I find the over generalizations of life interesting. Yesterday I had a table at a local festival we have here in Santa Barbara called Summer Solstice. It’s a huge parade and park festival where ‘they’ (the infamous people that say those things) say that we have over 100,000 people in from LA and surrounding areas that come join in the crazy festivities. It’s pretty funny to watch but quite honestly, it’s loud and crowded and well, you get the picture. I guess we do it for our ‘economy.’

Which bring me to the story and the conversation.

I had a young girl about 21 come up and she was trying to guess how many M&Ms we had put in a a big jar (courtesy of Ralphs supermarkets). We had put 100 in one jar and the second jar was filled to the rim (it was sunny mind you:-) with the representation of 40 years of compound interest at 10%. The answer? Well…it depends.

Those versed in compound growth (which is really what investing is all about and not compound interest) asked, “How often is it compounded?” Great brownie point people! Good job. We used yearly just for simplicity sake but look at the answer depending on the compounding method:

1) Yearly: $4525.93
2) Monthly: $5370.07
3) Daily: $5456.82

Kind of a lot of difference, especially if you imagine having more than $100 in the beginning or, as is suggested, using dollar cost averaging (putting a set amount away every month no matter what!) to investing $100 EVERY month for 40 years. I suppose you want to know what THAT would be! OK, it’s $648,451.90. If you want to mess around with your own calculations, I found a pretty cool simple compound interest calculator here: http://www.moneychimp.com/calculator/compound_interest_calculator.htm

OK, back to the story which brings me to the question: the young girl was a math major and she was frustrated because she (in her own words) ‘should’ have known what it was worth after 40 years. We talked briefly about her investing a little money into a retirement account and she said she couldn’t because the ‘economy was down.’ There was no talking to her in that state so I left it alone but this thing about the our economy being down is just an interesting one.

It’s such a generalization the way I look at it. The word ‘economy’ from my research comes from the French or Latin and is traced back to a word that means “One who manages a household.”. The simplest definition I found was this: The way a country uses its money, goods, and services.

Does that mean the US isn’t managing it’s money well? (go figure) Or that we’re not managing our goods and services, and let’s add resources, well? We all know that that certainly is true in many ways. But exactly which management is down? Is it utilities, food, clothing, real estate, consumer goods, technology (Apple certainly doesn’t seem to be down)? I think that what happens when we over generalize, we tend to not look for solutions and we tend to ‘blame’ things that aren’t responsible for our own situations.

When I see strikes by unions or groups of people who are demanding better treatment or say they deserve to get paid more, I ask myself, why do they think that? If they don’t like their job, why don’t they get a different one; start their own company; learn a new trade? I know it seems simple, but it can be if one wants it to be. The problem is that we stuck in a mindset or paradigm that says that the world should take care of us and that we ‘deserve’ this or that. I’m sorry to break it to you but the world owes you nothing. It didn’t invite you here. My suggestion is to find something you can do for the world and then you’ll have someone of value.

Anyway, just my two cents on the term ‘down economy’ because apparently, according to ‘them’, we’re in one.

Happy Sunday.