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Money is often grouped with resources that are limited, most notably time and natural resources. While similarities do exist between money and limited resources, thinking of money as a limitless resource is a way to broaden your possibilities.

The money that I’m talking about is not what’s in your bank account. That certainly is a limited resource. I’m also not suggesting that you go on a spending spree once you change you thinking on money. No, as you’ll often hear on the Lending Club blog, financial conservatism is at the heart of nearly every positive decision in personal finance.

I’m talking more about money in the global sense. Traditional zero-sum thinking holds that in order for my own money supply to go up, someone else’s needs to go down. That categorizes money as a limited resource. If there’s only so much of it, then clearly for someone to gain, someone else must lose.

I believe that viewing money as a limited resource is an outdated concept. Thinking about it that way may stunt growth and hamper innovation through the guilt of not wanting to take away from our fellow human beings. When something new is created, it can create money along with it. Growth of your money through innovation will likely increase the amount of money available to others, not take away from it.

To give you an example of creating value in the money supply, consider the example of YouTube. Within a year of its launch, YouTube had grown from nothing to one of the most recognized and visited websites out there. While people may see its value differently, Google was willing to pay $1.65 Billion in stock to buy YouTube.

Through their creativity, timing, and insight, the founders of YouTube had built incredible value in an amazingly short amount of time. Did they have to take away from others to do it? No. The jobs and revenue that they created wouldn’t have existed unless they had made it so.

If the thought of money as a limited resource, and the guilt that sometimes accompanies that thinking, has been holding you back from being creative, it may be time to change your thinking. Your bright idea may create more than just the next YouTube, it may create something that people used to think was a limited resource: more money for the world to enjoy.

I know I’m not the only 20-something who has seen each Star Wars movie (the originals, mind you, not the so-so new ones) like 17 times. You would think after watching the Death Star blow up 34 times (Episodes IV and VI) I would know every line by heart. Alas, I’m not quite that nerdy, or perhaps my memory is just terrible. I did however learn some financial lessons from all those viewings.

Lesson #1: Children Are Expensive

Let’s just focus on the financial impact Vader’s children had on him:

Luke:

• Blows up 1st Death Star in Episode IV (untold billions in Imperial Credit wiped out)

• Has his hand severed (albeit by Vader). Medical bills can add up quick! I’ll bet if Vader had gotten the bill for this, he would have thought twice about slicing that hand off!

Leia:

• Leader of the Rebellion, indirectly responsible for the loss of dozens of Star Destroyers (not cheap either)

So, Thank you Darth Vader for reminding us that kids can be expensive. I’m sure they are worth it (I mean, he did sacrifice himself for Luke after all), but someone needed to save up for their Rebel Alliance College Fund, and private Shyriiwook (Wookiespeak) language tutors are expensive. And don’t even get me started on the cost of Light saber training these days…

Lesson #2: When Building Your Death Star: Use Cheap Money

When Vader was overseeing construction of the Death Star, do you think he was financing the project with his own money? Of course not. While saving up for some purchases is a great idea, other times it makes much more sense to utilize other people’s money. So if you are thinking of making a large purchase and need to finance it, make sure you are borrowing money at as low a interest rate as (legally!) possible.

Note: This does not mean you should start taxing your dorm or neighbor any sort of Imperial Tax to raise money to buy your speeder!

Lesson #3: Don’t Delegate Your Financial Fitness

Vader learned the hard way about delegating important issues. How many Imperial fleet officers did he terminate because of poor performance? More than a handful! Your money is an important matter and is something you should watch and manage carefully. This doesn’t mean you shouldn’t get advice from qualified professionals, it just means you should make sure you are always in charge of your money. Vader didn’t leave important assignments up to anyone but himself. You shouldn’t ignore your financial well-being or assume your parents will always take care of you. After all, as Vader learned, children can be very expensive!

While nearly everyone agrees that children are expensive, the true cost of raising a child is a subject of much debate.

The United States Department of Agriculture (USDA) puts out a report on a yearly basis to set the government’s estimate on the cost. Usually, around the same time, you’ll start to see news articles abound quoting the new numbers. It’s no wonder that the results are newsworthy considering the extremely high numbers that are reported. The most recent report, released in April, estimates that a child born in 2006 will cost $197,700 through the age of 17, for a family earning an average of $59,300.

While that number is staggering, critics remind readers that the number can be misleading. In his article on the subject dated July 20, 2007, Texas A&M finance professor H. Swint Friday discussed some of the reasons why the number is probably much lower than that reported by the USDA. While some of his arguments are subject to your opinion, such as his claim that the USDA is politically motivated to overestimate the number to pad its own budget, other points are more quantitative.

As an example, consider the method that is used to determine the housing cost for a child: The family’s housing cost is divided by the number of family members. So if a family of 5 lives in a house that costs $15,000 per year (not counting principal towards the mortgage) to maintain, then the housing cost for the child would be estimated at $3,000 for the year. What this estimate fails to consider is that the family would have had the same, or a similar, housing cost regardless of whether the child lived there or not.

