Student Loan Help

Hey guys, I thought it might be helpful to take a broad scope view of the Financial System here in the United States. I mean, I’m always preaching about saving your money and getting the best value for your dollar, but why does that really matter? Why does a dollar even have value? Here is a high level overview for you.

First off, there are five core principles of money and banking. The acronym to remember these five core principle is TRIMS, which stands for Time, Risk, Information, Markets, & Stability.

Time affects the value of financial instruments. Interest payments exist because of time.

Risk requires compensation. In a world of uncertainty, individuals will accept risk only if they are compensated in some form. The more risky the investment the larger the potential return.

Information is the basis of educated decisions. If you weren’t given proper information you couldn’t make intelligent decisions.

Markets are used as a meeting place where buyers and sellers come together. This is the core of the economic system. Think of it like a Match.com.

Stability in the economy reduces risk and improves everyone’s welfare.

So basically the value of your dollar changes over time. The purchasing power of your George Washington in 1950 was certainly worth more than it is today. In 2050 the dollar will be worth even less (assuming we still use currency at that point).

If you are willing to take some risk and invest in financial instruments than you may be able to outrun inflation. But some factors are simply out of our control. We don’t control monetary policy, nor have the power to turn the economy around when it is slumping. All we can do is educate ourselves and make sounds decisions based on the information provided.

Knowledge is power. Time is our ally. Happy spending.