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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.

Infinity
Infinity

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 make 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 cheques = 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?

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 cheque 900
  • etc., etc.,

I Won’t Have Infinite Income ?

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

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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!

 

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Why are there So Many Things to Worry about at 2 AM?

Why are there so many things to worry about at 2 AM,  actually sprang out of a conversation I was having with my Mother. A family trait is to worry about every and all things in life (to the chagrin of our spouses), my claim is it is a genetic thing, but my guess is it is a learned trait (i.e. watching my Mother fret taught me that character trait).

The worst part of this compulsion is that if you wake up in the middle of the night (and worry can cause this all by itself), suddenly your mind will start the worry mantra all over. The amount of sleep I have lost by worrying in the middle of the night I am sure is shortening my life (it is shortening my sleep, that is for sure).

I am envious of those of you out there who are poo-poo’ing this and saying, “… why worry, it isn’t worth it…” or “… I have nothing to worry about…”, and I hope you are right, because in my life the list of things to worry about is very close to the definition of 1 divided by zero (i.e. infinite).

What do I worry about? Well you might ask:

  • Will I have enough money to retire?
    This is not really something that keeps me awake, but it is an excellent catalyst to start the worry cycle, because then my mind is thinking about money, and thus many other money related topics can appear.
  • How am I going to get out of debt?
    You think I rant about debt because I am somehow speaking from a point of leadership? Hell no! Sometimes my rants are as much aimed at myself as at you good reader.
  •  Health Issues
    I am over 50 and once that happens your health becomes worrisome. If you’ve had a health scare (which I have) and have enough of your joints that are wearing away (again like me), your health can create angst.
  •  The Job
    This one, not so much any more, but for anyone who has been laid off, and had a hard time finding another job, career and job issues can cause no end of topics to keep you awake at night.

For anyone about to prescribe antidepressants or suggest counseling  buzz off (I mean that with the greatest of respect). I’ll live with my inner demons, they are controllable, and at times can be useful motivation to get off my ass and do something, however, I do wish I had not learned How to Worry .

Luckily there is a very helpful bit of advice from the late Zero Mostel (on the Muppet Show). Evidently I must count and compel my things to worry about at 2 AM , and then I can quickly dispel them.

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Financially Acting in Haste

Many times I have espoused that if you feel you are not getting the service level you want or you are paying far too much for these services you should simply change your bank or find a different service provider (with phone services, cables services and internet services), however sometimes acting in haste can have some unpredictable consequences, so while you should act, always take a moment and figure out what possible ramifications there might be from you making a sudden change.

I write this remembering a story of my childhood where my Mother first taught me that you must stand up for yourself, however, that can cause unexpected ripples elsewhere in your life.

My Mother is an astounding woman, has worked very hard, and is a very independent person (even now when she is 90+), but this happened when she was much younger. She had gone to her Bank to do some banking (remember this was in the early 1970’s for a timeframe) and many times she had received condescending comments about “shouldn’t your husband be here?” from the Bank Staff (implying that my Mother couldn’t nor shouldn’t be making financial decisions on her own).

At the time my Mother had her own job as a teacher, her own income, her own benefits yet the Bank continued to treat her as a simple appendage of my Father. As a bit of background my Mother got a Statistics degree from University College of London in the early 50’s, when women did NOT get those kind of degrees, so while I would not view her as a feminist, she was and is a very strong believer in her rights.

All of this came to an interesting crescendo one day when a Bank teller refused to do a simple transaction for her without my Dad’s signature. The account was a joint account, however, either was allowed to sign for transactions, however this teller would not budge, and refused to let my mother do this simple transfer without my Dad’s signature. For my Mother this was the line in the sand, and she decided she had enough of this.

She thanked the teller, walked away (politely) then went over to the Customer Service desk and asked to close all of her accounts with the bank. My mother could not close any joint accounts, but she did in fact have her own account and a Chargex card with the bank as well, so she closed both of those and came home. The bank didn’t really care, I guess they thoughts it was some overly emotional woman flying off the handle, but my Mother refused to do business with them.

This story in itself would be a good example of standing up for yourself, but it also has an added epilogue which is important to remember too. The next day my Dad went to buy something downtown, didn’t have enough cash with him so he used decided to use his Chargex card, however, that Chargex card was not actually his account, he had a card off my Mother’s Chargex card, and thus the transaction was refused. My Father was not very happy about this, he ended up using one of his own Credit Cards, but when my Mother heard of this, she had a good laugh (my Father was not as amused by this turn of events).

Acting in Haste ?

Happy Birthday

The moral of the story: Stand up for your rights, don’t take crap from any service provider, especially your bank, but remember if you make a rash decision,  maybe think about it for a few minutes and figure out what all the ramifications of the decision might be.

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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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