The Infinite Income Fallacy

Understanding what Infinity means was one of the fun things in my Mathematics education.

The first time I started to really understand it was after  a Professor gave our class an example in a first year algebra course:

Suppose you have a hotel with infinite rooms, and every room is occupied, what do you do if someone shows up and wants a room?

Tell everyone to move 1 room down, and give the first room to the new guest.



Trust me that is a good answer to that question, but it also allows me to talk about the Fallacy of Infinite income.

When you are 20, 30 and sometimes even when you are forty, you feel that you will be earning income long enough to achieve all of your goals (financially), however, your potential to earn income is not infinite, and in fact it is quite finite (and countable, to use another mathematical term).

Countable? Think of it this way, if you assume you are being paid twice a month and you start working at age 24 and you retire at age 65 the number of pay cheques you have is:

 Total # Pay Chques = 24 * (65-24)  = 24 * 41 = 984 pay cheques

Certainly not infinite, and a quite optimistic number, because this assumes you work all the way to 65 (or that you can work all the way to 65). What might cause less pay cheques?

  • You decide to retire before 65
  • You are disabled before 65
  • You get laid off a few times

All of these will reduce the number of potential pay cheques in your career, but even worse is not having a pay cheque number in mind by when you reach your financial goals.

  • By pay cheque 864 being out of debt
  • Pay off the house by pay chque 900
  • etc., etc.,

The concept of infinite and income do not belong in the same phrase.


Two Sentence Financial Horror Stories Part Deux

As we saw in yesterday’s terrifying Two Sentence Financial Horror Stories my readers have quite twisted imaginations, and all of this from a Quicken Giveaway Contest, and because I am on vacation, I am taking full advantage of the new content.

He had a regular middle-class life, with a mortgage, credit card debts, car loan, and almost no savings. Then he suddenly lost his job, so he took his severance package and payed himself a nice trip to Europe.

I Know What You Did With your Money!

I Know What You Did With your Money!

An interesting and terrifying concept from Tiago which sounds a little to realistic to me (and thus, that much more terrifying).

“My total debt service ratio is only forty percent, and the interest rate is only 2.99%? Where do I sign”?

Sandi has gone a little too realistic, and it almost caused me to throw up (OK I threw up a little bit into my mouth, it was that bad).

I should have learned from my Nortel experience and not bought Research in Motion a few years ago. iPhones are a passing fad, right?

Seriously Glen what were you thinking writing such horrific financial prose?  Blackberry stock is either doing the cha-cha or is proving that anything that falls 200 feet will bounce.

She said to herself, “Whew, I finally have some hard-earned savings after I lost everything I had in that dot-com crash a few years ago. Well, it’s the mid-2000′s, so I think I’ll put it all into the red-hot market of Las Vegas real estate!”

OK S (or whatever your name is) that is science fiction horror, I hope, who would do that? Stop, please don’t tell me!

“As your financial advisor, my recommendation is to finance your investment of ABC Mining Solutions with your credit card, and invest in as many shares as your credit limit will allow,” he said, his deep, resonant voice lulling me into a trance. “Since you’re borrowing to invest, the interest is tax-deductible, and at a low price of only $3.10 per share, the price has nowhere to go but up.”

Daniel’s creation deserves an honorable mention, because holy crap it is far too realistic!



Why Don’t They Empty the Dishwasher?

And other questions about Teenagers

One of my pastimes is as an assistant coach on a girls’ basketball team, and a few weeks ago the head coach asked me a very good question, “Why aren’t they running the offense?“, which is a question we ask each other a great deal, but I had a momentary epiphany which I like a great deal (still).

Why don’t they empty the dishwasher, even though we tell them to do it every day? Why when they finish emptying the dishwasher don’t they put dirty dishes into the dishwasher?

It really does sum up the problems we have with the young ladies apparently not listening to us, they just don’t seem to remember things that we think are very important. My opinion is that they think these are “requests”,  they simply don’t listen or they don’t think the tasks are very important, but that is not really the point of this post.

We keep thinking the girls are making “mistakes”, but I don’t think that really is the case, it is just they simply don’t think of it at the time (i.e. a sin of omission not a sin of misinterpretation or mistaken action). We will keep working with the young ladies (although the season is coming to a close very soon), maybe they will have an epiphany of their own.

Sh*te Vortex

I have surmised this is what happens to a lot of folks when they start creating the Shite Vortex that is their financial situation, they are not trying to create it, but by forgetting the simple rules that Financial Bloggers spew (sorry a long weekend of dealing with bodily fluids) daily, they create the problem.

This doesn’t excuse either our players or the folks who create Financial Shite Vortexes, it just allows me to understand the thinking processes a bit more (I empathize, but I don’t sympathize). Understanding why mistakes are made, gives me hope that the “mistakes” can be averted the next time.

Why do you think folks do those weird things, that they know are wrong, but do them any how? Do you have a dishwasher that never gets emptied?

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