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THE GOOD LIFE

PERSONAL FINANCE: THE HOUSEHOLD SECTOR

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It is very, very true that money isn't everything in life. Yet, money is the chief means for achieving the end of living the good life, that is, a life of economic security and prosperity. It further is true that, in the USA, money (or lack thereof) is one of the main contributing factors for divorces.

What is the good life? Take the USA where I reside, for instance. In the USA, the good life is also known as the American Dream. Living the American Dream encompasses two components. One is the political component, and the other one is the socioeconomic component.

The political component of the American Dream is about living freely and living democratically. The political component of the American Dream means to be treated fairly and equally in society regardless of one's race, religious beliefs, creed, gender, physical disability, socioeconomic status, sexual orientation, political ideology, place of national origin, and so forth. The political component of the American Dream also means having representative government of, by, and for all of the American people. To be sure, the Preamble to the USA Constitution (implemented March 4, 1789) begins by declaring "We the people of the United States...," which suggests that representative government is meant to reflect a consensus of the collective wisdom of ordinary [voting] citizens.

The Preamble to the Constitution does not say anything about we the business corporations of the United States. The Preamble to the Constitution does not say anything about we the trade unions of the United States. The Preamble to the Constitution does not say anything about we the lobbyists for special-interest groups of the United States. The Preamble to the Constitution does not say anything about we the 527 organizations of the United States. The Preamble to the Constitution does not say anything about we the Super PACs of the United States. The Preamble to the Constitution does not say anything about we the church of the United States, and so forth. All of these participants have found ways to circumvent the spirit of the Constitution (that is, government by the people) without having to amend it. That is to say, all of these participants actively are engaged in the political sphere of USA life. All of these participants very much are engaged in shaping the public policy decisions of elected government officials to serve their more narrowly focused interests. It is as if these participants have become immovable buffers between ordinary citizens and the elected government officials whom these same citizens voted to represent them.

One example that immediately comes to mind of this buffer between the citizens and their elected representatives is this: Some (mainly Republican) members of Congress from various states have signed the Americans for Tax Reform's (ATR) "Taxpayer Protection Pledge" as spearheaded by Grover Norquist. It is as if the members of Congress who signed the pledge were elected to office by Grover Norquist rather than by the residents of their domiciling states. It is as if the members of Congress who signed the pledge are saying, "We are not going to do what the citizens want us to do; we are going to do what Grover Norquist's pledge tells us to do." Instead of submitting to the will of the people who elected them, it seems as if the members of Congress who signed the pledge are cowering and bowing down to Grover Norquist. In terms of fiscal matters, it seems as if the members of Congress who signed the pledge have abdicated their legislative authority to Grover Norquist. It has been established that these influential lobbyists and special-interest groups sometimes draft the outlines of certain pieces of legislation. Rhetorically, much like puppets on a string, one has to wonder if legislators who have been co-opted by lobbyists and special-interest groups next will be required to get permission and talking points from these lobbyists and special-interest groups before said legislators are permitted to appear before the news media? Keep in mind that the case of Grover Norquist is but one example among many, many other similar shenanigans and machinations on both the liberal and conservative sides of the USA's political spectrum. Grover Norquist's case merely is one of the more egregious examples of special-interest groups inserting themselves between citizens and their elected representatives.

The Preamble to the Constitution also does not say anything about we the generals of the USA military. In other words, the spirit of the Constitution is this: The USA government derives its power and its legitimacy exclusively from the will and consent of the people, not from the will and consent of the kinds of participants mentioned in the above paragraph. The intent of the Founding Fathers was to have government of the people, by the people, and for the people. The Bill of Rights or the first 10 amendments of the Constitution is a reflection of this intent. USA citizens exercise their will and consent through voting to elect government officials to represent them. The election process is referred to as the principle of one person, one vote. One of the roles of a free press (news media) in a free society such as the USA is to investigate and report on all covert and overt attempts by special-interest participants to influence government officials and their public policy decisions. Another role of a free press is to report on all covert and overt attempts by special-interest participants to subvert the process of open, fair, and unencumbered voting. Article V to the Constitution sets forth a carefully crafted procedure for amending the Constitution.

