102. Money Troubles

I don’t really understand money.  Yesterday morning, Caroline texted me from work.

“Meet for lunch?”

“No, too expensive,”

“Boo.  I’ll get a £2 sandwich then.”

“See? We just saved £30”

“Good.  So now we can afford lunch.  Where and when?”

There’s got to be a flaw with that logic but I can’t work out what it is it yet.  I suppose that it must be a bit like deciding not to buy a new Mercedes and then, instead, going on a World Cruise with the money you have saved from not buying the car.  

It’s the sort of logic that I’ve heard Caroline use when she comes back from an afternoon’s shopping.  Rather than answering my question about how much money she has spent, all I hear is about is how much money she has saved.  It is nonsense!

In July 2004 I bought a bread-making machine.  It cost £90.  I used it at least once a week for the next fifteen months and really enjoyed the bread that I made.  In October 2005 when we moved to Cayman, the bread machine came with us.  

A week after we arrived I threw it away.  It ran on 240 volts but the supply in Cayman is 110 volts, the same as in the USA.  A step-up transformer in Cayman, where everything except for coconuts is much more expensive in the UK, would have cost CI $120, which is about £85. 

I’ve just checked my current account and found that I have a (small) positive balance.  If I had not bought that bread-maker 10 years ago for £90, would the balance today read £90 more than it does?  No, of course it wouldn’t.

Until the year 2000, I used to smoke about 12 small cigars a day and until 2007, I drank beer, wine and spirits.   If I still smoked today, I would be spending about £4,200 a year on cigars and if I were still drinking alcohol, I would be spending about £1000 a year on that.

By giving up smoking and drinking I have awarded myself a rise in my net income of approximately £5,500 a year.  That is a substantial amount but I don’t notice it and I never have.

When I first stopped smoking cigars, I put £5 a day into a box to watch the amount grow but that didn’t last long.  After about five days I decided that I couldn’t afford to do that anymore.  That means that in less than a week I had imperceptibly altered my spending habits to use the money that I had previously spent on cigars and was now buying other things.

I have only once managed to save money by putting some away every day and that was about 25 years ago when I was awarded a 4.5 litre bottle of Scotch whisky as a reward for having an article published in a magazine.  

When the bottle was empty, many months later, I found that I was able to insert a 20p coin down the neck and into the bottle.  Every night, I searched through my pockets and put any 20p coins that I had into the bottle.  The coins made very slow progress ascending the bottle.  It was several weeks before the bottom of the bottle was covered but as the months passed I could see that progress was being made.

Eventually, three years after I began saving, the bottle was full.  I tried to estimate the value of the coins in the bottle but my assessment was nowhere near being close.  When I broke the bottle open I was surprised and delighted to find that I had saved £520.  I was much more delighted than the bank clerk who had to inspect, count and bag them all.

When I retired, my income was reduced by more than half but to our surprise it seemed to have no impact on our lifestyle whatsoever.  Whatever changes we made in our spending habits were so subtle that we didn’t notice any obvious differences.

I don’t know anything about economics and this next story illustrates my problem:

In a sleepy Suffolk village, the hotelier owed the butcher £50.  The butcher owed the farmer £50.  The farmer owed the seed supplier £50.  The seed supplier owed the psychic medium £50.  The medium owed the hotelier £50 and so everyone was in debt.

One day a travelling salesman came into the village to sell his goods. He left a £50 note as a deposit with the hotelier for a room for the night before he went to his first meeting. 

The hotelier immediately rushed off with the cash and paid the butcher; the butcher then paid the farmer; the farmer paid the seed supplier and the seed supplier paid the medium, whereupon she hurried off with the £50 note to pay the hotelier for the rent on the room she had used when she had held her last séance.

However, the salesman finished his business quicker than he expected and so when he went back to the hotel he told the hotelier that he wouldn’t need a room after all and he asked for his deposit to be returned.  The salesman took the original £50 note and left.

The outcome was that no one in the village was in debt anymore and everyone was happy.  Why can’t life be like that? 

Or maybe it can?  I might ask an economist but I’d probably fall asleep during the answer.

11:30 a.m. September 4th 2014.  Something interesting is happening.  

I usually get about 10 hits a week from the US but in the past eight hours I've had 42 from all over the country and it's the middle of the night there.  The really interesting thing is that virtually all of them have put "debt" or "money troubles" into a search engine.