Tuesday, July 12, 2011

show me the money

Remember the movie “Jerry Maguire”?

This post is not about the movie but about money.

I might have done this post yesterday but I got circled and then I circled others and --- I need to post about google+ soon.

But the flow of money is like a circle.

Oh before I get too far, I need to give you a little background. My career was in engineering not economics. Now that you know I’m not an economist or banker, maybe you’ll read on. Oh, I’m not a lawyer either so maybe that’s a plus too.

It’s sorta sad that many professions get such a bad name. But once in awhile a banker gets caught robbing the bank or a lawyer breaks the law. Those stories destroy our trust.

Money is all about trust.

If you don’t think it’s about trust, go read up on “a run on the bank” which often happened before the FDIC was created in 1933. If you don’t like to read, watch “It’s a Wonderful Life” in which a bank run plays a big part in the plot.

I had a lucky introduction to money as a kid. My father had brought me a raffle ticket that won. Not that this thought ever crossed my mind at the time, but I could trust him to pay me the winnings. I would have never known that I won.

My dad enjoyed coming home with the news and handing me $200 in cash. I thought I was a millionaire. I stashed it away in my bedroom drawer. For many days, the first thing I would do after school was count out the money on my bed (maybe that a first sign of OCD?).

After awhile the money counting wore off and I bought a stereo.

Mrs. 4444 was please to let me use the following picture that shows her mom getting a gift of money for a trip. It reminds me of my raffle winning.

showing you the money - taken by Mrs. 4444

Cash - Today we don’t even use it as much. Any of you still get your pay in cash? Most of our money is just shown as numbers in an account. Money transactions are numbers moving between accounts. If you need an example, let me know and I will have you deposit some money in my paypal account.

I don’t own a smartphone but I keep hearing about the new technology to allow them to be used as cash. I think it is a dumb idea until these smartphones become tamper proof, but that’s just my opinion.

So take a $20 bill and look at it (hopefully you can get your hands on one).

What makes it different than a $1, $5 or $100? They are printed differently is all. Ok, $100 bill has the most security features because it is the mostly traded one internationally. My point is we collectively trust that this printed piece of quality paper is worth what is written on it. Not much different than a check you could write and send me.

The difference between your $20 check or a $20 bill (I’ll accept either) is who is backing or who is being trusted for its value.

Ok so now we have this currency that we agree to trust. How much will it be worth next week, next year? Now you need to start thinking about inflation, cost of living, interest rates, future value formula, and possibly other things (who is this lisleman I just sent money too?).

Have you traveled to another country? International experiences really open your eyes and minds. Have you exchanged dollars for pounds, euros, loonies or colones? Why does the exchange rate change? - international trust between banks and traders.

For now I’ll just end this with a few of lessons I’ve learned regarding money.

  • You don’t really know what an item is worth until it is sold.
  • You don’t really save money by buying something for a discounted price. You actually only spend less. Saving is holding on and keeping money.
  • You do get what you pay for. Often it may take months to find out what you really got, other times you might find out after the first bite.
  • A constant imbalance of more people taking your money than adding to your money exists throughout your life. Life and money are tricky.

Did you find this post interesting? I hope you didn’t expect me to tell you how to make money. I’m very skeptical of get-rich schemes. Most all of them are just trying to get rich by selling you on some program or book. Let me know what you think of the idea of posting about the stock market.


Jillsy Girl said...

Ah...but as for your second bullet...if you don't spend it, you are saving!

savannah said...

i once lost my debit card and had to live on cash only until a new one came. i found that i spent far less and was much more careful when it came to actually having to count out dollars, instead of handing over a card. all of this to say, i now only have 2 credit cards. one is a gas card used when traveling and the other only used when absolutely necessary! i sort of like living on a "cash on hand/debit card" lifestyle, sugar! xoxoxox

lisleman said...

I'm glad you commented on that because it gives me a reason to explain even more.  I believe back in marketing history a marketer decided "save" sounded much better than "spend less".  They have used the word save so often that I believe some people (I'm not saying you) start to think they are saving up money by spending money.  The definition of the word has been changed in our heads.
For example if you and I start out with $100 and I put mine in a safe and you go shopping at some big sales event.  Afterwards I would still have my $100 and you may or may not have $100 worth of stuff.  The stuff's worth is much more subjective than my stash of $100.  Of course, just having money and nothing to do or enjoy is not the answer.  My point is don't buy stuff because of the "savings".  Buy stuff because you really want or need it.

lisleman said...

good point - the plastic CC money flows out of your accounts easier with credit limits.  You know why the casinos use chips?  The chips don't feel like money and people tend to forget they are dealing with real money.  I've had that problem with foreign money before too - when the numbers are lower because of the exchange rate I tend to forget what the dollar amount is.

Mrs4444 said...

