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Category: Behavioral Finance

Strike It Rich By Mining Your Debt: There’s Gold In Them Thar Loans!

Strike It Rich By Mining Your Debt: There’s Gold In Them Thar Loans!

A mining cart on rails, illustrating the potential wealth made possible by mining your debt with extra payments.
1 Ton Mining Cart” by Niall Kennedy, CC BY-NC 2.0 license

The topic of debt usually gets pretty rough treatment in the personal finance blogging community. And for good reason – if not handled with care, it can be as dangerous as a short-fused stick o’ dynamite.

But if you’re already in debt and your money situation feels as cramped as a claustrophobic miner trapped deep underground, you’re already acutely aware of how dangerous debt can be. So let’s pivot and instead explore a far more encouraging aspect of debt – it’s hidden wealth potential.

Yep, you read that right. If you’re in debt you are sitting on a potential mother lode of riches. So without further ado, let’s stake out your debt claim and discover how you can strike it rich by mining your debt. Continue Reading

Gimme Hands: The Power Of Being Selfish… With Yourself

Gimme Hands: The Power Of Being Selfish… With Yourself

Power lines trailing into the distance, illustrating the power of delayed gratification.
Learning to be selfish with yourself can power you all the way to financial freedom.
Manitoba Powerlines” by Matt Wiebe, CC BY 2.0 license

Selfishness is typically not a trait to be pursued, developed, or cultivated. But when it comes to your financial freedom, all of that conventional moral wisdom goes right out the window.

Now don’t throw the baby out with the bath water – I’m not talking about being selfish when it comes to the way you treat OTHERS. I’m referring only to the importance of cultivating selfishness in your future self when it comes to its dealings with your current self.

If you are still aghast that I would suggest such a thing, it may help for you to think of this concept in the much more palatable light of delayed gratification. Continue Reading

The Money Map: Identifying Your Financial Starting Point

The Money Map: Identifying Your Financial Starting Point

A pin labeled "You Are Here" sticking into an atlas-style road map, illustrating the absolute necessity of identifying your financial starting point prior to charting a course to your financial goals.
Photo © Tashatuvango via Dreamstime.com, Royalty-Free license

If you’ve ever attempted to follow a map to a given destination while unaware of your exact location, you know how frustrating and fruitless of an endeavor this can be.

Whether as a tourist, road-tripper, or mall-shopper, most of us have found ourselves in this situation at least once before. We all know the uncomfortable feeling of uncertainty that ensues – the second-guessing, the traveling in circles, the lost time and frustration.

It’s no mere accident that standard navigation software such as Google Maps, Apple Maps, and MapQuest require users to either input a starting location or enable the automatic tracking of their current location prior to providing directions to the selected destination. Continue Reading

Compound Interest, Part 5: Benjamin Franklin’s 200-Year Experiment

Compound Interest, Part 5: Benjamin Franklin’s 200-Year Experiment

Benjamin Franklin experimented with many things, including the power of compound interest. Pictured, Franklin's Electrostatic Machine, an invention which led to his creation of the lightning rod.
An electrostatic machine, a personal invention used by Benjamin Franklin to experiment with electrical phenomena, contributing to his creation of another invention still in use today –  the lightning rod.
Independence National Park” by Peter Miller, CC BY-NC-ND 2.0 license 

This is the fifth and final installment of a series on compound interest and the impact it can have to both speed and sabotage your journey to financial freedom.

In part four of this series, we reviewed how the power of compound interest creates a hidden, deadly cost of debt in the form of opportunity cost, which can effectively double the interest you pay on your credit card and easily triple the original cost of a mortgage. Continue Reading

Compound Interest, Part 4: The Hidden Opportunity Cost Of Debt

Compound Interest, Part 4: The Hidden Opportunity Cost Of Debt

A well-camouflaged owl, illustrating the hidden and hard-to-spot nature of the opportunity cost of debt.
A well-camouflaged owl, one of nature’s most seldom-seen, stealthy, and deadly predators.
Photo by Kdsphotos, CC0 1.0 license

This is the fourth installment of a 5-part series examining the massive impact compound interest can have on your journey to financial freedom.

Previously in the series we introduced the phenomenon of compound interest, explored how it can serve as a rocket to riches capable of powering us through the millionaire barrier, and discovered how it can serve as the best double agent the world has ever seen.

