Category Archives: Economics

Supply Side Home Economics

I’m tired of everyone telling us how to save money. What we need is people telling us how to make money.

Like a lot of people today, maybe your budget is tight. Maybe you read Money Magazine looking for a few tips to get ahead. Or maybe you read Get Rich Slowly (one of my favorite blogs). Most money sources have oodles of tips on how to save money and make your fixed budget go further.

Common Tips About Money:

  • Cutting coupons
  • Eat out less
  • Quit buying books and use the public library
  • Bring a bag lunch to work
  • Shop at the Salvation Army and the Goodwill
  • Buy in bulk at a warehouse club
  • Refinance your home
  • Send away for rebates
  • Get DVDs from Redbox
  • Use 0% credit card offers
  • Increase your insurance deductible
  • Keep your used car
  • Limit gift giving
  • Take advantage of matching 401k funds
  • Drink less alcohol
  • Stop Smoking
  • Avoid late payments
  • Replace light bulbs
  • Buy energy efficient appliances

I’m sure you’ve read dozens more. These are great ideas, but… they won’t solve most people’s money problems. They’re too minuscule. Too incremental. They’re a good start at getting your debt under control, or dealing with a lost job, but in the long run, they won’t get you were you want to be. They are temporary fixes to a lifetime issue.

We all want more money for one reason… It gives us freedom to pursue our goals, to travel, to grow, and to create the life of our dreams.

If you focus all your attention and energy on saving money, you aren’t focusing on the solution. You are focusing on the problem. The solution is creating wealth. To create wealth, you need income and you need to grow it. So if you’re focused on coupons and light bulbs you aren’t focused on the long term. You’re focused on a band-aid fix.

What is Supply Side Home Economics?

In 1997, Christine and I decided we would focus 80% of our money consciousness on the supply side. That means – we focused on creating more income for our family – the supply side of money. That doesn’t mean we don’t negotiate. We recently reduced our phone service by $30 per month. We also cut our cable and internet bill by almost $500 a year without compromising service. Focusing on Supply Side Home Economics means spending 80% of your energy on generating income.

Think about it…

If you make $50,000 per year and you spend $50,000 per year, you’re broke. But if you increase your income to $70,000 and you don’t change a thing, you’re solving your money problem. The bigger problem is… too many people spend everything they make no matter how much, but that’s another blog post…

How to start?

Look for opportunity everywhere. Instead of spending an afternoon chasing down a 50 cent discount on milk, work on a business. Sell stuff on craigslist. Sell stuff on ebay. Create new internet sites. Look for ways to help other people get what they want.

As noble as conservation and frugality is, it doesn’t create economic growth. Hunkering down and not spending will not get the economy out of this slump. Creating wealth will. Likewise, hunkering down will not get you or your family on the path to prosperity. Focusing on growth will.

With the technology available today, at near zero cost, there is no reason why you or anyone else can’t create $500 – $1000 in new income in your spare time.

How do you get there?

Ask yourself a few questions:

  • What do you have around the house you can sell?
  • What unique knowledge and life experience do you have?
  • How can you offer that knowledge and experience to others?
  • What value can you provide others?
  • How can you give them more value than you charge for your goods or services?
  • How can you help others sell their stuff?
  • How can you teach others your unique skills and knowledge?
  • How can you gain valuable specialized knowledge?
  • What makes you unique and how can you offer that to others?

Economic Fact:

When you create more wealth for yourself, it makes us all wealthier. It isn’t zero sum. The pie grows for everyone. It’s nothing to be ashamed of. So help humanity by making yourself wealthier. Here’s a great place to start (don’t let the hyped up title throw you off, it’s great).

Responsibility is the Price of Freedom

Do you ever question saving money? What if I got hit by a bus tomorrow and I haven’t traveled, haven’t started that new business, or denied myself simple pleasures?

During the depths of recession I asked Can You Live on 50% of your Income?

For many people, it isn’t a question of CAN you live on 50% of your income. The real question is… Do you WANT to live on 50% of your income? Are you willing to make the hard trade-offs? What might those trade-offs be?

