A Brand New Year

Happy New Year blog fans! I have always liked the beginning of a new year simply because it is symbolic of a chance to start over and to improve. And believe me, nobody needs improving more than I do, which probably explains why I like the New Year so much. After all, at 12:01 AM on January 1st I can honestly so "It has been a great year so far...I haven't messed up yet!" 

I, like most everyone else, create a list of resolutions that I intend to keep for the New Year. However, I do something else that many people do not, and that is to review them periodically to assess what I am doing right and where I need to try a little harder. Believe it or not, this is also a step in research, operating a business, analyzing a system, and the list keeps going. It is also the most overlooked step in all of the steps in each of these areas. People are great at coming up with an idea or a research topic or a business plan, but once they implement it, they often fail to analyze whether or not it is successful or doing what it was supposed to do or giving the desired results.

Reviewing and making changes is an integral part of personal budgeting as well. Step 1 is to come up with your financial goals, such as how much money you want to have saved up for a major purchase, your retirement, college for your kids, etc. Step 2 is to analyze the inflows and outflows of money to get an idea of your current financial condition. So far so good, unless you don't have very good records to rely on for the numbers. Step 3 is to analyze the spending while looking for areas where you can save some money. This is where you actually begin budgeting, first deciding how much you have to spend for fixed and variable necessities like rent, groceries, utilities, and car payments, as well as deciding how much to spend on extra things (the frivolous stuff) like eating out, movies, and that daily latte, as well as how much to save back for your goals that you developed in Step 1. 

Step 4 is where you record your actual inflows and outflows over a period of time while trying to follow your new budget. It is somewhere between Step 4 and Step 5 that things often begin to fall apart though. You see, Step 5 is to review your performance to the budget and goals you set up and make any necessary changes. Some people give up on Step 4, while others don't even do Step 5. The break down in these last two steps are the second most common reason people aren't successful in personal financial budgeting following the lack of motivation and determination (psychologist call this behavior modification). 

But don't despair, and don't give up. Just like January 1 is your chance to start over on your resolutions, there is no rule that says you can't start over on your budget. Just use Step 5 as a way to review what worked and what didn't, and revise your goals and budget (and your spending). If your problem was motivation and determination, use Step 5 to find ways to keep you focused on your goals and budget as well as ways to modify your spending and behavior. And a bonus for reading this week’s blog, you can always start your resolutions over too without waiting for January 1.

And by the way, if you must know, I have accomplished one goal I set out for this year, which was cleaning up and re-arranging my study (see the picture below). However, I have already broken one of my New Year’s resolutions, which was to start being on time (evidenced by this blog post being three days late). Oh well, I plan on starting over tomorrow on that one.

Till next week, keep trying and don’t give up!

Choices

One thing that I see becoming more prevalent is the fact that people don't make choices any more. I remember when I was a kid, people didn't have the access to money and credit that they have today. This meant that they had to choose their purchases carefully, making sure that they got the most value out of every dollar spent. A simple definition of economics is "the study of choices people make." The more boring, and long, definition is "the study of how society chooses to satisfy its unlimited wants with its scarce resources."

You see, everything that has a value is limited, or scarce in its supply. That is what gives it value. Take for example a new car. If there were so many new cars just laying around, and I mean so many that people saw them as a nuisance and grew tired of hauling them off like weeds, then a new car would be worth about as much as the weeds. But since they are scarce relative to people's demand for them, they have a value. The same is true for any resource used to make or acquire things. Even money, though it is not a resource in economic terms, is relatively scarce when compared to peoples demand for money to buy stuff.

When any resource is scarce, then a choice has to be made as to how best to use that resource. For consumers, that could be money. However, the availability of easy credit during the last 30 years has meant that people did not have to choose how to spend their money, but rather could buy many of not most of the things they wanted. That is one cause of the economic mess the country is in now- people not wanting to have to choose. Now many households are so far in debt that they are not able to satisfy some of their needs due to the overwhelming debt payments.

I don't mind people wanting things, and even view wants as having a positive effect often times. After all, if you really want something, you will work to attain it. The more you want it, the more you are willing to give up for it and the harder you will work for it. What I have an issue with is people ignoring what they have and only focusing on what they want. My wife and I often joke about this with the expression "it’s that time of year to think about what we don't have."

I feel that there is a slow move away from materialism and the strong desire to have stuff, however it will be some time before we will know if enough momentum will pick up to keep us moving this direction. I hope it does because we need to change the consumption and savings habits in order to assure a strong future for ourselves and our children. I challenge everyone that reads this blog post to start thinking more carefully about every purchase, treating it as if it was the only one you are allowed to make. By doing this, you will find yourself making wiser buying decisions, as well as possibly discovering that you did not want that item as bad as you thought you did. You might even save some money.

Till next time,

Robert

Welcome!

As the "About Me" section to the left says, I am an assistant professor of accounting and economics. I am very passionate about both subjects; much like someone might be passionate about reading, movies, golf or hunting. I enjoy these things as well, but as my wife will attest to, I can get lost in doing economic and statistical analyses or in reading the most recent FASB pronouncements and statements. While most may find the subjects of economics and accounting boring (after all, who likes numbers), I hold the belief that their view has been warped by those that talk about or teach the subjects not having a passion for them and often little understanding of them. Anyone who has suffered through a course (or more) in each will tell you that they are boring. However, as the title of my blog suggests, they CAN be fun if the person teaching them finds them fun, interesting, and truly enjoys them. That is where I and my blog come in.

After God and my family, economics and accounting (in other words, numbers) are my passion in life. I strive to display this fact in my class lectures, which has for the most part been a success in that my students seldom if ever fall asleep in my classes (at least I don't see them asleep).

This could just be due to my loud voice, but I hope it is also due to the feeling I put into my lectures since I care deeply for the subjects. Anyone that has seen "Ferris Bueller's Day Off" walks away thinking economics classes are brutal (Ben Stein portrays the stereotypical economics teacher in the movie and does a masterful job of it). Hopefully through this blog I can further each reader's understanding of economics and help them see that economics CAN be fun!

I also plan on including some simple tips and concepts to help people with their personal finances as well. With the current economic conditions, many people are struggling to understand what has gone wrong in the economy as well as struggling with their own personal finances. While I won't tell you how to invest to get rich, I will try to give you some tools that you can use to improve your financial condition and security.

I hope you enjoy this blog and will follow it often. It is my intent to have at least one post each week, probably on the weekend. If time permits or something really interesting comes to my mind that I feel I have to share with you (yes, I do occasionally have deep and profound thoughts, just not often and usually while I am asleep), I will put up as an additional post that week so that I don't forget them before the weekend. After all, I am getting older and so I sometimes forget things (ok, that may be the excuse I use for forgetting things I should remember like anniversaries and birthdays). I welcome any suggestions or comments that you may have, as these will help me to improve my posts so that you can get more out of them. 

That is all that I have for this week. I hope you all stay warm, and I wish God's blessings on you and your family. Now I will tell you what every college student loves to hear...

"That is all I have for today, so I will let you go early."