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Positive Versus Negative Growth

Understanding Positive and Negative Growth

The laws of nature determine that if a system is not growing it is shrinking. For example, bacteria either grow or decline in numbers, the same goes for human population, or the muscles in your body. An opposing force is required to counter growth and to hold a system in equilibrium. Nature must exert a counter force against growth to keep it in equilibrium, otherwise an unopposed force impacts its environment in a destructive way (like humanity destroying the planet).


Equilibrium

An Equilibrium is the Balance of Opposing Forces

Force A in the figure above is free to exert itself. In financial thinking this never happens, there are always exposing forces wanting your money or decreasing its value. In the second scenario Force B (you) is countered by Force C (the world) but a perfect balance rarely lasts, something always comes up, like an unforeseen bill. If you apply a little effort, you will get a little gain in your wealth each period (green), but if you apply a lot of effort, and make spending sacrifices, the green effort will become very large. The opposing forces in your life also change in intensity as your situation changes, the saying is, “The more you have, the harder it is to hold on to it”. You will have to adapt as your circumstances change. Do nothing and the green arrow points against you, and your balance sheet shrinks.

Financial Security Requires Effort

If you don’t apply your efforts to strong financial management all the other forces in the world will eat away at your wealth and keep you ‘bouncing’ from pay cheque to pay cheque. Money does not magically manage itself. This ‘bouncing’ effect is the only thing keeping you from financial oblivion, that is, bankruptcy or even gaol. Without a new pay day you will have nothing and no resources to support your life or that of those you may be responsible for. Sorry to be alarmist, but this is an important wake up call to apply action if you want your life to be different.

 

Problem Solve your Way to Financial Independence.

Further Reading

Economic Growth (wikipedia)