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 "The 12 Biggest Consumer Goofs..."
The Proof Revealed!
July 24, 2007 

This page lays out the proof for all the facts mentioned in the Special Report "The Twelve Biggest Consumer Goofs" from the Consumer Freedom Alliance.  You can request a copy of this report at  Some of the wording quoted on this page may vary from the words used in the report because it's been edited a few times.  Now let's begin with Consumer Mistake #1:

1. Settling for low interest rates.
Fact:  "Astonishingly, Americans have over one trillion dollars in outmoded accounts that pay little or no interest."
Proof:  We found this statistic at a web page titled Introduction to Banking.  Financial authors Tom and David Gardner ("the Motley Fools") have published eight books and now offer nine different financial newsletters.

Fact:  "You can earn about 5% interest in a money market account."
Proof:'s Money Market Account Search page lets you find accounts that pay about 5%.

Comment:  If Americans are losing out on approximately of 4% per year on one trillion dollars, that adds up to $40 billion per year.
2. Buying a home you can barely afford.
Fact:  "Nearly 1.3 million Americans had their homes foreclosed in 2006..."
Proof:  The 1.3 million is an average of estimates that range from 1 million to 1.5 million, as you can see by these Google search results.

Fact:  " an average loss of $75,000..."
Proof:  Foreclosures in the Subprime Market and Their Cost to Homeowners (PDF) by the Center for Responsible Lending states that " 2.2 million borrowers will lose their homes and up to $164 billion of wealth in the process," averaging about $75,000 per household.

Fact:  "...that's about $97 billion dollars down the drain."
Proof:  We multiplied 1.3 million foreclosures by an average loss of $75,000 to arrive at the $97 billion figure.

Fact:  "...most of America's 75 million homeowners... would go through foreclosure at least once in their lifetime!"
Proof:  Browsing Google search results will find thousands of pages confirming that there are 75 million American homeowners.  We don't have a figure for how many years of their lives homeowners own a home, so please excuse our fuzzy math.  Guessing that most Americans spend 30 years owning homes (including all the homes they own in their lives, not just one home), then multiplying by 1.3 million would make 39 million foreclosures -- a majority of American homeowners.

Fact:  "Lenders too usually lose tens of thousands of dollars when a home is foreclosed."
Proof:  Estimates vary, but this MSN Money article Avoiding home foreclosure starts with picking up phone quotes Duke Olrich, president of DRI Management Systems (a maker of software for lenders) as estimating that the average loss is $50,000.

3. Running up a high credit card debt.
Fact:  "About 15% of Americans are on course to declare bankruptcy at some point in their lives..."
Proof:  An article 2006 Bankruptcy Filings Down to a Third of Last Year's Totals quotes government statistics showing that "443,750 personal and business bankruptcies" were filed from January to September of 2006.  Adjusting this figure for the full year, we arrive at about 600,000 bankruptcies.  Multiplying by a 75-year lifespan, we arrive at 45 million bankruptcies, which is 15% of America's current population of 300 million.

Fact:  "...often at least partly because of high credit card debt."
Proof:  We cite Credit Card Borrowing, Delinquency, and Personal Bankruptcy - Statistical Data Included by Joanna Stavins, first posted in New England Economic Review, July-August, 2000.

Fact:  "Americans owe an astounding $876 billion in revolving credit..."
Proof:  See the Economic Outlook report for February 2007 from the U. S. Chamber of Commerce.

Fact:  "...paying about $127 billion in credit card interest in just one year..."
Proof:  The credit card industry reports an average interest rate of 14.54% (Credit Card Industry Facts and Personal Debt Statistics.)  Multiplying $876 billion by that percentage, we arrive at $127 billion.

Fact:  "An average American cardholder pays $668 interest per year on $4,611 in debt."
Proof:  Robert D. Manning's book Credit Card Nation: The Consequences of America's Addiction to Credit awakened a nation to America's credit card problem.  Manning recently estimated in testimony before congress that there were 190 million cardholders in the United States in early 2006.  Dividing by 190 million we arrive at the quoted statistics.
4. Letting safety slip your mind.
Fact:  "The total cost of traffic accidents is nearly $300 billion per year..."
Proof:  The NHTSA (National Highway Traffic Safety Administration) report The Economic Impact of Motor Vehicle Crashes 2000 The Economic Impact of Motor Vehicle Crashes 2000 estimates the total economic cost of motor vehicle crashes in 2000 at $230.6 billion.  Adjusting for population and economic growth, that number would be close to $300 billion in 2007.

Fact:  "...current rate of 2.8 million traffic injuries in a year..."
Proof:  This statistic is from the NHTSA 2004 Annual Assessment.

Fact:  "...half of all Americans will suffer a painful traffic injury at some point in their lives."
Proof:  Multiplying 2.8 million injuries by an average 75-year lifespan equals 210 million injuries, which is far more than half the American population of 300 millon.