Generally speaking, a cornerstone of the USA's political economy has been adherence to civility with obedience to fair play, majority rule, and the rule of law. Unlike in some parts of the world where tyranny reigns, unlike in some parts of the world where elections are plagued by violence and widespread ballot fraud, unlike in some parts of the world where bribery and corruption are endemic in all organs of government, and unlike in some parts of the world where political rule is conducted by the barrel of a gun, typically speaking, in the USA, problems are solved in the following manner:

Throughout this problem-solving process, neither a shot is fired nor a bone is broken. Injections of hatred, fanaticism, and violence into the debate are the exceptions rather than the rule in the USA. But, as I note in the book (The Age of Homo Sapiens Sapiens: Heaven or Hell), since the early 1980's, instead of becoming more cooperative, more sensible, more civil, and exhibiting a greater degree of willingness to reach a compromise, it appears that political debate in the USA is trending in the opposite direction. That is to say, political debate in the USA appears to be more polarized, more partisan, more fanatical, and less civil. With this rise in political acrimony, there seems to be more of an unwillingness to reach a compromise.

The socioeconomic component of the American Dream is to have a steady job or career; to foster a stable family unit; to become a homeowner; to live comfortably during one's working years; and to retire comfortably when one's working years are done. The epitome of socioeconomic success in the USA is to become a successful business owner, to become a household celebrity, to become a millionaire, or to attain some combination of these success markers.



Watch (Mint.com 90-second Overview - The Best Free Way to Manage Your Money)




Watch (Wave Overview for Accountants and Bookkeepers)




What does it take to live the good life? Some humans erroneously believe that, to become a millionaire, one needs to be as brilliant as, say, Bill Gates or as sagacious as, say, Warren Buffett (who also happen to be two of the richest individuals on the planet). In reality, to become a millionaire does not even require you to have earned a high school diploma. All that is required to become a millionaire is time, patience, self-discipline, and the magic of compound interest, which, for most humans, is easier said than done. The sooner in life you start to put away money into a financial instrument that pays compound interest, then the more likely you are to succeed in your quest to become a millionaire. Ideally, your parents would start your compound-interest savings program on your behalf at the moment you are born. How many parents actually do start such a compound-interest savings program for their newborns (and stick with it over the years)? Probably not many.

The following Rule of 72 table illustrates how anyone can become a millionaire when compound interest is applied. The Rule of 72 provides a quick and easy way to compute how long it would take for your money (principal) to double when compound interest is being applied to it. According to the Rule of 72, you should divide 72 by the interest rate to determine how many years it would take for a given amount of principal to double given the presence of compound interest.

The Rule of 72 and Compound Interest
Interest Rate Years for Deposit to Double
1% 72
2% 36
3% 24
4% 18
5% 14.4
6% 12
7% 10.3
8% 9
9% 8
10% 7.2
11% 6.5
12% 6
13% 5.5
14% 5.1
15% 4.8
16% 4.5
 
Application of the Rule of 72: A $5,000 Deposit at 8% Interest Compounded Annually
Initial Deposit at 8% Interest (Doubles Every 9 Years) Initial Year of Deposit
$5,000 0
Account Balance Years Elapsed
$10,000 9
$20,000 18
$40,000 27
$80,000 36
$160,000 45
$320,000 54
$640,000 63
$1,280,000 72

The above table shows that, if, at the time of birth, your parents made a one-time, lump sum deposit of $5,000 into an account for you which pays 8% interest compounded annually, then you would be a millionaire at the age of 72. The only thing that you would have to do is leave the money in the account until you became 72-years-old. The above table further illustrates that the duration (number of years) and the interest rate are the two variables that mostly influence how quickly you could become a millionaire, that is, strictly by doing nothing at all except investing money in a savings instrument that pays compound interest and then leaving the money invested for years.

For those who cannot afford to make a one-time, lump sum deposit of $5,000 as illustrated in the table above, I further illustrate in the book (The Age of Homo Sapiens Sapiens: Heaven or Hell) how you can make periodic deposits, say, monthly deposits of $28 for the next 72 years to achieve the same millionaire ($1,280,000) result. The assumption is that you would be receiving an 8% interest rate compounded monthly on those $28 deposits. You can use Calculator.net's Interest Calculator to obtain these same results. The only difference is the illustration above uses the Rule of 72 method to compute an approximate millionaire amount whereas Calculator.net uses financial formulas to compute a precise millionaire amount.

Watch (Investopedia Video: Compound Interest Explained)




Watch (How to Make a Million Dollars)


In pursuit of the good life, the starting point is to gain control of your personal finances. How do you gain control of your personal finances? The first step is to get into the habit of budgeting. Your budget plan enables you to gain control over where your money goes. The most important aspect of your budget plan is to make sure that your wants do not exceed your income. When applicable, you must learn to overcome the temptation of trying to live beyond your means.

