Scarcity, Risk, and Wealth Transfers
Three Problems Magnified by the “Box” Approach to Personal Finances

Wealth Transfers:

The way we save and invest typically involves certain “boxes” that lock up our money with taxes, penalties, and fees. We give up the use of that money, hoping that growth will take care of the future and make up for problems in other areas of our personal economy. If there is growth, that stays in the box too. So, with our money locked up we are forced to use credit cards, car loans, equity loans and other loans to finance what we need and want (at least the bigger items). Then, what we pay in interest, excess taxes, fees, and certain insurance costs takes away money that could be used to save and invest and to provide protection against a broader range of risks that will steal everything when they occur.

The “boxes” themselves create costs that make the scarcity problem worse. The “bottom line” is commonly negative: for most, the total of financial costs equal or exceed the total of financial gains. The “box system” mentality is a costly trap. Some earn enough money to disguise the problem and overcome the costs, but the costs still exist and severely diminish what could be. Solving the problem requires a different approach to finances.    

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