  • Travel
  • The type of food you eat
  • The clothes you wear
  • The car you drive
  • Walking away from a mortgage and renting a room in a crime ridden neighborhood
  • Dropping out of school

Most Americans would be surprised how little you NEED to stay alive. Most Americans use the word NEED to describe the things they think they NEED to live the life they WANT to live. Most things people think they NEED are not NEEDS at all, but DESIRES.

On Get Rich Slowly, a 20 year old just asked Am I Being Foolish Saving So Much?. He saves 50% of his income, lives at home, and attends college. If he quit saving so much, he believes he could move out, start a business, or buy a new car. Why should he sacrifice those possibilities to save money he can’t touch until he’s 65? Good point, isn’t it? J.D. gives him a decent answer, and he gets close, but not quite there. Maybe J.D. didn’t want to get esoteric or political, but this is the answer…

Everything you choose to do has a cost. It’s called opportunity cost. Every minute you spend could have been spent doing something else. The opportunity cost of writing this blog post is nearly infinite. I could have spent this time reading to my kids, golfing, biking, or even robbing a bank. The same principle applies to money. Your money represents your time and your(or someone’s) past labor. When you choose to do something with your money you are indirectly spending “time”. When someone steals your money or property they are murdering a portion of your life.  No one tells you that in school, do they? When you save your money, you are saving a part of your life for use later. If your life is shorter than expected, saving is a bad deal. That’s why you need to decide for yourself what you want to do. No one should decide for you. Don’t  allow them to. It’s your life. You choose. It’s called freedom. But you’ll have to live with the cost of your choices. (Well, maybe not, you can get someone else to pay your costs if the right people get elected, but in any case, someone is going to incur the cost of your decisions.)

Who are we to tell people what they should and shouldn’t do with their time? Who are we to tell a kid he can’t drop out and be a musician, or an artist, or an entrepreneur? We don’t know the cost of staying IN school. We think we know the odds, but I’m not sure we do. Who are we to say you shouldn’t get married at 18 and have kids? How do we know that will lead to unhappiness? Maybe waiting will lead to unhappiness. I’m delighted I’ve been with Christine since we were 19.  It’s one of the best decisions I’ve ever made. There are things about our relationship that would be nearly impossible for a couple to build if they met at 35.

We can only make an educated guess about risks and possibilities based on what has happened in the past to other people. But that doesn’t mean you will get the same results as others. There are oddles of people who took all the safe bets and are miserable.

So what should our 20 year old writer do? Whatever he WANTS, but whatever choice he makes will have costs. Weigh them, decide, and accept responsibility for the decision. Responsibility is the price of freedom.

Edit 5-15-2010: I know this post was all over the place. But this is my point – Imagine if Steve Jobs had decided to stay in school and save his money instead of building a computer in his garage. What would have been the opportunity cost of his decision?

What The Rich Know About Money That Most People Don't

Financial intelligence is mostly counter intuitive. Take everything you feel about the economy and turn it on its head.

You’ve heard “buy low, sell high,” right? Sounds easy enough, but how do you do it? Most people buy high and sell low.

This is why the rich are rich and most of us aren’t.

The rich…

Sell when everyone else is buying. Buy when everyone else is selling. Save when everyone else is spending. Spend when everyone else is saving.

I just met an entrepreneur who positioned himself perfectly for this economy. He said,

“This is great, I just bought a 2.5 million dollar building for 800K. I
hired a dozen unemployed construction workers off craigslist to gut it
and remodel it. I just hired 5 .NET developers for half the price I
would have paid last year.”

What will you do next time? Mark my words, this will all happen again.

That’s how you build wealth. It’s simple, but most people won’t do it. The social pressure to spend when the Jones’ are spending is too great. Most people can’t bear to show up at hockey practice in an old mini-van, when everyone else has a shiny new Denali.

Then when the bust happens, they are broke and paralyzed by fear of unemployment and they miss out on the cheapest prices in a decade.

