Make Money Jot

Why do so many people focus on making money?  This may seem like there’s some obvious answer, but if you think about people’s actions about making money then you start to think differently about this question.  People are highly irrational when it comes to making money.  So many people will take dangerous jobs and work many long and stressful hours at work just to make some money, not even a lot of money.  The first thing that you need to do is determine your want and desire.

Want and Desire

1. Determine what you want and desire.

Do you want to just make money or do you want to enjoy how you are making money?   Hint: if you enjoy how you make money, you will work more, and better, at making money!  Many people who just want to make money will go after marginally better paying jobs with a great deal of sacrifice – don’t like what they do, may be stressful and dangerous, and may cost more in the end than the benefit of the extra pay.  Think about the miners in Utah right now.  They were doing a job that needs to be done and they are paid a little more than a median wage, but six miners have been trapped for twelve days and maybe dead or, at this point, barely alive.

2. Learn how to measure the accomplishment of your want and desire.

A great improvement about earning more money will come when you think about measuring that accomplishment.  Keep track of how much you make now.  Set a goal for how much you will make in five years and measure the progress.  A majority of those who make a lot more money have a career focus and measure their accomplishment.  They do not take a job that pays them more money.  They determine a career, which may have a not-so-great starting pay, but will increase exponentially over the time of the career.  The best example is the individual who starts as a college graduate professional for a corporation and sets a career path from entry management to top management; the increase in pay is compounded with top executives who earn four hundred percent more than a average employee; it’s like the steep incline of a bell curve where the rate of increase surpasses the rate of inflation – the best circumstance.

Learning Where to Spend

Once you have determined your want and desire and have set a goal of how to make money.  The most important step, after making money, is learning how to spend money.  Follow these five steps and you will do quite well:

1. Buy quality where you need it

When an item needs to be replaced on a periodic basis, the quality of the item plays a calculated role.  Better quality may mean a longer lasting and may present a better image.

2. Buy cheap where quality does not matter

If you have a suit jacket that costs $100, but will be worn out in six months versus a suit jack that costs $500, but will be worn out in a year.  It would be more economical, better spending, to buy two $100 suit jackets rather than one $500 suit jacket.  There’s an additional consideration of an expanding waste line also – will that jacket still fit you in a year (I’m thinking about going for run today, how about you? ).

3. Accumulate debt only where inflation works for you

Inflation is an important measure against the value of an item.  For example, inflation works against buying a new car, but works for buying a new house (assuming you don’t need one of the subprime mortgages that are adversely affecting the US stock market).

4. Accumulate debt when scarcity works for you

Even though, generally, inflation works against buying a car on debt, the scarcity of a classic or limited edition vehicle may produce a different result.  The good, recent example is the redesigned Ford Mustang in 2005 when the 2006 models came out; the value of the used 2005 models (in like new condition) were of greater value than the new 2005 models!

5. Strictly avoid debt when inflation works against you

When considering steps 3 and 4, you need to keep the mindset to strictly avoid debt when inflation works against you.  No matter how much money you make, if you spend money through debt on items where inflation works against you then time is your greatest enemy.  A basic principle in finance is that a dollar today is worth less than a dollar tomorrow for two reasons – inflation and loss opportunity (stay tuned to this series on the philosophy of making money for more on loss opportunity).

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