Obviously, other costs, such as food, clothing, and healthcare do tend to increase with each additional child in the house. But even that is open to some interpretation. As an example, your health insurance premiums may increase to add your children, but won’t necessarily increase on a per-child basis. So the first child may cause a bump in premium cost, but additional children may not. It’s also interesting to note that the cost of raising a child increases with increasing family income.

As Professor Friday points out, even the USDA’s own report has dissenting authors who estimate the true cost of raising a child to be much less than the reported estimate using varying methods of calculation. One method, the Barten-Gorman method, estimated housing expenses to be 44%, and miscellaneous expenses to be 28%, below the USDA estimate. While using these reductions brings the cost per child down to $162,829, that is still a number that may seem daunting to parents.

Everyone wants to get rich. How do people actually do it? You could win the lottery, or maybe get a surprise inheritance check, but most people don't have that sort of luck. So how do average, reasonable people get rich? They do it slowly.

You are probably pretty young right now, so now is the best time to start. As I mentioned in my article on compound interest, every day that you wait to begin investing is a day of lost interest---each additional day of interest adds a lot to your bank account. So, let's look at 5 things you can do to get rich slowly.

1) Make it a goal to begin investing today - This is the most important thing you can do. Your money sitting in your bank account isn't doing anything for you--it's actually losing money because of inflation unless it is in one of the few high-interest accounts out there. By taking the first step and opening an online brokerage account as well as a Lending Club lender’s account, you are setting yourself up to accrue a lot of money thanks to compounding interest.

2) Open a retirement account - I recommend that you open up an IRA, and max out the account every year if you can. Roth IRAs are amazing because they minimize taxes that you have to pay when you take your money out. However, they also limit how much you can invest (around $4,000) each year, so check out the various types of IRAs and choose wisely based on your own circumstances. If your company offers you a 401k, definitely take advantage of it. In many cases, your company will match part or all of your 401k contributions--that's free money.

3) Invest in safe index funds - Index funds are a great investment because they directly model the market (or a specific part of the market), and they have very low fees in comparison to mutual funds. The stock market generally goes up about 10% a year on average, so you can expect very decent returns over a period of time.

4) But, don't forget about stocks - Certainly, stocks are much more risky than index funds because they are based on a single company's performance. However, if you are young and you can afford it, put some money into stocks that you trust. The stock could go down, but if it goes up you will have a lot more capital on which to gain future interest. For example, my investment in Amazon has earned me over a 100% return over the last couple years---not a normal return, but not unheard of.

5) Make a commitment to invest money from every paycheck - If you put 10% of every paycheck into your retirement accounts and personal investment accounts, your chances of getting rich will skyrocket. See if your employer can put the money into your accounts directly so that it never even gets to you. A lot of investment accounts offer steep discounts if you set up a monthly direct deposit plan, so see if you can transfer money every month into a specific index or mutual fund.

Of course, diversifying across a number of investment vehicles is always a good idea. If you invest in stocks and bonds, for example, you might also want to allocate money to make person-to-person loans via Lending Club. You can use LendingMatch™ to create diversified portfolios to match your risk/return preferences.

If you follow these guidelines, you have a very good shot at being rich--that is, rich enough to continue your current standard of living indefinitely. I'm not saying you'll be able to buy mansions and private islands, but you won't be out on the street either.

It seems as though the message about store cards hasn’t reached everyone yet, so it certainly warrants further discussion here on the Lending Club blog. I cringed when I heard someone in line ahead of me trying to “save 10%” recently while shopping at a department store.

While the trouble with store cards will be reviewed below, what made this case particularly frustrating was that the customer’s bill was only $30. I know that basic math skills aren’t as strong as they used to be, but I have to assume that nearly everyone can calculate that only $3 would be saved.

Here are the potential pitfalls of chasing that 10%:

High Interest Rate
Most store cards are run by third party banks and charge even higher interest rates than regular credit cards, averaging 20-25%. With such high rates, even small balances can quickly balloon. Any “savings” on the initial purchase will be eclipsed by the interest payments that will likely follow (unless the card holder pays in full right away).

Identity Theft Exposure
When prompted by the cashier, who was having trouble reading her application, the aforementioned customer disclosed her Social Security number in front of other customers. This is an open invitation to identity thieves. Your Social Security number should be treated as the most sensitive of personal data.

Another Bill Each Month
Having another card is also another deadline that you’ll be faced with each month. Remembering to pay the bill and the potential for fees and accumulating interest may be reason enough to avoid applying for a store card.

Credit Score Effects
Having an additional card also has the potential to lower your credit score. By having additional credit available through your store card, you may be seen as more risky to lenders for future credit. You may also increase your balance to credit available ratio, which could lower your score as well.

Conclusion
A final disadvantage was the anger clearly visible on the faces of other customers waiting for the application to take place. It wasn’t clear if they were angry at the customer for wasting their time in a futile attempt to save a few dollars or at the store for preying on the customer’s apparent financial ignorance. In any event, be sure to remember that saving 10% comes at a steep price.