I really enjoyed that song; the harmonies were beautiful.  The subject of money, though, its not one of my favorites. I suppose it would be if I had some...

secret agent woman said...

I've traveled a fair amount, including Europe before there were Euros.  However, in some countries they actually prefer you to hand over American dollars.

I have a few patients who pay co-pays in cash, but mostly I get paid in checks.  However, I use checks infrequently - I much prefer a credit card that earns me frequent flier points - I pay it in full every month so the points are just a nice bonus.

lisleman said...

I'm suspicious of a foreign business preferring dollars.  I suspect you are not getting a good exchange rate and they are probably making a little from the difference.  Maybe I'm just too suspicious.
Living at the level of being able to pay off your balance every month is the best but I could not do it early in my career.  Now it is possible.  Those frequent flier points are a whole other type of currency that can change value too.

lisleman said...

I think understanding money, loans and the system helps you keep some.
Thanks for listening to the song.  I found it while looking up some money related stuff.  So you are not the rich blogger I thought you were?  Actually you are a rich blogger but the riches are not in cash.

unknownmami said...

Can't comment, but it will let me reply to you.

Since you have been spending your time in circles, this post should have been called, money makes the world go 'round.

Bearmancartoons said...

Here is what I don't get.  Cash is considered legal tender for all debts.  YET when I fly an airlines and want a paid snack or alcohol they only take credit. 

Ripplespeak said...

interesting post....i enjoyed!

Pseudo said...

I liked the second bullet as well.  I am having a hard time getting my 22 year old daughter to get that concept...

lisleman said...

that seems like an odd comment problem ??
Good suggestion.  How long before we start using "circle" to mean connect with someone on google+?

lisleman said...

Rules change after 20,000 ft.  One of past jobs involved working with the airlines.  Have you ever heard of "shrinkage" in the retail store operations?  It's a nice word for employee theft.  The cash transactions on the aircraft has lots of shrinkage.  Which airline was it?

lisleman said...

thanks - I hope it got you thinking a little about money.

lisleman said...

I can relate.  I've had kids with credit card issues.  I know it was harder getting a credit card back when I was in my 20's and attitudes were different too.  Easy credit is not a good change overall.
thanks - and best of luck

joanna jenkins said...

Two hundred bucks to a kid is A TON of money!  How cool for you.  I like that you were smart enough to save it until you decided on something you really wanted rather than this and than, here and there-- which is exactly what I'd probably have done.

I have such a problem with currency when I'm outside the United States.  That's probably a good thing because I hardly spend any money for fear I'll mess up the calculations and have a gigantic credit card bill when I return.

My husband watches the stock market in our family--  I just read the statements each month.... And I know I need to start figuring this stuff out for myself, so bring it on!  I'd be interested!

Cheers, jj

lisleman said...

thanks - you are very right about having some knowledge of the finances.  I am glad you are interested. 

oceangirl said...

it is never enough:)

Jene said...

First off, wow, 2 Jerry Maguire titled posts in such a short span. I feel like I'm back in the 90s! (not a bad thing)

Second, yes, I did enjoy this post. I can still remember my high school economics teacher talking about the future of banking and how it was all really going to be numbers moving from account to account, and the thought of that sounding really neat and really terrifying at the same time - I think it's dangerous to think of money as just numbers moving from person to person, place to place, because then you don't have that emotional attachment and the strain of forking over cash to pay for things. But that's really all it is these days. My company gives me X numbers every two weeks. I pass on Y numbers to the bank to pay our mortgage, Z numbers to the grocery store, etc. It's like dealing in video game credits.

That said, I'm pretty much exclusively plastic, but in the form of a check card, not credit. Thanks to direct deposit, I very rarely carry cash. I still hate spending money, though :p

Jene said...

Thanks to my soul-sucking stint in market research, I know exactly what you mean. It's kind of sad that there's an entire science dedicated solely to figuring out how to best separate people from their money.

lisleman said...

depends on your lifestyle and attitude

lisleman said...

Movie references and quotes are fun.  An offer he can't refuse -
Dangerous - hmm that word didn't come to mind but if the system allows you to spend large amounts of money without any feedback that would be a problem.  I like the automatic withdraw convenience but not the unnoticed bill increases.  Our phone bill has that problem.  Bill creep. 

Go ahead, make my day

CaliforniaGirl500 said...

Agree with your list about money dos and donts.  I was taught to be frugal.  My husband, just the opposite.  We have had a 30+ yr clash of spend/save.  I've learned to be less of a tightwad and he's learned to conserve.  It works.  Our kids on the other hand can't hold on to a nickel.  No idea where that came from unless my FIL's spendthrift gene is bursting through.

lisleman said...

30+ years - congrats and yes something is working.
I don't think it is genetic but what do I know.  Either extreme is not good.  You can't take it with you but then you might want some before you leave.
(wow - I like that line.  Makes a good quote.)

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