`"Vic Smith" wrote in message
...
On Thu, 1 Dec 2011 18:23:36 -0800 (PST), DerbyDad03
wrote:



There a big difference between not spending money and earning it. One
of them increases your net worth, the other one keeps it the same.
I'll let you figure out which one is which.

Uh, no.
One common definition of earnings is income minus expenses.
It's pretty obvious that reducing expenses increases earnings.
That's what BobR did.
You're just stuck on your definition of pay check earnings.
And I showed you the book keeping entries to prove it.
Here's what you should do
Take a booked expense and cut it out.
Let's say a cable bill of $100 a month.
All else being equal after a year your net worth will increase $1200.
Now you might not want to call that earnings, but that's the effect.
When you mow the lawn and sweat a bit to increase your net worth,
nothing wrong with calling that an earning.
Especially when it had been an established expense.
It just doesn't matter that it rubs you wrong.

The only problem with that accounting is a little thing called "opportunity
costs." When you mow the lawn, you're spending your time. You have then
lost the opportunity to perhaps earn more money doing something you're
exceptionally good at. If you *could* earn $100 a hour consulting or making
carvings to sell, then you'd be losing $30 an hour by working for $70 an
hour instead of at your maximum. The only problem with both our examples is
that you really don't lose that extra $30, you lose the opportunity to have
MADE that money.

http://en.wikipedia.org/wiki/Opportunity_cost

"Opportunity cost is the cost of any activity measured in terms of the value
of the best alternative that is not chosen (that is foregone)"

If you chose to mow your lawn yourself, you can no longer use that time to
work extra hourse at work, do consulting, or break into your neighbor's
garages to steal their tools, or mug nuns on the street, if that's your
thing. G

If your time had no other possible value, then maybe you could feel that you
earned $70, but even then it wouldn't be true. To make or "earn" money in
the first place, you have to increase your net worth, not just conserve it.
Mowing the lawn yourself means you haven't spent money, but it certainly
doesn't mean you made any. That would happen only if you mowed your
neighbor's lawn, too AND they paid you for it.

Way back when Venice was the merchant capital of the world, they invented
double-entry bookkeeping, which has become the very cornerstone of modern
accounting. For every debit, there is a credit and vice versa.

http://en.wikipedia.org/wiki/Double-...keeping_system

This approach is also called as the American approach. Under this approach
transactions are recorded based on the accounting equation, i.e., Assets =
Liabilities + Capital

Your assets have stayed the same by mowing your own lawn. While some
apparently see that as a gain of money, your financial position has not
IMPROVED by mowing your lawn, it's simply held its own. Conservation of
assets is not the same as earning.

It's easy to understand why some believe that money they can keep in their
pocket is a net benefit, it just seems to be common sense. But consider
this. When you mow for yourself, you aren't being paid, there's no new
money coming in and you have to pay for the tools, the gas, the insurance,
the damage if you throw a rock and crack you neighbor's car window, etc.
You can't engage in any other activity during that time, and if you're a
professional earning a good rate, you could come out at a net loss. You'll
really lose money if the mower runs over your foot and cripples you. That's
a fairly large risk you previously offloaded to your groundskeeper.

The issue here is standard definitions. Earning and saving are two
different animals. Very different.

--
Bobby G.