In this episode of Saturday Morning Muse, Andy explores the dual nature of compound interest, highlighting its potential to build wealth while also revealing its darker side through the lens of compound debt. 

The discussion emphasizes the importance of understanding how compound interest works in both investing and borrowing contexts, particularly in relation to credit card debt. Temte provides practical advice on managing debt and making informed financial decisions to harness the power of compound interest for wealth building.

Growth requires some degree of risk tolerance. The more self-confident, and the higher our self-esteem, the more calculated and informed risks we’re willing to take. To build self-confidence and self-esteem, we must take risks and be willing to learn from failures and missteps. This virtuous cycle works best when we surround ourselves with positive challengers—people who will simultaneously support and challenge you in an environment of psychological safety.

How we feel about risk and how we respond to risky situations is not applicable solely to the financial investments we make. Our feelings toward risk influence what jobs we pursue, the relationships we engage in, the products we buy, and the recreational activities we take part in. Your personal relationship with risk touches and helps shape nearly every aspect of your life.

As humans, we tend to not put enough thought into the worth or value we assign to the products and services we purchase. We’ll make better decisions on what we purchase with our hard earned $$ if we take a bit more time to consider how we place value on the things we buy. The interesting thing about finance and financial literacy is that it is equal parts objective evaluation of our financial position and our behavioral perspectives about our personal economy. How we feel about money, investing, and consumption is as important as the numerical and analytical side of working with our finances.

As we continue our journey to build financial literacy skills, you may be wondering where all the formulas and numbers are? Well, this is a big misconception of financial literacy—that it is more about numbers than it is about behaviors. How we feel about money & investing and how we behave with the resources we have via the decisions we make are as, or more, important than our ability to work with numbers. Hence, this is where we’re going to place most of our initial emphasis.

The important point is to recognize that these biases exist and they have a profound impact on our ability to make sound decisions with our money. The purpose of engaging in self-talk is to challenge our internal biases and to bring more decisions—especially the important decisions we make—into working memory as opposed to giving agency to our biased, subconscious mind.

Our goal is to make better decisions about what we spend money on so that we can use our money more wisely. As an individual consumer, we want our assessment of value to exceed the price we pay. We want to minimize the likelihood of buyer’s remorse (feelings of regret) by thinking more carefully about the things we buy without tipping over into the spin cycle of analysis paralysis.

Financial success is dependent on making better decisions with our money. Making better money decisions depends on our ability to appropriately assign value to the things we buy. Turning off our mental autopilot tendencies and thinking more consciously about value is a prerequisite to improving our financial position.

We need to apply more effort as a society and as educators to making math more approachable and relevant. Why? Because our businesses and institutions are populated by millions who lack the necessary numeracy skills to be effective in their jobs. They’ve been conditioned to think that math doesn’t matter in the real world when math— the basis for finance and accounting—is literally the language of business!

In lieu of a rah-rah speech about the wins of 2024 and the promise that 2025 hold for us, today’s Muse is focused on the skill of decision-making. Why? Decision-making is one of the most important skills that you can build for personal and professional career success. It is a higher order skill that relies on myriad subskills such as courage, creativity, communication, analysis, problem solving, compassion, self-awareness, situational awareness, financial literacy, business acumen, constructive conflict, teamwork, and the list goes on…

It’s that time of year when we spend, spend, spend on holiday gifts for family and friends. According to The Conference Board, the average US consumer is expected to spend $1,063 this season on holiday-related items and $677 on gifts for others. When adjusted for inflation, holiday spending is at or near all-time highs. However, the most disturbing statistic is that a large proportion of shoppers are still paying off the debt they accumulated in 2023 to purchase holiday gifts.

The challenge we face is that critical thinking is hard. The easy path is to not question, not ask ‘why,’ and not dig for deeper meaning and root cause. The more difficult, but ultimately more rewarding path is to challenge fixed belief systems, internal biases, and recognize that when we deflect and point fingers at others, three more are pointing right back at us.