Sep 18, 2012

Trust Fund: Iceberg Ho!

Most people don't understand the Alabama Trust Fund and don't really know how to vote. Quin Hillyer  explains it pretty well. For those who still don't get it, let me try to simplify it:

Let's say you won the lottery. You invest in annuities and live off the interest, never touching the principal. Then you overspend on Beemers and coach bags, and decide you can't live off interest alone. So you raid the principal. Now, because of its reduced size, your fund is going to earn less interest EVERY year, and you will run into the "problem" (self-generated crisis) again and again until you have no choice but to sell your coach bags on eBay and get a job. Sad.

Poor results come from short-sighted thinking.

Solve the real problem (overspending), don't just put a bandaid on this hemorrhage. 

What wise spending decisions will you make today?

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