FOX Translator
No data currently available.
No data currently available.
TITLE
We like to think that when we deposit a dollar at the bank, it goes into a big vault and we can pull out that same dollar at any time. But that¿s not how the U.S. banking system works. Banks take that money and invest it to make money themselves, so cash gets spread around. This, naturally, leads to a big risk: What happens if those investments go sour? Well, you¿d be out of luck. You can¿t get your dollar back.
The Federal Reserve doesn¿t like that scenario, so it prohibits banks from putting all the cash it has on deposit on the line. In fact, the Fed forces banks to keep a portion of their assets at the Federal Reserve itself, to make sure that some of your assets won¿t get squandered if the bank¿s bets go south. These are called ¿reserves,¿ (hence, Federal Reserve. Got it? Good), and usually amount to 10% of the total cash kept in checking accounts.
These reserves are never exactly 10%, and banks like to keep a little extra in reserve ¿ not, as you might think, to make you more comfortable that they¿re in good financial shape, but rather so they can take that excess and lend it to other banks and make money off it. (They¿re banks, they can¿t help themselves.) The rate at which they make these loans is called the Federal Funds rate, which is set by the Federal Reserve¿s Federal Open Market Committee.
When you hear people chattering about how the Fed cut or hiked interest rates, this is what they¿re talking about: the interest rate banks can charge for lending money from their reserves. This begs the question: If these are essentially loans between banks, why is the Fed Funds rate so important for the rest of the economy?
Well, simply put, because loans make the financial world go round. Bank A lends Bank B $10,000 at a Fed Funds rate of 5%. Bank B then lends out $10,000 to a small business at 7%. The small business then takes that money and expands the business and hires new workers. Now someone is employed, Bank B has made interest off the loan, and Bank A is the richer for making it all happen. It¿s perhaps overly simplistic, but you get the idea. When you want the economy to thrive, you make lending cheaper.
Of course, sometimes you don¿t want the economy to thrive. In fact, you might want it to cool down, mostly to avoid money flooding the system and causing inflation. In that case, the Fed raises interest rates, making it difficult to lend or borrow.
Home / Personal Finance / Lifestyle & Money / Consumer & Debt
Wednesday, February 27, 2008
Game Plan
Financial Satisfaction: A Balancing Act
Nancy Colasurdo, Life Coach
FOXBusiness
Back in 2004, when the Emilio Pucci boutique opened on Fifth Avenue, I went in and bought a silk square with a classic
geometric pattern in blue, pink, lavender, black and gray. I have worn it many times, tied to handbags and threaded through
jean belt loops. It lifts each ensemble to another level and with it the spring in my step. It was $65.
I had this
Pucci flashback the other day while reading these lines from Oprah Winfrey’s back-page column in the March issue of O magazine: “I’ve always had a great relationship with money, even when I barely had any
to relate to. I never feared not having it and never obsessed about what I had.”
Of course! It made perfect sense.
This was not enlightening to me. It was validating.
The thing is, on a practical level, I had no business buying that
scarf on that particular day. I was embarking on a new business and money was ultra tight. But I was compelled to buy that
silk square that day because it represented a leap of faith.
It is no coincidence that right around that time I was
reading a book called "The Wisdom of Florence Scovel Shinn," a treasured gift from an astute friend. It is a compilation of
four books written by Shinn--a metaphysician and lecturer--between 1925 and 1945. In it she introduces a concept of prosperity
and abundance that was foreign to me up until that point.
“You are either heading for lack, or heading for abundance,”
Shinn wrote. “The man with a rich consciousness and the man with a poor consciousness are not walking on the same mental street.”
Or
on Fifth Avenue, for that matter.
With all the debt Americans have become mired in, it is no surprise I frequently
get clients who want to work on their finances as one of their goals. Typically they are struggling because they have no financial
identity or reference point aside from what they experienced growing up. I often send them to works by Shinn and Suze Orman
simultaneously because each speaks to a different level of the intellect and emotions. They are an ideal combination, I find,
to help clients form a financial philosophy that works for them.
This helps them sort through the ongoing money challenge
of knowing when to say "when" and exercise restraint or knowing when to say "go for it" and demonstrate faith. One client
and her friend even coined the phrase “Shinn”-ing for those times when a purchase is made as a show of active faith. Of course,
there’s a limit to that. This is where Orman’s practicality comes in handy. For example, had I bought a fabulous $2,000 silk
caftan in the Pucci store that day in 2004, it would not have been a leap of faith but a big fat sabotage to my financial
well-being.
It really boils down to a feeling. You either feel joyful, sustainably joyful, at having made a great purchase
(not “high” as in a temporary fix). Or you have a knot in the pit of your stomach because it was an extravagant impulse buy
that put you deeper into debt. The key is to find a balance, one that makes you feel like you’re living life with your eyes
open and not your head in the sand.
After a recent career milestone, I stopped back into Pucci. I love the pristine
walls that make the bright colors pop. I bought a vibrant day planner that is smooth to the touch and dazzling to the eye.
More
faith. More abundance. More joy.
Find your Pucci.
Nancy
Colasurdo is a practicing life coach and freelance writer. Her Web site is www.nancola.com. Please direct all questions/comments
to FOXGamePlan@gmail.com.
Market Snapshot
| Symbol | Last Price | Netchange | Volume |
|---|---|---|---|
| -- | -- | -- | -- |
| -- | -- | -- | -- |
| -- | -- | -- | -- |
| -- | -- | -- | -- |
| -- | -- | -- | -- |
