Yes
Most people would answer that way. But reality is far different for most, if not all.
Last night I was watching a great program on PBS’s Nova entitled ‘Mind over Money’ on how the human brain deals with financial matters. Generally, I was aware of these issues already but it was a well done program. I highly recommend it. http://www.pbs.org/wgbh/nova/money/
Now one might question how often irrational behavior occurs in reality. The experiments in the show were on college students doing simple things.
Well, do any of the following scenarios apply to you?
• Have cash in a checking or savings account while carrying a credit card balance?
• Carry a credit card balance yet have access to a home equity line of credit?
• Get an income tax refund?
• Have a large balance in your checking or savings account yet have low deductibles on your home and auto insurance policies?
• Make extra principal payments in order to pay off your mortgage early
• Keep a balance in a savings account earning almost nothing?
• Pay for the ST or LT disability income benefit with pre-tax dollars from your paycheck?
If any of the above applies to you, then one could say you are irrational when it comes to your money. The list above is merely a small sample of what people do. I see these types of things all of the time.
So what does this really mean?
Well, it means extra interest you end up paying. Or losing interest you could be earning. Or not having the money to use when you need it. And don’t forget the opportunity cost.
The bottom line is making your money work as hard as possible – and efficiently as possible – for you.
So, are you rational with your money? And if you’re not, how much is it costing you unknowingly?
If you have a LinkedIn account, please take part in my monthly poll. This month is about tax planning for next year. http://polls.linkedin.com/p/85366/vzzau
Answer to the last trivia question: B - $7,889. College tuition inflation is much higher than general inflation and you can see the effect of compounding.
This week’s trivia question: According to a recent Transamerica survey, what percentage of workers stated that they could work until age 65, save, and still not have enough for their desired retirement lifestyle? Was it?
A – 12%
B – 29%
C – 66%
D – 94%