My neighbors are doing a major remodeling project right now. As I write this, I am looking out the window, and there are four pickups parked outside and even more men inside working. So in this economy, how can they afford it? I don’t know, but I can guess they saved during the boom and they are now paying half the price they would have paid two years ago.

Booms and busts are as certain as night and day. They are the natural cycle of economic life. Trying to rid the economy of booms and busts is like trying to rid the world of night and day.

This is simple if you build self-discipline and refuse to be herded into the latest stampede.

2006 was the top of the last boom. Most people I knew were buying new cars, buying new homes, remodeling, and spending like the good times would never end. About that time I had a conversation with a real estate agent about investment properties that went like this…

“Sooner or later the price of homes will drop.”

“It isn’t going to happen. It hasn’t happened since the 1930s.”

“Doesn’t mean it can’t happen again.”

“It’s happened in a few localized markets, but not one like ours.”

“What goes up, must come down. The higher it goes the farther it has to fall.”

“Unemployment would have to skyrocket and I can’t see that happening, not now. They are projecting a million more people in the metro area in the next 10 years.”

“Hmm, so buy now, it’s only going up?”

“If you buy this house (600K), it’ll be worth 30K more by the time you close. You can’t lose. You don’t want to get left out. Don’t leave money on the table.”

“I’ll pass.”

The words “you can’t lose” were the trigger.

You see, if I had done what I knew was right, I would have sold him my home and rented an apartment.  I didn’t sell because it would have been too disruptive to my family and Christine’s business. In retrospect I
should have, I would have made a pile of dough, and right now I’d be buying the 600K house for 300K.

But no matter what you do, you can lose, and you should be willing to accept responsibility for your loss. Take calculated risks, not blind gambles. Responsibility for the results of your actions, good or bad, is the foundation of freedom.

Is Fear Keeping You and Others Poor? It Doesn't Have To.

Fear creates more of the things you fear. Let me explain.

Elisabeth commented on Do Not Fear the Economic Crisis.

Glad to hear you, Dawud Miracle, and the previous two posters are
doing so well, but I must say this is a depressing post to read after
having spent twelve hours every day for the past five days pounding the
pavement looking for a new job. I was recently laid off due to the
“hype,” and If I don’t find something in the next couple of days I
won’t be able to pay rent and will literally be on the street (medical
bills for family and myself have drained my bank account dry, and some
recent deaths in the family have left me stranded in an unfamiliar

To whatever degree you choose to believe it, these hardships exist. To REAL people even – people like me.

“Right now you have more opportunity than you may ever see again.” Oh, Mr. Olson… if you could only walk a mile in my shoes…

Continued successes to you and your friends/family.

Take care.

It appears Elisabeth hit an ugly storm of unemployment, poor health, death, while stranded and alone. Elisabeth misunderstood much of what I wrote. That is my fault, I hope she will give me a chance to clarify. In no way, did I mean that hardships do not exist. Suffering exists, no doubt.

Acknowledge Suffering Exists but Never Focus on It

Continue reading Is Fear Keeping You and Others Poor? It Doesn't Have To.

Do Not Fear the Economic Crisis

This is not the time to panic. This is certainly not the time to sell your assets. This is the time seize opportunities.

Dawud Miracle lives in Michigan, and he tells us why we shouldn’t fear the economic situation. Every detail in his article is accurate.

Dawud Writes…

You see, small businesses are the backbone of the U.S. economy now.
Can we compete with Walmart, Ford or Pepsi – no. But we don’t need to

I have a number of close friends that work for large corporations.
Most of them are scared they’ll loose their job because of the economic
conditions. But the other side of the coin is that I have a large
number friends who are self-employed or own small businesses who are
doing quite well – and plan to continue that way.

Besides, this crisis is nothing new. Most of us have lived through times like these. If you think this is new, take a look at this set of Time Magazine covers from 1974 – 1994. Isn’t it strange how every headline could apply to 2008? Don’t buy the hype. Turn it off, bust your butt, and make something happen.