Fact:  "If you're an average driver, your chance of a fatal or incapacitating crash in your lifetime is a sobering ten percent."
Proof:  The 2004 NHTSA Report states that there were 42,636 traffic fatalities and 308,000 incapacitating traffic injuries in 2004.  Multiplying the total by a 75-year lifespan, we arrive at a figure of 26,297,700.  That's about 8.8% of America's population -- we took the liberty of rounding it up to 10%.  Note:  The word "incapacitate" in the field of traffic safety isn't strictly defined, but often it means that the crash victim was evacuated from the crash scene to a hospital.

Fact:  "Crashes put most habitual drunk drivers in wheelchairs or graveyards." (actually this is more of a probability than a fact.)
Proof:  A study Drinking histories of fatally injured drivers states that about 30% of drivers killed in crashes have high blood alcohol concentrations, and 68% of these drivers are habitual "problem drinkers".  It's reasonable to assume that the rate of incapacitating injuries among drunk drivers is similar to the fatal crash rate.  The approximate number of drunk drivers who are killed or incapacitated in traffic crashes is therefore (350,636 x 30% x 68%) = 71,530 in a year.

Estimates vary, but there are approximately 15 million alcoholics in America.  A February 2007 study in Alcoholism: Clinical & Experimental Research journal states that 17 percent of alcoholics had driven drunk in the past month.  We can therefore estimate that there are about (17% x 15 million) = 2.55 million drunk drivers in America.  Dividing by 71,530, we conclude that an average drunk driver has a 1 in 35 chance each year of experiencing a fatal or incapacitating traffic accident.  If he makes drunk driving a lifelong habit, and considering that most people drive for 50 or more years, it's an unavoidable conclusion that a majority of habitual drunk drivers will probably experience a fatal or incapacitating traffic accident.

5. Tolerating high fuel bills.
Fact:  "The average American could save at least $150 per year by adopting more energy-efficient driving habits."
Proof:  We have personally tested the energy-saving tips listed at and found them to be that effective.

Fact:  "reducing our fuel consumption by just 5% would actually halve the price of gas."
Proof:  The Department of Energy publishes an oil production spreadsheet that lists world oil production at 84,284,000 million barrels per day, 5% more than world oil production of 80,127,000 mbpd in September of 2003 when the price of oil was about $25 per barrel -- less than half of the past year's average price of approximately $60 per barrel.  According to the law of supply and demand, reducing world oil demand by 5% would force a return to 2003 price levels.  Admittedly there are some unknown variables, but this is our best approximation.

Fact:  "We would spend billions less on oil imports."
Proof:  The DOE Basic Petroleum Statistics page states that America imports 10,126,000 barrels/day, which at $60 per barrel would cost $222 billion.  Cutting consumption 5%, we would import 9,086,000 barrels/day which would cost $99 billion, so America could cut oil imports by about $123 billion.

Fact:  "Americans would save over $200 billion dollars per year..."
Proof:  The same DOE stat page lists USA oil consumption as 20,802,000 barrels/day.  Cutting the price of oil by $30 would save ($30 x $20,802,000 x 365 days) = $228 billion dollars per year, and the 5% consumption reduction would save another $11 billion.

Fact:  "...that's about $700 per man, woman and child!"
Proof:  Divide $228 billion among 300 million Americans calculates out to $760 per American.

6. Money-draining investments.
Fact:  "Each year, American investors spend hundreds of billions of dollars trying to 'outperform the market.' "
Proof:  See this irreverent article by analyst Rich Smith, for which he gives credit to investing guru John Bogle, (who was named one of the investment industry’s four "Giants of the 20th Century" by Fortune magazine.)  Any estimate must be approximate, but we would be very surprised if the cost of this mistake was less than $250 billion per year.

Fact:  "They often end up chasing "hot tips", paying excessive commissions, or getting burned by risky stocks. Those who follow unverified advice usually wind up with the short end of the stick. Most people are better off minimizing costs and risks by investing in a diverse, mostly buy-and-hold portfolio."
Proof:  Read this CNN Money article Build Wealth in Any Market: What if everything you knew about stocks... Was Wrong?.

7. Not being careful about your spending.
Fact:  "It all adds up to hundreds, even thousands of wasted dollars each year for the average family."
Proof:  You can read about various ways that people overspend in these online articles: Top 10 Money Goofs New Families Make by American Baby Magazine, Investopedia's Seven Common Financial Goofs and's 10 money mistakes to avoid repeating.  It is difficult to quantify this type of consumer mistake because buyer's remorse is very subjective.  Two thirds of America's $11 trillion economy is consumer spending ( and approximately forty percent of consumer spending is discretionary (  If consumers regret just 10% of their purchases, they waste $293 billion per year.  Of course, 10% may be too small; if you talk to people of advanced age, many will tell you that they would do many more things differently if they could just live their lives over again.

8. Poor nutrition.
Fact:  "Junk food makes us feel less vital, shortens our lives, makes us more vulnerable to disease, and costs society hundreds of billions of dollars each year in extra health costs."
Proof:  Read the Surgeon General's Report on Nutrition and Health, which links poor nutrition to heart disease, stroke, high blood pressure, diabetes, obesity, osteoporosis and dental diseases.

Fact:  "one in three Americans are predicted to become diabetic..."
Proof:  Read the Center for Disease Control assessment of diabetes.

