Of course, everyone would rather be smart than stupid. But
not everyone can be so fortunate.
Stupidity affects your income, for sure. Someone lacking in
brain cells is more likely to be an average or poor performer at work, which
ultimately means less money in the paycheck compared to his or her smarter coworkers. This is compounded as years go by and the spread gets
wider and wider.
But the financial damages do not stop there. Not only does
stupidity hurt the revenue side of the equation, it also affects the expense
side. Case in point – a friend of mine was purchasing a home and locked in his
interest rate at 6.00%. By the time closing rolled around, interest rates
dipped to 5.75%. His mortgage broker told him that if he wanted to get the
lower market rate, he would have to pay some $400. My friend declined. Dumb.
The 5.75% interest rate made an approximately $50 per month
difference in his 30 year fixed mortgage payment. He would have broke even on
his $400 in eight months (excluding time value of money). His stupidity has
been costing him $50 per month ever since that fateful day, when he failed to
think through his actions. Five years later, he is in that same house, with the
same mortgage, with the same 6.00% interest rate. Instead of buying a car this Christmas, it might be a better idea to get them an Amazon e gift card instead. Or anything that doesn't require financing!
Another example is an old friend, who would never be
confused with a rocket scientist. She didn't work with a Chicago financial planner and had amassed some $20K in debt for her
matriculation. And never consolidated those loans! Now, for those who have
never had the pleasure in borrowing money for school, student loans are awarded
per semester, so by the time you graduate, you have multiple loans, each with a
different interest rate depending on what the market rate was when you
borrowed. The government allows you to consolidate your student loans once at
ridiculously low statutory rates. For instance, my rate is 1.88%. But not
everyone can be so fortunate.