By now you should be familiar with how to calculate the total amount of interest incurred over the life of a loan when you purchase something on credit, whether that be in the form of a credit card, auto loan, student loan, or a mortgage. Continue Reading

Compound Interest, Part 3: History’s Best Double Agent

Compound Interest, Part 3: History’s Best Double Agent

Black and white outline of tuxedo, drawing a parallel between double agents such as James Bond and compound interest working against you.
Photo by Tom Woodward, CC BY-SA 2.0 license

This is the third installment of a 5-part series examining the massive impact compound interest can have on your journey to financial freedom.

In part two of this series we reviewed how the power of compounding accelerates over time and can serve as your rocket to riches, making it possible to break the sound millionaire barrier by simply saving and investing $46.00/week over a period of 50 years.

In today’s article we’ll be detailing how compound interest can actually work AGAINST you by going undercover and acting as a double agent to thwart your financial goals.

Continue Reading
Compound Interest, Part 2: Your Rocket To Riches

Compound Interest, Part 2: Your Rocket To Riches

A rocket pictured mid-launch, demonstrating the acceleration and sheer power of compound interest.
The 9/27/2007 launch of NASA’s Dawn spacecraft via a Delta II-Heavy rocket, the most powerful in its class. Dawn Begins Its Journey” by NASA / Sandra Joseph & Rafael Hernandez via pingnews.com, Public Domain license

This is the second installment of a 5-part series examining the massive impact compound interest can have on your journey to financial freedom.

In part one of this series, we reviewed the phenomenal nature of compound interest, its life-changing potential, and a basic illustration of how it actually works.

Today’s article will illustrate how compound interest can become a rocket capable of breaking the sound millionaire barrier and launching your financial freedom into orbit.

Continue Reading
Compound Interest, Part 1: A Powerful Phenomenon

Compound Interest, Part 1: A Powerful Phenomenon

The Northern Lights, illustrating the phenomenon that is the power of compound interest.
Another phenomenon – Aurora Borealis, also known as The Northern Lights.
YUCH Northern Lights” by NPS / S. Tevebaugh, Public Domain license

You may view the concept of compound interest as simply a boring financial term that you (fortunately) only have to deal with a few times in your life, such as while applying for a credit card or slogging through mortgage origination paperwork.

But if you’re reading this article, it’s probably safe to assume that you’re interested in either ending the stranglehold your finances have you in, increasing your bottom line, or becoming independent of a paycheck. Maybe even all three.

If that’s the case, we need to revisit this concept of compound interest. It is one of the most powerful forces in the universe, and it has the potential to change your life. Continue Reading

Financial Intentionality: The 9th Wonder Of The World

Financial Intentionality: The 9th Wonder Of The World

The Great Pyramids of Giza, one of the original 7 Wonders of the Ancient World. The photo illustrates the great impact that financial intentionality has on personal finance.
The Great Pyramids of Giza, the last of the 7 Wonders of the Ancient World still standing.
The Pyramids at Giza” by Josh Cutherell, CC BY 2.0 license

In the last article, we took a look at the surprising fact that an annual income of just $32,400 ($15.58/hour on a full-time basis) is all it takes to rank within the world’s top 1% of earners.

We also learned that nearly half of all Americans already meet this criteria and that the average adult is only $1,301/year ($.63/hour at 40 hours/wk, for those counting) from doing the same. Lastly, we reviewed some troublesome statistics regarding the money situation of everyday Americans:

  1. Up to 78% report living paycheck-to-paycheck
  2. As many as 72% identify as being stressed by money
  3. 57% have less than $1,000 in savings
  4. 39% have no savings at all

The obvious question remains: why this stark discrepancy between high average income and extremely low levels of personal prosperity? Continue Reading

The Average American Income Is Only $1,301 From World’s Top 1%

The Average American Income Is Only $1,301 From World’s Top 1%

Photo of a sleek grey Maserati auto, illustrating the luxurious life available to the top 1%.
Maserati” by Ramin Ekhtiar, CC BY 2.0 license

Does your income rank in the top 1% of the entire world? Before you roll off your couch in a fit of cynical laughter, you should know that the answer to that question might just surprise you.

A recent study found that the level of annual income required for someone to be within the top 1% of earners in the world is a mere $32,400. This translates to an hourly wage of just $15.58, assuming a standard 40 hour workweek and full-time employment.

Yes, that’s right – make $15.58/hour or more on a full-time basis and you’re part of the global 1%, based on income.

Continue Reading