I think that we, as a society, have a poor understanding of what money actually is. And because of our misconception of money, we have come to use it poorly.
Money is the vehicle for acquiring the goods and services you want or need.
Oddly enough, I was that way back in the first grade, but it was a concept that I couldn't understand at the time. Being from a poor family, it was instilled in me time and time again that money is a scarce resource, and that it was something I must save at all costs until it is needed. I remember when I found $20 on the ground one time and my parents told me to save it until I found something I really wanted. Well, I ended up saving that $20 bill for over 6 months, and actually had loaned it to my parents a few times (sometimes without me knowing). In the end, I ended up mostly using it to buy $10 worth of jolly ranchers in bulk from Sam's club. That bag literally lasted me years and to this day, the thought of a cherry or peach jolly rancher makes me sick to my stomach. Nevertheless, the enjoyment I gained from that bag of Jolly Ranchers was worth the cost, but in the end, it was still an impulse buy. I saw the enormous bag and determined that this was worth my money. So why did I save it for 6 months? Because I had been taught that I had to.
Saving even used to be a game, I remember when my parents left me alone for 5 days when I was 13. They were going on a vacation to Hawaii and was to watch the house. I had demonstrated that I was capable by then. The house was stocked full of food and gave me $40 to enjoy or in case of emergencies. I remember trying very hard not to use any of that money. The day before they came back, I spent a bit of it on mini golf with a friend of mine, and a sandwich at a nearby fast food restaurant. It felt good to be able to d things, but I still had this lingering feeling that I wasted some of the money. I was very proud though, to hand them the crisp $20 bill back when they came home.
But I was putting more value into the money than it actually had. It was just $20, enough for a days worth of gas and a home cooked dinner from scratch. I was treating it as if it would provide me with much more. Though you could "stretch" it over a few days, it still could only provide the amount of goods and services that it was worth. It may have also been because I didn't have any source of income and this was all I had.
This is both the curse and the altruism of being at poverty level - you treat money differently, as if your life depended on it, because usually it does. You need to save up for the important things, rent, food, utilities. Then you end up using the rest on impulse buys or low quality goods and services. Sometimes you save, but saving takes longer, and usually, the saving is used to to purchase some other good and service.
Fortunately, I was able to receive some good values and a good education that pulled me out of the poverty cycle. I also was lucky enough to have much of my initial college education paid for, and this, coupled with determination, helped me to obtain a decent paying job. But, what happens when you take someone out of the poverty level and give them money that they never had? Well, you get someone that clings to every dollar as if it were their last. They save and accumulate money, they treat it as if they were still poor. All the while, the money sits there piling up, not being used, or at least that was the case with me. And all of that money sits their, all of those goods and services, sitting their being unused. Worse, I still sometimes find myself buying low quality goods and services that won't endure the test of time, which sometimes is the cause some stress and frustration in my life. Or, I end up not using the money where I could or should, limiting or diminishing its value over time. Not investing it into things that would provide me with better growth or enjoyment. And ultimately saving it and not putting it back into the economy, hoarding those goods and services. Limiting my travel and my life experiences. I was still living poor though I had money.
Money is the vehicle for acquiring the goods and services you want or need.
Oddly enough, I was that way back in the first grade, but it was a concept that I couldn't understand at the time. Being from a poor family, it was instilled in me time and time again that money is a scarce resource, and that it was something I must save at all costs until it is needed. I remember when I found $20 on the ground one time and my parents told me to save it until I found something I really wanted. Well, I ended up saving that $20 bill for over 6 months, and actually had loaned it to my parents a few times (sometimes without me knowing). In the end, I ended up mostly using it to buy $10 worth of jolly ranchers in bulk from Sam's club. That bag literally lasted me years and to this day, the thought of a cherry or peach jolly rancher makes me sick to my stomach. Nevertheless, the enjoyment I gained from that bag of Jolly Ranchers was worth the cost, but in the end, it was still an impulse buy. I saw the enormous bag and determined that this was worth my money. So why did I save it for 6 months? Because I had been taught that I had to.