It is amazing how the media sells the same old stories.

Right now is when fortunes are made. Right now is the time to act. Right now you have more opportunity than you may ever see again. Set your goals, make your plans, and execute now.

Ebay Sellers Boycott – Did it Make Economic Sense?

Ars Technica Posted an article today about the effectiveness of the Ebay sellers boycott.

If you are unfamiliar with the story, Ebay in an effort to compete in an increasingly competitive marketplace decided to do two things:

  1. Change their fee structures, which will benefit some sellers and potentially hurt others.
  2. Eliminate negative feedback from sellers about problem buyers. Problem buyers are a huge problem for some sellers on Ebay.

Some sellers were furious about these changes and decided to mount an organized boycott of Ebay last week.

I’m not going to debate whether this particular event – the boycott – had any impact or not, I’m going to give you what I think is the core economic lesson here…

If there is money to be made selling what you are selling on Ebay, then someone will sell it on Ebay. It might not be you, but someone will fill your shoes and render your boycott meaningless.

If you’re right, and Ebay has changed the rules so sellers can’t run a profitable business on Ebay then you’ll leave Ebay permanently and no one will backfill your position because they can’t make money either. Ebay will suffer and the business will go to Amazon or some new marketplace.

For years, sellers have complained about other booksellers pricing books for a penny on Amazon. And it hasn’t changed, because someone has either found a way to make money selling books for a penny (we haven’t) or there is a constant flow of people willing to give it a go. Either way the internet company (Ebay or Amazon) would be foolish to change the rules in favor of the sellers and make an imbalanced marketplace. It is in the market’s best interest to facilitate the transaction with as little interference as possible.

In fairness to Ebay, it appears there is apprehension on the part of some buyers to leave honest feedback on Ebay because they fear retaliatory negative feedback from sellers.

In fairness to the current sellers, Ebay is gambling with your business. If they are right, and the current rules favor sellers over buyers, they will gain market share. If they are wrong, they will lose market share, and it should open new marketplaces for you to sell your wares. Unfortunately, in the meantime, you’re a pawn, because you don’t own the marketplace. Right now, the only choice you have is to stay or to leave. I suggest sticking it out, seeing what happens, because it might not be that bad. You never know, it may increase the number of ‘good’ buyers and result in an unexpected windfall. However, if it is bad, you can always leave later.

Remember, historically, when you go on strike, even when you win, you rarely come out ahead in the long run, because during the strike you leave too much money on the table and the economic conditions which forced the conflict will ultimately control your destiny if you don’t change. The best antidote is to keep your eyes open for new opportunities and position yourself for rapid change.

Was Life Better in the 1940s and 1950s?

Do you feel your energy fade after you see all the negative news about our world? Headlines that seem to say things are getting worse everyday. Some common headlines I see are about how the poor are getting poorer, the middle class is losing ground, and that there is less opportunity today than in the past. But is it true?

This weekend, as my 2 and 5 year old sons were tearing around my parents kitchen howling in glee, one of them grabbed the tablecloth shattering the centerpiece on the floor. As we were cleaning up the mess my dad said, “things sure are safer today”.

“Safer tablecloths?” I asked.

“No, when I was their age the center piece on our table was a kerosene lamp. If I’d grabbed the cloth and dumped the lamp the house could have burned down.” he said.

“Why didn’t you just use a light bulb?” I asked.

“We didn’t have electricity or running water. We used an outhouse, you had nowhere else to go, even when it was 20 below zero, except the chamber pot. When I was really little, maybe 4 or 5, my biggest fear was falling down the outhouse hole.” he said.

“When did you get electricity and running water? I asked.

“We got running water and electricity when I was 11, between 4th and 5th grade, when we moved into the city because my mom couldn’t make any money on the farm. We didn’t own the farm. My grandpa lost his farm in ’34, so my dad rented the place. Dad inhaled poison gas during the war and it damaged his lungs. When he got home everything was fine for a while but it eventually caught up with him. He was hospitalized in the VA for two years and mom couldn’t make the farm work. The farmland was pretty poor, so we moved into town.” he said.

