You might be curious why we’re spending so much time on the history of trade, money, and other economic concepts at the outset of this financial literacy series. In finance and economics, having a basic understanding of the evolution and history of money and financial tools is key because “those that fail to learn from history are doomed to repeat it,” as Winston Churchill famously wrote.

So here’s the key point: if I hold money, I’m holding someone else’s debt. In our simple economy, in the spring, fur pelts and meat are sent to FruitLand in return for money. Then in the fall, fruits and grain are sent to ProteinLand in return for money. FruitLand has the fur pelts and meat they need, and ProteinLand has the fruits and grains they need. Money is the tool that has been used to solve the seasonality problem with trade between these two economies. The “money” used to enable trade flows back and forth between these economies as a medium of exchange, store of value, unit of account, and standard for deferred payment.

So what is money? Money is anything that acts as (a) a medium of exchange, (b) a measure of value, (c) a standard that can be used for credit or deferred payment, and (d) a store of value. Early coinage ticked each of these boxes.

Money also has the following properties. Money must be:

• Durable

• Fungible

• Divisible

• Portable

• Acceptable

• Scarce

The world you live in today is a direct outcome of advent of trade — of entrepreneurial humans recognizing that their lives can improve by trading with other groups who possess skills and/or resources that they do not. Making trade more efficient and effective has driven some of the most fundamental tools and advances we take for granted as modern humans.

In this episode of Saturday Morning Muse, Andrew Temte explores the foundational concepts of trade and macroeconomics through a hypothetical economy consisting of two regions: Fruit Land and Protein Land. He discusses the advantages of trade, the impact on societal well-being, and the necessity of education and retraining for those affected by economic changes. The conversation sets the stage for future discussions on currency and deeper economic principles.

We’re going to wrap up our conversation on risk tolerance this week by discussing common risk tolerance blunders humans make on a routine basis. This isn’t the last you’ll hear on the subject as there’s a lot more to discuss on how to measure risk, the relationship between risk and market volatility, and many other topics.

In this episode of Saturday Morning Muse, Andy Temte explores the concept of risk tolerance in personal finance, discussing various factors that influence an individual's willingness and ability to take risks in investments. He emphasizes the importance of understanding one's financial goals, time horizon, age, income, existing portfolio size, knowledge, and stress tolerance. The conversation aims to enhance financial literacy and encourage listeners to make informed decisions about their investments.

Growth requires some degree of risk tolerance. The more self-confident, and the higher our self-esteem, the more calculated and informed risks we’re willing to take. To build self-confidence and self-esteem, we must take risks and be willing to learn from failures and missteps. This virtuous cycle works best when we surround ourselves with positive challengers—people who will simultaneously support and challenge you in an environment of psychological safety.

How we feel about risk and how we respond to risky situations is not applicable solely to the financial investments we make. Our feelings toward risk influence what jobs we pursue, the relationships we engage in, the products we buy, and the recreational activities we take part in. Your personal relationship with risk touches and helps shape nearly every aspect of your life.

As humans, we tend to not put enough thought into the worth or value we assign to the products and services we purchase. We’ll make better decisions on what we purchase with our hard earned $$ if we take a bit more time to consider how we place value on the things we buy. The interesting thing about finance and financial literacy is that it is equal parts objective evaluation of our financial position and our behavioral perspectives about our personal economy. How we feel about money, investing, and consumption is as important as the numerical and analytical side of working with our finances.

Today, we’re going to continue our exploration of financial literacy with a fairly straightforward conversation about our consumption habits and how they can, over time, derail our ability to save for the future and establish the financial security that so many of us desire…

Speaking of habits, the monthly review of your financial records should be a habit you adopt and never break. Yes, this habit should be reviewed periodically with an eye toward making the review more efficient, but it should be something you do every month for the rest of your life.

As we continue our journey to build financial literacy skills, you may be wondering where all the formulas and numbers are? Well, this is a big misconception of financial literacy—that it is more about numbers than it is about behaviors. How we feel about money & investing and how we behave with the resources we have via the decisions we make are as, or more, important than our ability to work with numbers. Hence, this is where we’re going to place most of our initial emphasis.