future economic future was shifted from the company to the individual. Unfortunately, many people find investing and frustrating and confusing, which may put their future savings in jeopardy. The future of Social Security is also cloudy. We simply do not know what that program will look like over the coming decades. Sadly, some retirees have even seen their “guaranteed” pension amount reduced overnight due to mismanagement and other economic factors that threaten the very solvency of the funds.
Own Your Personal Economy
My overall point is that none of us can solely rely on these institutions to take care of us in the future. One of the things that makes me sad in our current environment is living in the “Go Fund Me” era. I greatly appreciate the opportunity to help those in need, but it’s always sobering to see those posts come across social media on a daily basis. The newspapers are also filled with stories of those who have met with financial crisis due to unforeseen misfortune. Many of our social safety nets are not equipped to assist these families, and my heart goes out to them.
Because of a lack of insurance or other financial resources, those families feel the life-changing impact. I could go broke wanting to help all of those people, since their stories are so touching. It just shows that we have to take proper steps to not only grow our wealth, but also to protect our personal economy if it is at all feasible. One thing I tell my clients all the time is that it’s never too early to protect our economy with insurance, but there always comes a day when it is too late.
My mission is to help you enjoy, protect, and grow your money. Every financial decision you make affects your personal economy. With proper planning and clarity on what’s important to you, you can set yourself up to succeed. Take ownership of your personal economy and build a foundation that will serve you for a lifetime.