The Seven Deadly Sins of Personal Finance

Managing your money isn’t easy. It doesn’t help that there are thousands of different opinions out there on what you should do in regards to things like budgets, credit cards, debt, saving, retirement, and so on. I’m usually the last person to throw out my opinions as absolutes. In fact, there are at least three good reasons why you shouldn’t take my advice at all.

But in this age of relativism, the motto “personal finance is personal” is intended to empower people to pursue financial freedom, not to encourage them to use it as an excuse to make stupid decisions. People who get defensive and say “Don’t judge me” are usually more interested in justifying their behavior than taking a good hard look in the mirror. So let’s take a look at some of the worst things you can do (the seven deadly sins—original, right?) if you ever want to be financially independent.

Pride

Consider this quote from former U.S. Secretary of Agriculture Ezra Taft Benson:

“Pride is a sin that can readily be seen in others but is rarely admitted in ourselves. Most of us consider pride to be a sin of those on the top, such as the rich…looking down on the rest of us. There is, however, a far more common ailment among us—and that is pride from the bottom looking up.”

Listen, I don’t deny there is a major wealth distribution problem. I wish there was a ready solution. In fact, I’d like to think that there are enough politicians on Capitol Hill who would try to change that, but it seems like no matter the side, they’re all in some billionaire’s pocket. So we’ll file that under wishful thinking. In the meantime, though, no amount of whining, bashing or occupying Wall Street is going to improve your situation. Instead, spend your time creating opportunities for yourself.

Greed

For some people, money is just a means to get stuff. No matter what their income is, it’s maxed out on an oversized mortgage, brand new cars and a slew of other toys. Their desire for more stuff is insatiable, and they don’t care what they have to do to get it. They max out their credit cards, throw their money at “get rich quick” schemes and resort to dishonest and unethical means to get ahead. They end up with a lot of garbage and nothing meaningful to show for it in the long run. So the question for you is what is your motivation when you buy things? There’s nothing wrong with spending your money, but it’s important to know the why—and to see the patterns.

Sloth

The optimal way to reach financial independence is to have a slew of passive or residual income sources. With the Internet, the opportunities for passive income are endless. But most people who are just starting out don’t realize how much work goes into getting there—whether it’s hustling to improve your offense (income), or flexing those defensive muscles (budgeting, saving, etc). When I was doing a financial planning internship, I spent a lot of time helping young couples put together a plan to start getting on the right track. When I presented it, it all made sense. They were always so excited to get started! But when I called six months later to follow up, the vast majority of them had done nothing.

Sloth is one of the worst of the deadly sins because the time value of money is constantly working, whether for or against you. If you start saving $263.67 a month at age 20, you will have $1,000,000 at the age of 65 (assuming a 7% return). But if you start at age 30, you’ll have only about $475,000. Yikes!

Lust (sorry no pic, we like to keep things rated G here)

The funny thing about lust is that it’s an almost perfect counterfeit of the real deal. Love, for example, provides us with lasting peace and happiness because it’s selfless. Lust, on the other hand, is the epitome of selfishness and is only concerned about instant gratification. In general, most of the stuff we see from Hollywood is the former rather than the latter. Here’s the thing, though. There’s nothing wrong with wanting to have a lot of money. But lusting after it means you want it for all the wrong reasons. The people who lust after money are the people who become consumed by it. They’re the Scrooge McDuck’s of the world who are more interested in the size of their bank accounts than just about everything else. It’s never a bad time to ask yourself what your motivation for becoming wealthy is.

Wrath

This one’s a little tough, but I promise it’ll make sense. 🙂 I haven’t had any violent rages recently (or at all, I don’t think). But from what I’ve seen, the rager usually exhibits one very distinct characteristic: complete denial that he or she is wrong.

Are you doing everything you need to in order to reach financial freedom? If you answered yes, you’re probably lying to yourself. In fact, I always found it funny during my internship if they had everything in place to retire, and they would respond, “Oh yeah, I’ve got a 401(k).” Errrrr. Unless you’re maxing that baby out, there’s more to do. Get rid of the denial today or reality will take care of that when you’re in your 50s.

Envy

I’ll be honest, I got caught up in this one for a long time after graduating from college. While all my other finance classmates went on to corporate finance, private capital, investment banking and public accounting jobs, I was stuck behind a bank counter making $9.75 an hour. But the funny thing is that once I moved down to Texas for a new job and started freelance writing, I was making more than most of my peers who graduated with me.

Here’s the dealio. Everyone has a different path in this life. We all have different trials and circumstances we have to deal with every day. The more time you spend comparing your income or lifestyle to someone else, the more likely you’re going to overspend to try to make it look like you’ve closed the gap (all the while you’re slowly drowning in debt). Let the Joneses do their own thing. You just focus on you.

Gluttony

The gluttonous are all about overdoing things to the point of waste. In finances, you can go both ways with this. On one hand, the stingy put so much energy into saving money that they waste opportunities to appreciate what money can do for them and their loved ones. On the other side of the coin, some overspend on things they never use. For them, it’s not for any reason other than because they can. Both sides of the spectrum are harmful.

Are you guilty of any of these seven deadly sins? What can you do to make good with the financial gods?