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Schrödinger’s Financial Cat

Schrödinger’s Financial Cat

I enjoy discussions of Schrödinger’s cat  because it can spawn off some very interesting ideas, so what if we think of his cat in a financial model?

SchrodingersCat

The interpretation of his original thought experiment ( from Wikipedia (about the Copenhagen interpretation)):

Schrödinger’s cat: a cat, a flask of poison, and a radioactive source are placed in a sealed box. If an internal monitor detects radioactivity (i.e. a single atom decaying), the flask is shattered, releasing the poison that kills the cat. The Copenhagen interpretation of quantum mechanics implies that after a while, the cat is simultaneously alive and dead.

What does this have to do with Personal Finances? Suppose we weren’t actually talking about a cat, but your level of debt instead, and yes I know people who think the following:

If I simply spend my money, without checking the status of my savings, investments, debts or anything financial, I am then in a calm state because I am both rich and poor, I am in a state of financial equilibrium.

On the surface this is not that far off base because, “According to Schrödinger, the Copenhagen interpretation implies that the cat remains both alive and dead (to the universe outside the box) until the box is opened….” , thus this idea of being both Rich and Poor is like the cat being both Dead and Alive.

Schrödinger’s idea that if you didn’t see things, the answer is not known thus both answers can be true is an interesting thought experiment, but not really applicable to your financial life. Allow me to make the same comment I have made when this way of dealing with your finances was proposed to me, “You may be in a state of equilibrium, but you are also insane!“.

If you don’t plan on keeping close tabs on your financial state, you are going to end up in a bad financial place, that will take a long time to clean up, and it will happen whether you open your financial box or keep it closed (and assume that you are OK because you don’t know).

 

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Financial Wastefulness

The Pope in his Easter message had one very interesting line:

Help us to overcome the scourge of hunger, aggravated by conflicts and by the immense wastefulness for which we are often responsible.

The phrase that really caught my eye was “.. the immense wastefulness for which we are often responsible…”, and specifically in terms of what this does to our finances. Overcoming hunger is very important but I will leave that to the religious blogs to discuss, but monetarily there are countless examples of waste financially, do any of these ring a bell?

  • How much clothing have you donated to whatever “charity” called you that still had the price tag on them?
  • How much food do you throw out, that is still in the package?
  • How many “fees” are you paying for being late paying for things, or because you can’t be bothered to go an extra mile to use a non-fee ATM?
Pope Francis

Pope and his peeps

The word convenience seems to have become synonymous these days with waste.  It’s inconvenient to go that extra mile, so I’ll just pay the $1.50 fee from the ATM (and then the $1.50 fee from my bank) to take only $20 out of the bank, because I need some cash. I know people who have said that to me, I believe my eye twitched a bit when I heard it (nervous tic), it takes a lot not to ask what is wrong with them.

What other wasteful lifestyle things have I missed?

 

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Fiscal Fasting

Now we have reached the Christian tradition of Lent, and for those who are religious, or just gluttons for punishment,  are looking for things to take up (or give up) for this time of the year, fiscal fasting might be an idea for you.

Allow me to suggest “Fiscal Fasting” , which is a delightfully obtuse switcheroo on the Lenten tradition of Fasting. Good Christians (in the day) might take up fasting to emulate Christ’s 40 days in the desert by giving up Meat or the like, I am not suggesting that (although I could do with giving up say Snacks and specifically potato chips for Lent) with this concept.

Fiscal Fasting would be simply denying discretionary spending for a week (to start). Can you live the same $20 you had in your pocket Monday all the way until next Sunday?

Pay the bills that must be paid (e.g. Mortgage Payment, Rent, Electrical Bill, etc.,), I am suggesting cutting out spending on things like eating out, buying clothes, etc., . No this does not mean that you should have an orgy of spending the day before and “coast” for a week either. If you wish to cheat that kind of defeats the purpose of this idea.

Fiscal Fasting Ideas

Maybe the best thing to do is:

  • Automate your bill payments so they don’t end up in arrears. Try to be like that woman they found who kept paying her bills 6 years after her death.
  • Plan how you aren’t going to spend money, or how you will avoid buying crap you don’t need (or worse can’t afford)
  • Take $20 out of the bank

Start on Sunday, if by Saturday you still have that $20 bill you win, and should try again for another week. How long can you keep that bill intact ?

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Best Budgeting Tip?

I got asked on the Tweety on Saturday what is my best budgeting tip, and it got me thinking that I really don’t have a “budgeting” tip, as budgeting is really a tool for an entire lifestyle you are choosing. My response was a bit flippant:

 

But it’s not like I haven’t talked about Lifestyle Creep before, it’s insidious in many folks lives. Budgeting tips are fine, but budgeting is really kind of useless if you just make up a list of things you think you can save money on, without thinking about things first.

Best Budgeting Techniques?

The easiest budgeting method from my book is, if you use Quicken or something like that to track your spending, look at how much you spent last year in major areas, and try to do that again this year. I hear you saying, “But BCM that isn’t saving”, no not really but it proves that you can follow a budget. If you get a pay raise then suddenly you are ahead of the game. Next year, do the same thing again, and you’ll be a little farther ahead, etc., etc.,. Sounds simple doesn’t it? It can be, if you want to do it.

Getting rid of debt is another budgeting tool too (in an obtuse way). If  you can get rid of each debt, and then use the payments you used to get rid of that debt to save (or better still pay down other debts) (while continuing to live within your means, and not increase your debt), you are budgeting too (or at least spending within your means).

Any other budgeting tips out there?

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Orthogonal Stuff Downsizing

A big topic these days for folks is downsizing their lives (at home), and how to get to a minimalist lifestyle. I agree that if you have too much stuff and it is sucking the life out of you, then yes, get rid of it, but I am proposing a much more important technique when it comes to downsizing, and I am hoping it revolutionizes how people think about downsizing.

As an example of this new concept, say you walk into a store and you see an awesome new tablet computer that you are sure will help you wow your neighbours, make you irresistible to women and help your internet experience be that much better, remember these simple words, “You don’t need it”. (YDNI)

3 planes that are orthogonal to each other

The reason I call this revolutionary concept Orthogonal Downsizing is that it is the opposite to downsizing (or perpendicular to the downsizing plane of existence), if you never buy all this stuff, you don’t have to worry about downsizing (and you have the money you didn’t spend, but that is an obvious side effect).

If you stay on the Orthogonal Downsizing plane of existence you have the added benefits of:

  • Not having your basement full of stuff that might catch fire and burn all your nice stuff (and maybe you).
  • You won’t have to pay rent on a storage unit, because you have that much stuff, that it doesn’t fit in your “Stuff Holder” (be that your house, apartment, parents’ basement, trunk of your car, etc.,). I am not sure which industry has a faster growth potential, Pay Day Loan places or You Storage Units, but I digress.
  • The danger of being crushed to death by a pile of stuff you no longer use, when it falls on you is diminished a great deal.
  • The word downsizing isn’t needed in your vocabulary (you can replace with a cool word like Orthogonal).

Is YDNI the New YOLO ?

If you want to get YDNI tattooed on the knuckles of your right hand (or your spending hand) this might slow down that urge to buy the deluxe cheese straightener that you feel you simply must have, or the granite mortar and pestle set to make sure your curly basil is prepared in the correct way.

Seriously folks, stop buying crap, and if you rent a storage unit, you are in trouble and need to get rid of stuff.

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