Miscellaneous Money Stuff
By Steve Gillman - July 20, 2013
This is a collection of various opinions and news items and
ideas related to money. It consists of my notes on miscellaneous
ideas and money stuff that I collected but did not make into
single-topic pages. We start with the lottery -- that poor excuse
for a get-rich-quick plan.
I recently read that one out of every four Americans believe
their best chance of becoming rich is by playing the lottery.
There are two reasons to think such a thing. The first is over-estimation
of the odds of winning. If you play all of your life and devote
a good chunk of your paycheck to the lottery, you still have
almost no chance of ever getting the jackpot.
Many people know this yet still feel it is their best chance
- and they may be right. Getting rich by other means may be much
more likely, but only if a person is willing to use those means.
Starting a business comes to mind, but even just living on less
than one makes and investing the difference will eventually make
almost anyone rich if they start young. Most people know this
too, so when they say the lottery is their best chance for wealth,
they must be acknowledging that they have no intention of doing
anything else to make it happen. That's not a problem unless
the person actually wants to be rich, in which case it is very
sad, isn't it?
Timothy Ferris, the author of The Four Hour Work Week, says,
"There is a direct correlation between your willingness
to expand beyond your comfort zone and your likelihood of success."
I think he is right. I make a living online now, but I had no
interest in computers or the internet when I started. I still
don't care for the technological part of the business, but I
love to write and make a living at it. It definitely helps to
go beyond your comfort zone.
I recently read the book "Nudge," by Richard Thaler
and Cass Sunstein. It is about small changes that can make big
improvements in health, wealth and happiness. It has a lot of
interesting ideas. For example, having a meter in the house that
shows your electrical usage in real time and in dollar terms
can make it much easier to cut your power usage. We just don't
see electricity being used, but if we see the dollar cost rising
as we use it, it becomes more real. I'll include a short review
of the book, or at least the money-related parts, in a future
What is Money Worth?
Imagine a man who worships hammers and nails. Despite all
the useful things they can do, all the homes and others buildings
that can be built with them, it would still seem too much to
collect more and more of them for their own sake, right? And
if this man was to start doing crazy unhealthy things and compromising
his moral values just to get more hammers and nails, we would
think him insane. Yet this is how some people approach the tool
we call money. Of course it is useful, and can be used for good
purposes. It is not evil, but the love of it for its own sake...
that's another matter, which brings us to our next couple news
I recently read two statistics. I hope the second was invented.
The first was that two-thirds of Americans polled say they
would live on a deserted island by themselves for an entire year
for a million dollars. No surprise there, and why not? Many suffer
through many years of classes they mostly don't enjoy just to
get a degree that makes them a little more income.
The more disturbing poll found that almost 7% of people would
murder someone for ten million. I suspect it was an invented
statistic and that there was no such poll. At least I hope that's
the case. And I hate to even ask the following question, because
someone might answer it, but what does a person think they could
buy that would justify murder for any amount of money?
Money Mistakes to Avoid
There are many mistakes we all make with our handling of personal
finances. Here are a few to watch out for.
1. Creating unplanned future expenses. Don't buy that fish
pond for the back yard unless you also fully plan for the cost
of fish food, pumps, algae removers, water treatment, water,
and repairs. In general, always ask yourself what additional
future expenses come with a purchase - and be honest!
2. Borrowing for depreciating assets. A home or business may
be a good thing to borrow for (unless rent is substantially cheaper).
But a car isn't, because you have to pay interest all the while
the value is dropping. Save and pay cash for all depreciating
3. Overextending yourself. If you think you can afford the
ongoing cost of something, such as a payment for a vacation condo,
make the expected payment into an account for six months before
buying. If this is difficult, you aren't ready financially for
that condo. Fixed expenses (those you can't easily get rid of)
should be taken on carefully, and should never come close to
eating up all your income.