Our journey to Financial Independence

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7 Deadly Personal Finance Sins To Avoid In 2021

How do Personal Finance Sins impact you?

Whether you are religious or an atheist – you commit these Personal Finance sins. They have led to bad financial habits. You might not notice it but they wreak havoc over your future. 

Personal finance and FI/RE are about the path to independence which requires discipline and focus. Yet, along the path, traps are often disguised as great opportunities. Which all lead to Personal Finance Hell. They range from debt, an empty pension fund to overwhelming clutter. 

Any of these sound familiar?

We often don’t realize the situation we are in before we take a hard look in the mirror. For me, the realization came during a move… As I was clearing my room the number of unnecessary clothes, gadgets, and other “must-haves” appalled me. I had accumulated so many pointless items. 

As the saying goes “Hindsight is 2020”. It hit the nail on the head, all these purchases were made on a whim, to keep with society, or to have the latest tech. None of them were thought out or aligned with who I am. It felt like I had gone on a gluttonous shopping spree that left me with nothing but dust and an empty wallet.

Key Takeaways

  • Take your time before any financial decision at minimum 24 hours
  • Never make big decisions when you are emotional
  • If it sounds too good to be true it is
  • Pay it forward, match every dollar spent on wants with a dollar invested
  • Be humble, you’ll never know everything about finance (or anything else for that matter)

As I moved forward I started noticing different types of impulses and mistakes. It led me to re-categorize them as the 7 deadly personal finance sins:

1. Lust - The Impulsive Buyer

Have you seen the new iPhone?

How can you live without it? The only path to happiness is to own it now. 

How couldn’t you?.. everyone else bought it. 

Even your broke friend has it. 

It can’t hurt it’s just another $34 per month or maybe just $900 today. Not only do you need it but you need it now. Before, the hype has passed.

Lust makes you crave unnecessary things just for imaginary pleasure. Social Media and events, such as Black Friday, are tremendous enablers. They spam you with ads, reviews, and deals. You to fantasize about the amazing new features. 

Aaaah the “IT”, the purchase to rule them all, to satisfy all cravings. You just know you’ll be fulfilled once you have “IT”. For that reason, no point thinking much – let me enter my credit card.

The purchase has gone through – you own “IT”. The Amazon Delivery comes in the next day. My gosh is this what happiness feels like? You put the item in the cupboard – it can wait for now. 

The rush is gone it lasted all of 30 seconds. The fantasy was arguably the most enjoyable part of the adventure. Oh well, maybe the next iPhone will do the trick…

The first of the 7 Personal Finance Sins Lust is treacherous…

Tools against Lust

When your mind gets filled with dreams of a new marvel. Start a clock, give yourself 24 hours during which you don’t shop around for accessories, look up the stats, or research good deals. 

Take the time to discuss with someone you trust – explain why you must have it. Ask them about their opinion. How would they use it? Don’t try, to convince them instead of having a conversation.

If you still want it. Start researching for another day. How much does maintenance cost, how long does it last, and what’s the best deal. If you are approaching Black Friday or the summer sale be patient. You’ll be thankful to have saved 20+% on your purchase.

Shopping Lust
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2. Gluttony - The Overflowing Wardrobe

I often feel gluttony creeping up when I go grocery shopping. I have a clear list of what I need. I have a distinct plan of which shops and where to go. 

Yet when I get to the shop it all goes through the window. The offers, sales, and yellow stickers draw me in. Another box of cereal of course. Obviously, the pack of 3 only cost $1.29. How could I not… there’re only 5 others in the cupboard.

The never-ending cycle of stockpiling. Suddenly I have an overflowing bag and a 30-minute walk home. 

If only it stopped here. As you go online to buy a new pair of running shoes you notice the nice looking shorts. You definitely could use more of those. Down the rabbit hole we go… 1 hour and $150 later you have bought 2 t-shirts, 1 shorts, and a football but you forgot your running shoes. It doesn’t matter the deals were so good. 

Now where to put them my wardrobe is full…Not only had you not bought these shoes would you’ve avoided clutter. But in 20 years these $150 invested in an ETF could be worth: $605.81. That small decision cost you over $450. Start your investment journey with Trading 212 (and get a free stock valued up to $100)

As discrete of a personal finance sin, gluttony is not to be underestimated.

Tools against Gluttony

Reverse engineer sales; do your research. My favorite habit to get in the right frame of mind is withdrawing the exact amount of cash I need for each trip and leaving my credit card behind. 

Ok… I add around $10 just in case but it means unless I find the deal of the century. I cannot give in to my gluttony and leave with exactly what I planned for. It might sound rigid but after a few times, I promise you will not think twice about shopping trips. 