Saving even used to be a game, I remember when my parents left me alone for 5 days when I was 13. They were going on a vacation to Hawaii and was to watch the house. I had demonstrated that I was capable by then. The house was stocked full of food and gave me $40 to enjoy or in case of emergencies. I remember trying very hard not to use any of that money. The day before they came back, I spent a bit of it on mini golf with a friend of mine, and a sandwich at a nearby fast food restaurant. It felt good to be able to d things, but I still had this lingering feeling that I wasted some of the money. I was very proud though, to hand them the crisp $20 bill back when they came home.
But I was putting more value into the money than it actually had. It was just $20, enough for a days worth of gas and a home cooked dinner from scratch. I was treating it as if it would provide me with much more. Though you could "stretch" it over a few days, it still could only provide the amount of goods and services that it was worth. It may have also been because I didn't have any source of income and this was all I had.
This is both the curse and the altruism of being at poverty level - you treat money differently, as if your life depended on it, because usually it does. You need to save up for the important things, rent, food, utilities. Then you end up using the rest on impulse buys or low quality goods and services. Sometimes you save, but saving takes longer, and usually, the saving is used to to purchase some other good and service.
Fortunately, I was able to receive some good values and a good education that pulled me out of the poverty cycle. I also was lucky enough to have much of my initial college education paid for, and this, coupled with determination, helped me to obtain a decent paying job. But, what happens when you take someone out of the poverty level and give them money that they never had? Well, you get someone that clings to every dollar as if it were their last. They save and accumulate money, they treat it as if they were still poor. All the while, the money sits there piling up, not being used, or at least that was the case with me. And all of that money sits their, all of those goods and services, sitting their being unused. Worse, I still sometimes find myself buying low quality goods and services that won't endure the test of time, which sometimes is the cause some stress and frustration in my life. Or, I end up not using the money where I could or should, limiting or diminishing its value over time. Not investing it into things that would provide me with better growth or enjoyment. And ultimately saving it and not putting it back into the economy, hoarding those goods and services. Limiting my travel and my life experiences. I was still living poor though I had money.
But there was something else I was doing at the same time - and this is what I'm getting at when I said the altruism of being at poverty level. When you are scraping for every dollar, you are also spending every dollar you come across. That money is changing hands and going right back into the economy to pay for goods and services - being used over and over again in the same year. When you save it, you've locked that money away, preventing it from being used again, preventing someone else from using it for their goods and services. And as more and more money gets locked away, there are fewer dollars with which to trade and trade beings to slow. People cannot acquire as many dollars, people can't use it to buy as many goods and services, companies fail and people become unemployed because no one is buying their products anymore. Then fear kicks in, and as people become unemployed, they further limit the amount that they can spend, and those still with money, cut down on their spending and hoard even more, reducing money....it's a self perpetuating cycle until someone with the wealth gets up the nerve to spend again.
This also works with credit in the same way, except with credit, people are spending beyond their actual wealth, borrowing it from people with that stored wealth. It works, because it moves the stagnant money that would have otherwise been saved and not used as a vehicle for buying goods and services. The problem, however, is when people spend beyond their ability to repay - defaulting - shrinking the original owner's wealth, and reducing their capacity and tolerance for loaning out further. This acts in the same way that hoarding does, because it reduces the amount of dollars available for trade.
This isn't to say that people shouldn't be saving and should not be a scapegoat for spending everything you have. Living at poverty is ridiculously hard, the fear and stress it puts on you daily is immense and poisonous, especially if you do not have the means to ever escape it. Alternatively, you shouldn't be borrowing beyond your means either. Everyone should have a savings cushion of about 6 times what they typically spend in a month, and they should be saving up a little bit each year to have enough for when they are no longer making money later in life, but short of that, there really is no reason to hoard money, it takes the trading of goods and services off the market, and I'd go as far as to say that it is probably reducing our overall growth and evolution as a society. This is especially true if the savings are in non-tangible vehicles that cannot be borrowed against.
Money is the vehicle for acquiring the goods and services you want or need.
Now this is great in theory, but try to tell someone with lots of wealth that they should be spending more and saving less. Yea, right. It doesn't work on the micro scale. People don't like being told what to do and they certainly don't like being told what to do with the money that they've earned.
And that's where government steps in - which will be written extensively in another post.
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