What Money is

January 11, 2020

My Dear Reader,

Did you ever hear the Song by The Beatles In which they say they don’t care much for money? What about the old song by adam parnell in which the chorus is “money, money, money when will I ever catch a break?” Money seems to have infiltrated many is not all aspects of American culture. This wouldn’t be a problem except I believe that few people know what money actually is, and what it’s used for. Of course we always see people abused it. how many sports entertainers and celebrities have gone broke over the years, but while in their Prime had all sorts of houses and fancy cars? I feel as though that mindset is not one of wealth or abundance, but more so one scarcity.

Money is a tool. It’s not to be worshipped, and it’s not to be wasted. it’s the only thing in the world that can take an idea which exists in an ethereal plane of thought, and make it concrete, something real. Those who are impulsive, and not buttoned-up will typically waste it on consumable luxuries Like alcohol, or depreciating assets like cars. I believe that the younger you are in life, the more money should be put into things that will produce money. We can debate endlessly about what those vehicles are, but if you don’t get this philosophy down first, I believe it will set us back potentially indefinitely.

 As I’ve said numerous times before and courses and talks, opportunity cost is one of the most important factors in determining wealth. every dollar spent today will never again be able to work in our favor. Opportunity cost is seldom explained by the financial community. If your financial advisor has already explained this to you, or you know what it means, thank him or yourself; not understanding it can cost you hundreds of thousands of dollars over your lifetime. The basic premise is that every dollar you spend today could have been invested to yield increasingly more money over time. This is a sobering fact: every dollar spent today will never again be able to work in your favor. For in-stance, $100 invested today at the market average rate of return of 7.91 percent will be worth about $1,000 in thirty years. So, every payment made today with your own dollars hurts you in the future. This is why excessive taxation, especially personal income tax, is so harmful to all levels of society. USA Today estimates that the average American pays roughly $10,000 in personal taxes per year. If we use this number and apply the current market average rate of return of 7.91 percent, that one year’s payment of $10,000 costs $96,463 thirty years later. Now that we understand why opportunity cost is such a threat to the prosperity of the average American, it’s imperative to understand why compound interest is so important.

So get this with mine, the next time the right side of your brain wants you to splurge a little, think about what it will really cost you. 

To your creation and freedom,
Kevin Prendiville