Budgeting helps to ensure that you do not overextend yourself in the economic marketplace. Budgeting helps to ensure that you do not make irresponsible and impulsive spending decisions. The idea is to spend no more within a given budget category (say, groceries) than what is allocated or budgeted. If it is not budgeted, then do not spend it.



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After you have mastered the discipline of budgeting, then the next steps involve mastering the disciplines of earning, spending, saving, borrowing, and investing. Fortunately, in this Age of the Internet and the World Wide Web, numerous tools readily exist to assist you in mastering all facets of the personal finance challenge.

  1. Budgeting: Take Calculator.net's Budget Calculator, for instance. It provides a quick method for computing a budget.
  2. Earning: Take Calculator.net's Investment Calculator, for instance. It provides various computational scenarios for becoming a millionaire (using compound interest). USA residents have an abundance of educational and occupational choices to earn money.
  3. Spending: Take Calculator.net's Gas Mileage Calculator and its Fuel Cost Calculator, for instance. These tools offer handy ways for you to compute how much money to allocate in the monthly budget for gasoline purchases.
  4. Saving: Take Calculator.net's Roth IRA Calculator, its 401K Calculator, and its Retirement Calculator, for instance. These tools allow you to prepare for a financially secure and propserous life after work.
  5. Borrowing: Take Calculator.net's Loan Calculator and its Credit Card Calculator, for instance. These tools offer handy ways for you to manage spending and debt.
  6. Investing: Take Calculator.net's CD Calculator, for instance. It shows you what you should expect to earn from investing money in a CD, for instance.

Some common questions to arise are these: Given all of the opportunities to make money, how should I proceed? Which is the wisest investment choice? Should I deposit my money into a bank account that pays compound interest? Should I invest in the stock, bond, or commodities market? Should I invest in the foreign exchange market? Should I invest in real estate? Should I invest in a business venture? Because the returns on these various investments are different, it is not easy to know which type of investment is the most profitable one. The internal rate of return (IRR) and the net present value (NPV) are two common techniques for comparing the return on investment for dissimilar investment types. The following two videos provide introductory illustrations to the IRR and NPV techniques.

Watch (Internal Rate of Return [IRR] ~ Defined)




Watch (How to calculate NPV and IRR EXCEL)


The following videos offer primers on personal financial planning and various investment alternatives.

Watch (Financial Planning 101 Introduction | Financial Management | Personal Finance Money)




Watch (How the Stock Market Works)




Watch (Introduction to Bonds)




Watch (Relationship between Bond Prices and Interest Rates)




Watch (The Truth about Mutual Funds)




Watch (The Truth about Wall Street)




Watch (Suze Orman Retirement Road Map For Ages 20s 30s)


To be sure, for various reasons, not all members of society aspire to earn a lot of money in life. Some members of society have made a conscious and deliberate choice not to spend their time on Earth in pursuit of amassing vast sums of money. Some prefer to live the simple life with few material possessions and sparse material comforts (for instance, for the sake of leaving the tiniest possible ecological imprint on Earth). Another reason why some members of society choose not to spend their time in pursuit of amassing great wealth is because sometimes great wealth proves to be a burden and a curse to those who have it (that is, the more-money, more-problems syndrome). In truth, many more things in life are far more important than having millions of dollars. These more important things include maintaining your good physical and mental health; obtaining a good education; leading a disciplined, principled, and morally humble life; having good friends and strong family ties, and so forth.

There is no shortage of music videos that extol USA ideals about having lots of money and living the good life. Some of these music videos include Fergie's "Glamorous," Kanye West's "Good Life," Rick Ross's "Aston Martin Music," Ne-Yo's "Champagne Life," Tiesto's "Who Wants To Be Alone," Jay-Z's "Excuse Me Miss," and Jamie Foxx's "Blame It." To be sure, DJ Jazzy Jeff & The Fresh Prince's "Summertime" music video plus Stevie Wonder's "Fun Day" music video capture the essence of relaxing and enjoying life at the dawn of the 21st century.

