It’s May, which means it’s almost June, which means it’s almost summer. What do you need for heading into the summertime? Probably some self esteem which was just stolen from you this past school year, by the perils that are peer pressure, and self acceptance… (kidding)

You’ll also need some finance tips!!

A lot of people see summer as a new stage, in their lives. A time when they can reinvent themselves. And start fresh. And a lot of people do this by creating budgets. Actually I don’t think anyone does this by creating a budget. But a lot of people consider starting a budget, because, maybe you want to get better at being an adult and taking care of yourself and your money.

I often find that people who struggle the most with personal finance and budgets, are the ones who haven’t had the opportunity to take an economics class. Or the ones whose economics classes sounded like Charlie Brown’s teacher.

I wanted to share some basic econ concepts, that when applied to every day life can help turn a sh*tty relationship with personal finance, into a better, more manageable one. This information will be perfect for anyone who is broke, in college, curious, over it…

The thing is, there’s no perfect method to the madness of money. It is something that is so personal but so difficult. Like your love life. (KIDDING)

The coolest thing about economics… it is based off the principles of scarcity. We have a limited amount of time and money available to us, and because of this, we have to make choices of how to allocate what we DO have. The concept of money scarcity and college blend together so well. Like Donald Trump and the human condition.

So I thought sharing some core economic principles may help you better deal with money scarcity in your own life. It definitely helped me with my own.

Here are three econ concepts, explained in plain english.

First, Opportunity Cost. Life is just one endless balancing act. During life, I feel like I’m constantly faced with the question: what do I need to give up to attain what I want. This is the definition of opportunity cost. For example, you can choose to study for an exam or go party with friends. If you choose to study, your opportunity cost is partying with friends.

Opportunity costs, don’t only mean money. They can also mean anything of value to the person (you) assessing the situation including energy and time. You may find it’s smarter to spend extra money paying someone to do something for you, then it is to spend your time doing it yourself. That’s a form of budgeting.

-Should I go to grad school that costs $X,000 per year, or continue at my job making $X,000 per year?

-Should I save that extra $100/month or put $100/month towards my high interest credit card debt?

-Should I grow my side business, or put more hours in at my day job?

-Should I stay at this job or should I find a new one?

Budget blogs often tell you that they have all the answers to your budget. But they don’t. Only you do. Because only you know what is worth what value to you. It’s different for everyone. Easier said than done, assigning this personal value to everything… But just, don’t get too accustomed to listening to your professors, parents, bosses, friends… dictate the value of certain things. YOU choose what’s valuable to you, however the f*ck you want. You live in America. Or you don’t. Either way. Express yourself.

Second, Sunk Costs. This is the process of resigning yourself to the idea that you are only a human. And you can’t change the past. And you should stop letting that give you anxiety.

There are somethings you may spend money on, or time on, and you wish you didn’t but now that you did….Might as well keep going….. WAIT. NO. Please, don’t. Just, let it go. Sunk costs are the costs that have hit the point of no return.

For example, a gym membership that you’ve never used or a car you’ve already purchased. A dangerous trap is the thinking of “well, I’ve already put so much money and time into this so I might as well just keep going.” This type of thinking leads to throwing “good money after bad money.” Cut your losses.

Think of your decision going forward and leave your past expenditures out of it. From there you can determine your values and use the principle of opportunity cost to make your decision.

Third and finally, the Law of Diminishing Returns. This one, is harder to explain, but I’ll do it with metaphors. If you don’t know about the Law of Diminishing Returns, you probably think your 4th hot dog will bring you as much satisfaction as your 1st, 2nd, and 3rd.

You also probably think that an extra hour of studying at 2am is just productive as your first hour of studying was at 9pm. AHH? Getting it? Cuz it’s not.

Let me put it this way. Not understanding, law of diminishing returns, is why the drug addict needs higher and higher dosage of a drug to feel the same pleasure they did from their first high, to get the same level of…. Whatever that feeling is.

There are mathematical ways of calculating the point at which your action has less of a positive effect than it did the first time. The truth is, being aware of this basic principle should help you keep things in check in terms of spending money, buying too many new shoes, overeating, oversleeping, overworking, etc. At some point the things you do in your daily life have a diminishing return.

I hope this was helpful!! If you didn’t find it helpful, then hopefully, subliminally, your subconscious found it helpful, and you just don’t know it yet.