Let’s take a moment to look at the plight of Mike, commenter number 13 on the post “Equality of Flexibility” at Freakonomics.
I graduated in the top 10% of my high school class. I have a master’s degree. I scored an 800 on my math SATs.
It absolutely BAFFLES me how people manage to buy homes and do their taxes.
I have a 401k account, a Roth IRA account, stock options and grants from my employer, stock holdings worth a few grand via at least one trading website, school loans, a car payment each month, a bank account with my debit & credit cards, and an online savings account.
There is no way I can keep track of all of that at once. Smith Barney could steal $5,000 from me tomorrow – just pull it out of the balance of my 401k or Roth IRA or something – and I’d never know it was gone. I don’t even know who I owe my student loan repayment to… all I know is I pay them $170 per month, and they pull it right out of my checking account. I *think* the balance is $10k or so, but if I somehow managed to log into their website (assuming someone told me what it is) and I saw I owed $13k, I wouldn’t be surprised and I wouldn’t complain.
Stop and Shop could randomly charge my credit card $52.64, or $111.09, on a day I never even went there, and there’s probably an 80% chance I would never notice.
And this is before we even get into the fact that I have NO idea what a mutual fund is, what a bond is, or what the hell Smith Barney is doing with my money. The financial system is so utterly complicated and ridiculous, I think it only serves to keep the number of people who “understand” it very low, so they can continue to take advantage of those who don’t.
Poor Mike! It’s probably tough to be out of control with one’s money! It sounds like, from his point of view, someone who knows what they have financially at any given time has superpowers. Well, Mike, as one of those select few who have good grip on their money and investments, I’ll tell you how to have those financial superpowers. Lean in, and I’ll whisper the secret to you: it’s called bookkeeping.
That’s right, everybody’s favorite word with triple double letters!* You see, Mike, you sound like a smart guy. You’re trying to brute force your way through your finances with nothing at your side but blazing intelligence. Unfortunately, modern life is just too complicated for that strategy to work, so you’ll have to do something us lesser intellects have known we had to do for a thousand years: write it down.
And thus, bookkeeping was created. And, lo, it was good.
Please, don’t get all whiny about this. Nowadays, it really is as simple as typing your transactions into a computer program and then reconciling when you get your banking and investment statements. Once you get you computer program set up, it takes about 1-2 hours every two weeks or so to keep everything up-to-date.
There are number of options out there. I just so happen to use Quicken®. Please don’t think that, because I mentioned it, that I endorse it. If I could find a good substitute, I would replace it in a heartbeat. However, it’s doing the job at the moment, so I’ll stick with it.
The point is, Mike, that most people are completely out of control with their money. Please, don’t be most people. Use a basic personal bookkeeping program on your computer, and you too will be on your way to magical money superpowers!
* 1) Double “o”s, 2) Double “k”s, and 3) Double “e”s.