Why a programmer should understand finance

You may have heard that the better you understand finance, the more you can earn. Unfortunately, I used to ignore this story. I'm a programmer, so my main task is to write many, many lines of code and make as few errors as possible in them.

And this restriction in my head fettered me.

I just thought: well, I just do not want to know what is happening beyond the boundaries of my world outside of code and development, and even more so I don’t want to understand finance. After all, money spoils everything?
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Most developers are completely illiterate in finance, economics and other sciences, in which the words money, inflation, assets and budget can appear, and they perfectly exist without it, and they don’t even seem to be in trouble: they ride electric scooters, drink coffee from Starbucks, their apartment the robot washes a vacuum cleaner, and the cover from their last iPhone stands as Redmi Note 7.

However, we are faced with finances on a daily basis, and it’s still worth exploring them, especially if you are a developer, because developers write programs that should be profitable.

There are very few products on the market that can afford to exist absolutely free. And, as a rule, they are far from the best quality. Yes, there is open source, but even github introduced donates, which will now allow to bring the development of open products to a completely different level.

So let's talk a little about sales. We have an abstract plastic apple and we will sell it in an abstract market. You bought an apple for 100 rubles, and when it went up to 110 rubles, you can sell it and earn 10 rubles. I think everyone can easily understand this very simple scheme. Most dealers generally just raise the price at their discretion, rather than waiting for it to grow in the market.

However, when you see a tendency to reduce the cost of plastic apples to 90 rubles, you sell your apple for 100 rubles and at the same time earn 10 rubles, because you can buy an apple for 90 rubles. This type of buying and selling is no longer easy to understand, it took me a while to realize this.

The school teaches us to add and subtract, but no one has ever told us about finances (at least this applies to my school). And, as a rule, families also do not talk about it.

Of course, the most basic reason for my ignorance is simply that I was not interested in this area in the past and didn’t really want to take the initiative and study this science, which ultimately led me to financial blindness.

So, it's time to change everything!

What is currency?

Money is a contract of exchange right.

A very long time ago, the main method of exchange among people was a rather simple and crude rule: one sheep changed to twenty chickens, one cow changed to ten chickens. It will not be possible to exchange just one chicken, lamb or beef leg - this does not work. ERROR

But the emergence of money could resolve this dilemma. We are very fortunate that we live in the age of the Internet. We no longer need to use paper money. We can travel with a smartphone and pay with it. Hell, we can even pay with watches or rings. Of course, physical bills still exist, but, in my opinion, they should disappear soon.

Is there a place in our world where money cannot be found? Some may say they are prisons. But whoever reads Escape from the Shawshank knows that cigarettes have become money in prisons and people there exchange them.

Inflation and deflation

About two months ago, when I once again went to the grocery, I noticed that the price of my favorite sort of apples rose by 25 rubles. I was surprised and immediately checked Apple stock. They were the same as a week ago. Hmm, I thought.

And now let's think together.

Your salary has not been raised during the year, and for someone else in general for several years and, finally, feel this enormous pressure of inflation. Your wages have not increased, and prices in stores have risen, so in fact your purchasing power has fallen. You have been devalued.

Not only that, but another obvious fact arising from all this is that the money that you put into the bank is becoming less and less valuable. This should be understood. Five years ago, you could buy a kilo of fifteen apples for ten dollars. Now you can buy only five for the same money.

How is inflation going?

The cause of inflation is very simple. Just the amount of money entering the market has increased. As for the deeper reasons why this happened - I do not know.

Many economists believe that moderate inflation contributes to economic development. However, let us remember Zimbabwe in 2008, when people had to bring a bag of money to buy a piece of bread.

So, we talked about inflation, now we can talk about deflation. To begin with, I would like to ask a question into the void: under what conditions can deflation occur?

Deflation is the opposite of inflation. That is, the price of goods and services is reduced in order to raise the value of money.

In the case of inflation, people borrow money in banks to buy real estate, because the rise in housing prices is more than the percentage of repayment of loans. In case of deflation, it is necessary, on the contrary, to pay off your debts as soon as possible, because the debt will increase.

In recent years, crowdfunding has become very fashionable. That is, the buyer pays the seller money in advance. Having received certain funds, the seller only after that produces the product and sends it to the buyer. If the seller does not abuse money, in the case of inflation, the buyer actually purchases the goods at a lower price than he could get the same, but only after its production.

So paying for an apple that only ripens on a tree and having received it in a week, thanks to inflation, you will save.

The principle of operation of banks

People invest money in a bank, and the bank promises to increase them. Then the bank lends the same money to borrowers at higher interest rates than promised to depositors. The main principle here: all people will not withdraw deposits at the same time, that's all.

Of course, banks must have practical experience in lending and must ensure that the depositor can get his money back the moment he needs it.

Promotions

A share is a title document issued by a joint stock company. The purpose of issuing shares by companies is to raise funds, and shareholders owning or trading shares are a model of investment behavior.

The most important feature of stocks is that they constantly change their value (there are no upper and lower bounds at the same time). The stock market is the place where the trades are already issued shares.

Like futures trading, when you buy stocks at a lower price and sell at a higher price, you make money (roughly speaking, you can make money by buying). Of course, you can sell them immediately after purchase, but in this case you lose money because you have to pay a commission.

I have many friends who have had the experience of buying and selling stocks, but most of them have simply lost money. The same applies to the crypt. If you are not a professional in this business and are not ready to follow the course 24/7 - this is not the best way to make money.

Instead of totals

I once talked with my friend and she praised her husband for buying a lottery ticket almost every time he returns home from work. A year ago, he won the car. A couple of times he won all the little things, but the car, in fact, immediately paid for all their expenses for the purchase of these tickets. And this is really cool, I was even so inspired after talking with her that when I went home, I ran into the post office and bought three tickets at once. Of course, they were empty :)

There are cases of winnings, but you should always keep in mind that buying lottery tickets, stocks, real estate investments, regardless of what you are doing - people who lose their money are much more than people who manage to make money on all this and As a rule, these people know what they are doing, or they rule in general with a ball.

And my last remark: the better you understand finance, the more you can earn, so we can not stay away from it and we will have to study finance, if we want this system to work for us, not against.

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