Chapter 2 - "I Want it All, and I Want it Now!"

"The rich rule over the poor, and the borrower is servant to the lender" - Proverbs 22:3, New International Version

As I discussed in Chapter 1, we live in a world saturated by advertising and marketing. In addition, a strong culture has developed around the idea of instant gratification. Combined, this leads to the concept for our second chapter, "I Want it All, and I Want it Now!"

At least for a period of time, it actually becomes possible to satisfy the desire for instant gratification even if one truly does not have the means to do so. This is because of the mechanism known as debt. Basically, debt allows you to purchase something that you cannot fully pay for from current income or savings.

Debt - The Big Picture

It is not my intent to demonize the concept of using debt, or cast it in a negative light. Used properly, debt can be a very powerful, and even necessary tool. Used improperly, however, debt has the potential to inflict almost limitless financial damage. Sadly, this can in turn lead to emotional damage in the form of extreme stress if a person reaches the point that they literally cannot repay the debt they have incurred. My goal here is twofold; 1) to show you the difference between the two, and 2) to do it clearly enough that it motivates you to use debt positively, and not detrimentally.

Chapter 1 - "How Much do I Want It?"

For most of us, the very first challenge we will have to address if we wish to have any long-term hope of achieving financial success, or at least stability, is to learn to control our spending.

In America, this task starts to become difficult at a very early age. We live in a culture saturated by carefully-choreographed advertising and marketing campaigns. These infer that unless you have the very latest and greatest of whatever product or service is being offered, your life is less than ideal. Particularly in the area of technology, which is changing at a breathtaking pace, can this be a challenge. It may be a simple as not appearing as "cool" as the kid next door who has the latest and greatest. For example, I happen to own the very first version of the iPod Nano from Apple. It's a great toy. As I write this, however, I am already two versions behind. My Nano cannot play video; the newest model can both play and record video. Apple would very much like to sell me on the idea of running to the nearest authorized retailer, or their online store, and upgrading as soon as possible and their advertising is very carefully produced, by wonderful people who are extremely talented and paid very well, in an effort to get me to do so.

Introduction to Fundamentals of Finance

Mission Statement
So why this blog?

The genesis of the idea came from a growing concern of mine in the wake of the economic turbulence of the past year, particularly in the land in which I live, the USA.

While it is clear that much was promoted in the way of harmful financial products, in particular mortgages that were virtually guaranteed to never be repaid, it also becomes apparent that financial illiteracy on the part of the consumer is a rampant problem. For whatever reason, be it greed or financial illiteracy, someone accepted these loans. Assuming that humans are logical beings at some level, likely many did so based on false premises. Premises such as; "I know I may not be able to make the payments when the rate resets upward, but I'll simply sell the house at a higher price and walk away with a profit." Then, the thought went, a similar process could be repeated endlessly.
The only problem with such thinking was that it ignored the most fundamental questions that needed to be asked as such a transaction was entertained: "Why, exactly, will house prices go up from here? What is the basis for such a belief?"