Debt grows, savings grow slower

I am unsure if Albert Einstein said this, but famously, he is attributed to have said that compound interest was the world’s eighth wonder. “He who understands it earns it; he who doesn’t pays it.” Translated, debt grows, and savings grow slower. A simple example is if someone who views money as a tool may figure out how to save a few bucks each week and put it into the market, where it compounds until one day you have a healthy retirement account after 40 years. However, someone who tells themselves a story of money as this burden may buy themselves a 500-dollar television on a credit card will see the interest compound at 20+ percent rates, and the debt grows out of control.

Yes, money is a story. But it isn’t that simple either. It would be unjust to say it is the only thing that drives us into wealth or poverty. Economist Raj Chetty’s work has shown that we can accurately predict someone’s chances of economic mobility based on their zip code. Race, incarceration, discrimination, education opportunities, social engagement, family dynamics, short-term assistance, and even landlords play a part in upward economic mobility. It’s a map that is already drawn for all of us now. It feels like determinism based on circumstances of when, where, and whom you were born to. The culture says it is the individual players’ fault if you are not rich.

Attribution theory is the idea that when we are successful, we point to internal forces that got us there. We are likely to give ourselves credit for making the right moves. When we fail, we are more likely to blame external forces. “The dog ate my homework.” That’s because our narrative works overtime to protect us from ourselves. We don’t want to be wrong, we don’t want to be blamed, we don’t want to be judged, we don’t want to be seen or exposed.