An interesting study done here at Ohio State:

But this higher yearly income did not translate into higher wealth. In fact, people with slightly above average intelligence (105 IQ score) had an average net worth higher than those just a bit smarter (110 IQ). “There are some very smart people who get into financial difficulties,” Zagorsky notes. “Even smart people don’t save.”

I can attest to this
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4 thoughts on “I can attest to this

  • Why Johnny?

    Because of the American banking system and the credit system, it is too easy for Americans to live beyond their means. In the U.S. one can buy a house with nothing down. One can buy anything one wants with an 18% interest charge. We are socially programmed to live beyond our means. It’s a credit system. In Europe, it’s a cash system. Most people buy their homes with cash, buy their clothes with cash, buy their cars with cash. To buy their homes, they have to save (or inherit). Interest rates are low, but one must have at least 25% down to buy a house with a mortgage and lots of assets to cover the other 75% in case of default. The 18% that banks and credit card companies get of your money pays for a lot financial mis-management, for example, loans to people who have over-extended and will default. Maybe that’s why the Euro is $1.36 for 1 euro. Europe is liquid. The U.S. ain’t.

  • I agree with you on the merits of a cash society. No one, however, puts a gun to supposedly more intelligent people’s heads and forces them to buy a 3 bedroom house when they can only afford a 1 bedroom house.

    I once suggested to a family member that the elimination of the mortgage exemption on federal taxes, coupled with a lower overall tax rate would be a boon to the US economy. I may as well have flown down from Mars and told him to wear tin foil on his head to block satellites from spying on his thoughts.

    The difference between your position and mine is that you ultimately blame the banks (or at least you insinuate the blame there) whereas I think the problem and solution resides in tax policy…otherwise I think we’re on the same page. Cheers.

  • Johnny,

    I think it would be a good idea, a flat tax for corporations (on gross income just as the percentage paid for social security by individuals is deducted based on gross income) and for individuals. Years ago when I studied income taxes, the professor told us that the government was trying to put everyone into the tax tables by eliminating most deductions. So far, mortgage interest has remained a “sacred cow” for individuals. It would probably have to be phased out slowly. My professor was probably right, though, because once upon a time one could deduct all interest paid to financial institutions; there aren’t too many other deductions left to take.

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