How Many Americans Know What Compound Interest Is?

what compound interest is

A reader pointed out a fascinating study from George Washington University and Standard and Poor’s. The researchers wanted to discover how many people around the world know what compound is. The survey targeted over 150,000 respondents in 144 countries. The study can be found from its original publisher here. In this post, I am going to focus on the policy implications from the stunning realization that 39% of Americans do not know what compound interest is. Continue reading “How Many Americans Know What Compound Interest Is?”

My Frugal Ancestors Help Explain Why I’m So Extreme

ancestors have been very frugal
My great great grandfather’s cabin in the Smoky Mountains Source

The cabin above was built by my great great grandfather in the mid 1800’s. It is one of the oldest surviving structures in Great Smoky Mountains National Park. Visiting it gave me great perspective on the toughness of my frugal ancestors. Why are some people spenders and others savers? There are definitely exceptions, but I think the values you grow up with have a lot to do with it. People ask me how I live in such “poverty.” These folks want to know what motivates me to not buy new clothes for two years or eat Brussels sprouts for lunch. To answer the question adequately, I think I need to explain my family history.

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The Extreme Racial Inequality in Savings

racial inequality in savings

I read a shocking statistic the other day that I felt compelled to write about. Around 75% of households headed by an African American or Hispanic have less than $10,000 saved for retirement. To put it in perspective, $10,000 will generate about $33 a month in retirement income. I did further research into the financial disparity between black and brown Americans and the rest of us, and found stark racial inequality in savings in America. Once you see how serious the problem is, perhaps you become convinced like I did that we need federal financial literacy standards in our schools to help pull minority communities out of poverty.  Here are a few areas where the numbers absolutely stunned me.  Continue reading “The Extreme Racial Inequality in Savings”

Do You Have House as a Work Of Art Syndrome?

house as a work of art syndrome
A homeowner who mistook their living space for the Met in New York. Source

I’ll never forget one night I was out on the town for a business dinner with some financiers from Wall Street and learned about ‘house as a work of art syndrome’. They ordered two $150 cheesesteaks at a time I had never heard of a sandwich that cost more than $20.  The conversation meandered between the professional and the personal. I got to find out how much you pay in taxes on a $3 million bonus and how difficult it was to find a good private preschool in NYC. One of the young men at the table confessed to the group that he was moving in with his girlfriend, and they had been to a home decor boutique where she had picked out some curtains that cost thousands of dollars.  The other guys at the table said just wait, that curtains were only the beginning. Continue reading “Do You Have House as a Work Of Art Syndrome?”

I Have Been Showering Way Too Often

showering way too often
Warm showers are the best, but I’ve used them too much. Source

Lo and behold, some researchers from Columbia University just discovered what I have long suspected. Human beings in the developed world have been showering way too often, myself included.

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Captain America is the Most Frugal Superhero of Them All

Captain America is the most frugal superhero

Have you ever noticed that superheros have a tendency to be worth billions of dollars? It seems like having a huge net worth can give the financial freedom necessary to fight crime. They use their billions to create cover stories and build fancy gadgets. It is no wonder that superheros usually need a lot of money, given that they do not have the time to dedicate to a stable job. There is one notable exception to the big spending type. Indeed, Captain America is the most frugal superhero perhaps in the whole world. Continue reading “Captain America is the Most Frugal Superhero of Them All”

I Prefer a Goodyear Restaurant To a Michelin One

goodyear restaurant
Chartier restaurant in Paris, where you can get a $10 dinner with tax and tip included. A favorite ‘Goodyear restaurant’ of mine. Source

It took me almost 26 years of life to realize that fine dining had a widely recognized rating service, the Michelin star system. All this time, the only Michelins I knew about were the ones that burned rubber. Believe it or not, I do from time to time go out to eat. After all, I am not very good at cooking. Traveling around the world for months on end has made going out to eat fairly common in my life. However, there is a huge difference in the establishments that I frequent and the ones that get reviewed by a NY Times food critic. I prefer a Goodyear restaurant. Continue reading “I Prefer a Goodyear Restaurant To a Michelin One”

Your Bank is Riskier than the Stock Market

bank is riskier than the stock market

If you put your money in a bank or credit union in the USA, the government guarantees your deposits up to $250,000. While you could lose a lot of money to fees if you bank with a major financial institution, the money in your account is secure. This is one of the biggest lies in the American financial system. Continue reading “Your Bank is Riskier than the Stock Market”

How To Rig the Economy In Your Favor

rig the economy in your favor

Bernie Sanders believes that there is a group of rich, international capitalists conspiring to rip off the poor and middle class. While that might be partly true, the poor and middle class do far more to rip themselves off. 62% of Americans do not have $1,000 in a bank account. A majority of college students carry credit card debt. The average millennial only has $16,500 in their 401k, and that figure includes workers all the way up to age 34! To use a biblical analogy, we have a lot of planks in our eyes that we need to clean up first before we blame millionaires and billionaires for our financial problems. Here are a few practical ways to rig the economy in your favor.  Continue reading “How To Rig the Economy In Your Favor”

The IRS Time Machine to Fix Your Empty IRA Problem

empty IRA problem

Everybody assumes you can only fix your retirement account problems around the end of December. However, that couldn’t be more wrong. In fact, the IRS generously gives a gift that keeps on giving. You have until Tax Day of the following year to make any IRA contributions that can count for the year prior. You can fix your empty IRA problem by looking out for these special cases and seeing if any apply to you. Continue reading “The IRS Time Machine to Fix Your Empty IRA Problem”