Life Changing Economic Theories, Applied To Personal Finance

The Woke Salaryman

 My parents always insisted that I should make economics a core part of what I learnt in school.

So when I went to Ngee Ann as a Mass Communication student, I absolutely disappointed them.

That said, it’s never too late to start learning.

As part of my commitment to becoming a specialist with a generalist skillset, I’ve started to pick up economics along the way by reading articles and watching videos, just to see what I’m missing.

And it turns out, my parents were right. I was indeed missing out on a lot. Here are six theories that made me wish I went to JC and learnt the subject earlier.

We’ve reframed these so that it applies to individuals instead of entire countries or geopolitical regions. Here’s to hoping it helps tweak your perspectives.

They certainly changed mine.

Law Of Diminishing Returns

Simply put: Allocating more time/resources/energy into something usually means a positive outcome. But there comes a point where adding more just doesn’t have a big impact anymore.

How you can think about it: If you work 8 hours a day, you are an acceptable employee with okay performance.

12 hours a day? You might be an exceptional employee with high performance. You might even get an increment because of your effort.

After that, it doesn’t make sense to work any harder or longer, at least when it comes to money. Your boss won’t pay you even more if you work 24 hours a day.

Likewise, you might be happier if you had a million dollars today. Even happier if you have 10 million. But subsequent millions? They won’t make you as happy.

That is why money rarely is the sole solution to a contented life.

Paradox Of Plenty, Or The ‘Resource Curse’

Simply put: If you have a lot of resources, but become overly reliant on it and don’t develop your own skills, then you’ll fall behind someone with fewer resources but with the right attitude.

How you can think about it: The reverse implication here is this: you might be born in a poor family, but if enough rich kids suffer from the paradox of plenty – and they will – you will not need to remain poor forever.

To continue reading, please go to the original article here:

https://thewokesalaryman.com/2020/05/05/life-changing-economic-theories-applied-to-personal-finance/