“How ’bout you mom?” I asked.

“My dad had a good government job and we lived in the city. We didn’t live on a farm like your father so we had running water and electricity as long as I can remember. I guess when I was born the house didn’t have running water or electricity, but I don’t remember it. Most small towns didn’t have running water in those days, so a lot of my relatives had an outhouse and an outdoor hand pump.” she said.

“I don’t think they had residential water in Ashby Minnesota until the late 50s or early 60s. You had to get water at a community pump.” my dad said.

“You lived in a damp dark old basement. It wasn’t very nice was it?” my dad said to my mother.

“My sister and I lived down there off and on until we moved out. My mother sometimes had to rent out our rooms to make ends meet. I hated it in the basement because the bugs ate holes in my clothes. I had to work at the dime store to buy all my clothes. I was fortunate to have that job, my dad knew the owner. Up until Jr. High my mother hand made my clothes, but after that I was on my own. I worked and bought my clothes myself and when the bugs ate holes in them it was frustrating.” she said.

“Did either of you consider yourself poor?” I asked.

“No, I had everything I needed. We had more than most people I knew. We weren’t poor.” my mom said.

“When I was young, we had a farm so we never went hungry. We were better off than most. Nobody had any money. My aunt Annie Larson had nothing. Hardly any furniture. She had nine kids. Her husband delivered everyone of them himself, at home, in the farm house.” my dad said.

“So you didn’t have electricity, running water, your parents rented out your bedroom to strangers just to make ends meet, you lived in a damp dark basement where the bugs ate holes in your clothes, and you didn’t consider that poverty?”

“No”, they replied together.

“So you considered yourselves middle class?”

“Yes, I suppose. We struggled sometimes, but we had what we needed. We were like most other people. No one had much money, it’s fair to say we were middle of the road.” my dad said.


I’m sure my parents told me this story many times of over the years. But I didn’t hear it until this weekend. It never sunk in. And if you think their social and moral environment were better, it wasn’t. Life could be very abusive and ugly, but in those days, no one talked about those things. But that’s for another post.

Cars, phones, running water, central heating, air conditioning, televisions, radios, prepared food, ready made clothing, comfortable mattresses, access to education, libraries, and sewer systems are just few of the luxuries many self-described middle class Americans didn’t have until the very recent past. Today, most of the poor people in this country have all these things and more. We do indeed have a high, high standard of living and it is still rising. Don’t let naysayers tell you things were better in the past, they weren’t. Even healthcare is far better than it was 20,30, or 40 years ago, even for the poor. Many of the procedures and medications routinely provided to medicare recipients were not available in the 50s and 60s. Only in a few pockets around the world (North Korea and Zimbabwe) are things actually getting economically worse. We live in times of vast prosperity.

A respected economics professor told me that she has stopped using the word necessity, because she tired of arguing with people about the definition of necessity. She said most Americans will argue that cars, TVs, and air conditioners are necessities. Some even argued that $25,000 fertility treatments are a necessity, but when one man argued, in all seriousness, that cable television was a necessity, she dropped necessities from her lexicon. She now states unequivocally that there are no necessities because 99% of her students cannot comprehend actual necessity.

Are things like cars, healthcare, housing, and education becoming more expensive in real dollars? Yes. But that’s because we expect so much more. Few people want a 1955 car, 1955 medical care, a 1955 house, or a 1955 education. They wouldn’t live up to our high expectations and if someone were to provide them today as they were then they’d be prosecuted for malpractice, negligence, or worse.

I am grateful to be alive today – grateful to have access to limitless opportunity, information, products, and services – all luxuries previous generations couldn’t have imagined.

When some negative piece of disinformation slips past your defenses telling you how rotten everything is becoming, return to this and read it again and be grateful for the luxuries you have. You are living in the best of times and they are only getting better.

Read more about the 1940s or the 1950s

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This post is part of the Season of Gratitude at the Balanced Life Center.