The original question was this: Given all of the opportunities to make money, how should I proceed? When it comes to career paths and getting started in life, in developed countries, the choices and possibilities seem almost endless:

It does not matter whether you choose a blue-collar career path or a white-collar career path. It does not matter whether you choose an academic, vocational, technical, artistic, or athletic career niche. When it comes to choosing a career, the two most important factors to consider are these:

  1. Are jobs plentiful in your chosen career? Will you be able to find a job in your chosen career such that you would become a self-sufficient member of society in adulthood?
  2. Is it a legally sanctioned job career in which you are passionate about doing that kind of work?

You have to strike a balance between the above two factors. For instance, sometime the career you are passionate about is not hiring. For instance, although your lifelong dream might be to become an actor or actress, it makes little sense to go to college to study to become an actor or actress if you are not likely to find full-time work as an actor and actress. A college education should be treated as an investment in your future livelihood.

A MODERN HISTORY OF MONEY:

The following video titled The Ascent of Money places money, finance, and capitalism into both an historical and a global context. As its author (Niall Ferguson) aptly notes, while money might not make the world go around, it must be acknowledged that many consumption products, production products, and related human activities revolve around money. It also must be acknowledged that, for better or worse, many humans do judge one another by the fortunes they amass or by their net financial worth.

Prestige accompanies wealth in USA society. And, for those who are fortunate enough to become billionaires, well, they are in an rare and exclusive league of their own; I admire, commend, congratulate, applaud, and salute them for being so successful in life. Some of these billionaires have committed to The Giving Pledge, which is a commitment in principle by the wealthiest USA residents, on some future date, to give most of their wealth to philanthropic causes and charitable organizations for the betterment of humanity. These billionaires (and millionaires) might as well enjoy their wealth while they are alive because, as the saying goes, they definitely cannot take all of that wealth and all of those material possessions with them into the grave when it comes time for them to die, presumably, of old age and natural causes, of course.

Watch (The Ascent of Money: A Financial History of The World by Niall Ferguson)


In the USA, one guiding principle of government is to keep the money quest or the quest to become wealthy an honest, lawful, civil, and clean quest between all parties involved in the transaction. When it comes to businesses and individuals entering into financial contracts and exchanging money, on the one hand, one role of government policy is to maximize principles such as integrity, trust, propriety, and confidence. On the other hand, one role of government policy is to minimize financial activities such as cheating, stealing, and fraud. At the societal level, on the one hand, government policy strives to encourage and reward productive economic activities in society. On the other hand, government policy strives to regulate, discourage, penalize, and outlaw counterproductive economic activities.

Watch (John C. Bogel, Capitalism and Democracy w/ Bill Moyers Pt 1)




Watch (John C. Bogel, Capitalism and Democracy w/ Bill Moyers Pt 2)


At the personal or individual level, within the framework of free, capitalistic, and global markets, assuming the infrastructure and opportunity exist, it's all about going into the broader society and obtaining a good education; pursuing your career niche; becoming gainfully employed and self-sufficient; prudently planning and saving for the future; getting your slice of the world's economic pie; being a good neighbor and law-abiding citizen; and, enjoying your relatively brief 75 or so years of life on Earth.

Watch (How Is Poverty Measured?)



Click Here for a Snapshot Comparison of Economic Deprivation in the Northern, Southern, Eastern, and Western Hemispheres



Additional Links for the Good Life:
  1. Money 101 - Financial Advice & Lessons Made Easy by CNNMoney.com
  2. Economics Education and Financial Literacy - Virginia Board of Education
  3. American Consumer Credit Counseling - Financial Calculators
  4. National Foundation for Credit Counseling: Consumer Tools
  5. Money, Personal Finance, Business, Careers, Life Skills: Lessons, Education - MoneyInstructor.com
  6. Moneydance® 2011 - Personal Finance Manager for Mac, Windows, and Linux
  7. Free Accounting Software | GnuCash
  8. Millennium Development Goals | UNDP (United Nations Development Programme)


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Intellectual Property Disclosures: All videos and songs (as well as many of the images) referenced or spotlighted throughout this website are the legal and intellectual properties of others. All content and opinions on this website (bruessard.com) are those of the author (Edward Bruessard) exclusively and do not necessarily reflect the opinions of the contributors, creators, owners, and distributors of these referenced videos, songs, and images. The author holds no legal interest or financial stake in any of these referenced videos, songs, and images. The contributors, creators, owners, and distributors of these referenced videos, songs, and images played no role at all regarding the appearance of said videos, songs, and images throughout this website; they had no clue that this website would be spotlighting their works.


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