Part 5 – Closing the Reality Gap

I follow an incredibly simple philosophy with regards to personal finance: Reduce risk and increase power. If the Fitzgerald household can do just those two things, we will largely be successful in our attempts to properly manage money. The advantage of this philosophy is how simple it makes decision-making. For instance, we will never spend … [Read more…]

Part 4 – Why Are We So Bad At Assessing Risk?

What does type II diabetes, fear of terrorism and distrust of the stock market all have in common? Mismatch theory. Mismatch theory describes the phenomena in which adaptive traits in a given environment, passed down and preserved by natural selection, become maladaptive (mismatched) in the current environment. In other words, a trait that at one … [Read more…]