The Story of Box A and Box B: Conclusion
A Knowledgeable Economic Strategy
Participating in this “system” without a knowledgeable economic strategy causes a large part of our income (including earnings on savings and investments) to be systematically and continuously drained away, throughout our lives, through excess taxes, interest expenses, fees, certain insurance costs, and economic costs – many of these are costs that the “system” itself creates. For example, as much as 34.5 cents of every disposable dollar is spent on interest alone*.
Obviously, those costs rob us of wealth building growth; but, we don’t
calculate the potential future value of what we spend. We should. It allows
us to see bad decisions. Over time, costs that we pay unknowingly and
unnecessarily accumulate to a lost fortune. For most, this lost fortune is equal
to or greater than their “realized” fortune – whatever wealth they have been
able to accumulate
Notes:
- The "Box A - Box B" syndrome also applies to mutual fund accounts, CDs, annuities and other accounts.
- The "obvious" solution, to save in a liquid account and pay cash, has its own major economic problems. For an analysis and explanation of those problems see the section titled “The Opportunity Cost of Paying Cash”. “If you understand the problem you’ll know what to do”. We add “The trick is to recognize and really understanding the problem, which is the first step to the solution.”
* “Becoming Your Own Banker”’ by R. Nelson Nash. We recommend this book as a “must read” and offer it at a substantial discount from the normal single copy price.
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To learn more about “being your own banker”, please click here.
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