Tuesday, August 14, 2007

Stupid Finance

Why is it that such smart people are so stupid about money? My friend Sarah has worked for the same company for twelve years and never (yes) contributed to their 401(k) plan. Why? She doesn't want her money to be "untouchable." She thinks that if she puts money into a retirement plan, she won't have access to it.

Sarah.

Do I need to point out why this is incredibly dumb? Ok, I will.

1) You have other money to use. The idea behind saving is that you designate some money not-usable and not-touchable for some period of time.

2) You are leaving money on the table. By not taking advantage of your company's matching plan, you are saying to your company....nah, don't give me any free money. Why do I need free money?

3) Chances are, if you are doing this, you are probably not investing your money either. It is probably sitting in a 2% savings account. If your money is not working for you, you will not build any sort of wealth whatsover.

Oy. This is just beyond stupid. And yet so many smart people I know do dumb things in personal finance. What is that? They don't like money?

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