The Big Picture: Microeconomics v. Macroeconomics
November 17th, 2009 // 10:32 am @ Andrew Rosenbaum
Microeconomics is the study of economic parts that appear unrelated to the whole, or without consideration for the whole.
In contrast, macroeconomics is the study of how every economic choice relates to and impacts your entire financial world. This view redirects one’s financial decisions because of the powerful understanding that each decision is inter-connected.
From any individual’s vantage point it appears that the earth is flat, but seeing it from space verifies that it is round. This simple analogy illustrates the radical difference between micro and macro.
When one takes a global view of their financial world things look radically different in contrast to how it’s seen from the traditional perspective.
Seeing your financial world from a macroeconomic perspective allows the trained eye to discover two things. I not only see the tiny flaws, but more importantly the hidden possibilities, specific to each client’s life.
The financial flaws and possibilities are never precisely the same for any two people, but if they go undetected the erosion of wealth is always the same. We must correct the flaws, and capture the possibilities to increase efficiency.
One of the biggest reasons why this matters so much is that the microeconomic approach to personal finance teaches the false concept “high risk = high return.”
In contrast, the macroeconomic planning methodology I use is based on “wise risk = safe return.”
Every investor I’ve ever met was risk tolerant until they lost money. With high risk you will invariably lose your money because it is no longer financial planning, but rather legal gambling.
Being willing to shift from the traditional micro view of money to a more global and
comprehensive view will maximize your enjoying greater economic confidence. In macroeconomics it is not only important what you do. It is of equal importance what you do not do, for what you don’t do can financially destroy you.
Category : Featured Content &Financial Certainty &Macroeconomics
