Finance Friday: Making money
My short post on Wednesday was about winning the lottery. I did buy a ticket in the end. I had just £2.00 left in my account and so I thought it was worth a try. Was it worth it though or just another £2.00 down the drain? It wasn’t worth it because I didn’t win, but we have to take risks in life and I took a risk.
Did I learn anything from it? I didn’t really, but I only usually buy one lottery ticket a week and despite the fact buying more would increase my chances of winning I know the odds would still be so high I am unlikely to win in my lifetime. So why bother? Because I can afford it and if by some strange chance I did win, I could do a lot of good with the money.
We all dream of winning the lottery, we imagine what we might do with the money. In the real world we have to imagine how we can make some extra money. Imagination is often important and so too is learning from our experiences and being willing to change.
A couple of years ago the weather through the summer was really wet. Imagine how the farmers felt when they harvested their potatoes only to find the harvest was a fraction of what it would normally be. All the farmers were in the same boat and had no choice but to put up prices or go out of business. That didn’t altogether solve the problem though. They couldn’t put up prices too much because people would simply stop buying their potatoes. They might buy imported ones instead or eat something else. When the price of potatoes is high, people tend to eat more bread. There are several lessons to learn from this. The effects of supply and demand. When supplies are low, prices increase and people look for alternatives. The farmers also had to use money from the ‘good’ years to support the ‘bad’ year they had. You might also learn from this that potatoes are to some extent in competition with bread and other staple foods like rice.
This week I learned that a well known bread manufacturer has developed some new flavoured bread. Will it take off? Do we want spicy bread for our barbecue hotdogs? I think people will try flavoured bread. The guy who put the currants in currant buns thought it was a good idea and putting a cross on them and selling them on Good Friday was a masterstroke. Maybe flavoured bread will be popular in the summer barbecue season. Have you heard about the new flavoured bread? Probably not. So there are a few lessons to learn from this. Diversification, making a new product with the same equipment, can give you a new supply. The new supply will compete with existing supplies of different products. The flavoured bread will compete with not only unflavoured bread, but also rice and potatoes and other staple foods. The other lesson is that people have to be told about it. It has to be publicised and advertised.
Whatever, you are trying to do to make money. Look at supply and demand. Look at competition. What can you supply that other people will demand. If you can supply something in short supply with a big demand, then you can set a higher price. Knowledge and skills are in demand and in the UK they are often in short supply. The experts make the most money. Investment is also in demand and people who invest in a recession can make money too. If you combine imagination, investment, knowledge and skills then you might come up with a new product or service; like flavoured bread…
What do you think? Please share your thoughts in the comments box. What is in demand in your neighbourhood? Would you use flavoured bread at your next barbecue?
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