Fact:  "...costing America over a hundred billion dollars per year."
Proof:  The same publication reports the cost of diabetes as $132 billion per year.  That's the cost for the 7% of Americans who now have diabetes; if that rose to 33%, that cost would explode.

Fact:  "...experts recommend that we (1) take a daily vitamin, (2) eat lots of fruits and vegetables, (3) eat "good" fats and avoid bad fats and sugars, and (4) get fiber from whole grain cereals, and we'll slash our chances of developing cancer and many other health problems."
Proof:  Read the nutritional recommendations of, a joint project of the American Cancer Society, American Diabetes Association and the American Heart Association.

Comment:  In 2001, non-communicable (diet-related) diseases contributed to about 46 per cent of the global disease burden... the global burden of diet-related diseases is expected to climb to 57 per cent by 2020 (  Considering that health care is a $2 trillion industry, an estimate of $400 billion in extra costs due to poor nutrition seems conservative.
9. Yielding to vice.
Fact:  "Goofs such as smoking, illegal drugs and alcohol abuse result in health care problems costing a staggering $500 billion dollars each year."
Proof:  A CDC estimate pegged smoking costs at $167 billion per year.  Another study estimates alcohol-related problems cost America $175.9 billion a year, while it costs $114.2 billion for other drug problems and $137 billion for smoking. This study's 1995 figures add up to $427 billion, which if adjusted for growth in population and income would certainly top $500 billion, not to mention other problems faced by vice squads.

10. Not being crime-aware.
Fact:  "Not being crime-aware."
Proof:  A study titled The Aggregate Burden of Crime published in the Journal of Law and Economics in October 1999 estimates the total cost of crime at $1.7 trillion in a year. Since then, the expanding GDP has certainly increased this statistic past the $2 trillion mark; a proportional increase would make the 2007 cost $2.6 trillion.  Much of this cost is borne by defrauded businesses, but such costs normally are passed on to consumers -- and business executives are consumers too, after all.  Incredibly, some have theorized that the total "pain and suffering" damages due to crime could amount to as much as $27 trillion dollars annually (see The costs of crime, an article by reporter J.W. Mason for

11. Career drift.
Fact:  "The combined yearly cost of fraud in America approaches a breathtaking trillion dollars..."
Proof:  A 2002 report titled Occupational Fraud: The Audit as Deterrent by the Association of Certified Fraud Examiners estimates that about 6% of revenues are lost each year due to occupational fraud and abuse.  In 2002 an estimated $600 billion was lost; if the loss rate is still 6% in 2007, that loss is closer to $700 billion in a year.  Coming in a distant second is health care fraud, which a Wikipedia article False insurance claims estimates at $259 billion (citing statistics from The Coalition Against Insurance Fraud and Medicare.)  Then we have mail fraud, other types of insurance fraud, and telemarketing fraud which together may push the total over one trillion dollars.

Fact:  "...that's nearly a crushing $5,000 burden for the average American household!"
Proof:  According to the Census Bureau an American household averages about 2.5 persons, so America's population of 300 million people is divided into about 120 million households.  Dividing a trillion dollars among those households actually results in a figure of $8,333 per household, which we lowered to a more conservative estimate of $5,000.
12. Drifting away from one's values.
Comment:  While we don't have any concrete proof that concepts like "values" and "character" lie at or near the root of personal and financial results, we think it's so basic and intuitive that no proof is needed.  As just one example, think about the effect of these intangibles on career success:  If 50 million Americans suffer character problems that impinge on their career, and those problems cost them $20,000 in annual salary, that multiplies out to one trillion dollars per year.

Quote:  "If a person gets his attitude toward money straight, it will help straighten out almost every other area in his life."
Source:  Billy Graham (1918- ), American evangelist.

Summary:  A $5.7 Trillion Dollar Drain!
Now let's add up the costs:
 Financial Mistakes:  $1.0 trillion
 $50 billion Low interest rates
 $97 billion Foreclosures
 $127 billion Credit card interest
 $200 billion Excessive fuel costs
 $250 billion Investing mistakes
 $293 billion Wasteful spending
 Personal Decisions:  $2.2 trillion
 $300 billion Traffic accidents
 $400 billion Poor nutrition
 $500 billion Vice spending
 $1 trillion Career/values drift
 Crime and Fraud:  $2.5 trillion
 $400 billion* Crimefighting & corrections 
 $574 billion* Risks to Life and Health
 $603 billion* Fraud and unpaid taxes
 $130 billion* Opportunity costs
*The quoted crime costs are 1999 figures from the study The Aggregate Burden of Crime; 2007 costs would be approximately 50% higher.
If you were to get a dozen professors together in a room, no doubt they would argue over various additions and exceptions that could alter this total by a trillion dollars, or perhaps even more.  Nevertheless, it's an inescapable conclusion that consumers are making a mind-boggling number of easily corrected mistakes in their everyday lives, mistakes that are costing them many trillions of dollars.  There's a definite need for consumer advocates to help consumers overcome these problems, and that's a big reason why the CFA was formed.
That's a wrap -- if you have any comments or questions, please visit our contact page.

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