Having built the habit, I no longer need the trick but my gosh am I grateful. So is my wardrobe…

3. Greed - The Vicious Circle

Greed is in the same vein as Lust. You can’t resist your appetite. It’s more than a fantasy you need it. You are willing to do anything for it. As a result, Greed is the greatest of the Personal Finance Sin. 

You are willing to sacrifice social ties, your credit score, or your emergency fund to get it. Greed is what sucks people into Multi-Level-Marketing (pyramid schemes). The promise of riches and freedom sound so good don’t they…

People that buy into these programs sacrifice their family ties, their dignity, and their financial prospects. Not only does the initial investment come at a high price. For even the smallest ROI  you must leech on your family. Down the line, you are left with an empty bank account and no social ties. 

Greed leads you to emptiness and hopelessness. The only thing holding you together is the object of your greed. Soon, that too fades away as you can no longer afford it…

Tools against Greed

The only tool against greed is patience. There are no get rich quick scheme you need to invest in today. There is no point in going into debt to buy a brand new car or to kick-start your MLM career. 

Take your time if you cannot afford it today don’t dive headfirst. As I explained in my article around financial goals understanding what you value will lower your greed.

Don’t forget to be humble and seek advice! It will lead you to review the objective impact of your decisions.

4. Sloth - The Lazy Text

From Takeaway to uneducated purchases… we all pay this tax once in a while. How often have you been sat on the couch thinking “I’m too lazy to cook: I’ll just get a pizza delivery.” Instead of spending ~$1 on your meal you’ve just spent $10.

We’re all culprits here and honestly once in a while fair enough. Indulge in a small pleasure. The trick is it quickly snowballs into a regular offense. Just like everything else… If it’s ok today it means I can do it again tomorrow. 

This leads to the $10 quickly transforming into $50 or more. Imagine that $50 a month… that would be worth $10,681.24 in 20 years

The Lazy Tax also strikes when purchasing new items. If you don’t take the time to shop sales or find deals with apps such as Honey (the US mostly) or Pouch (the UK only). This is a harder amount to put a number too. But if the purchase isn’t an emergency why buy it today?

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Tools against Sloth

TAKE YOUR TIME. Personal Finance is all about the long game. If you aren’t in a rush shop around and wait for the next sale if you can. This not only lets you think twice but leads to you being ready for sales.

As far as takeaway goes, I’ve gotten into the habit of matching my spending with an investment. For each dollar I spend – I invest another. This has transformed takeaway into productive action. The easiest way to lower your food expenses is to meal prep and freeze your leftovers. You just need to fish them out when you feel lazy!

Sloth is the easiest of the Personal Finance Sins to get rid off all it takes is preparation!

Wrath - The Decision Maker

This one is going to be short. You make a lot of financial mistakes when emotional. A great example is the March 2020 market crash. Many rushed to selling and closing their positions expecting a bearish market for the year.

Yet the S&P 500, for example, increased more than 60% since then. With many other financial indexes reaching all-time highs. Whereas by selling and buying in once more. You pay the fees and spread twice. Without benefiting from Dollar Cost Averaging.

Tools against Wrath

This one is tricky… emotions are incredibly difficult to control.  I can tell you to stick it out. But if you’re in fight or flight mode you won’t remember. I’ve learned meditation and breath-work has helped me stay in control as my adrenaline rises. 

What are your tricks to handle wrath?

6. Envy - Lifestyle Inflation

Stop trying to “keep up with the Joneses”. Whether it is through credit cards or spending all our income on payday. We need to keep up appearances. What matters isn’t how our bank account and future looks but what our Instagram feed reflects. 

Social Media is consistently trying to sell you something. Whether it’s holidays on the other side of the world or a new car you need the likes. AT WHATEVER COST. Influencers in Russia have started renting studio space to make them look as they can afford a private jet…

We look forward to our next raise or bonus as it will allow us to have more. You need more right? You need that Tesla. Instead of seeing the potential of additional investments we see a new wardrobe. 

In the end, we are blinded by the likes and the clout. It’s all that matters. Whether the investment brings us value or not.

Tools against Envy

Take a break from social media. I’ve uninstalled Instagram for around 2 months now. My gosh have my purchasing impulses changed. No longer do I feel like I need all the latest tech. I’m happier to take time to discover what works for me and around me. 

I now invest in what I value instead of what others do. It has made a huge change in my life. 

Unsubscribe from brand newsletters. From Amazon to Converse they bombard you with offers and “1 time opportunities” opportunities. Worse they share the most popular discounted items. In an attempt to generate sales. As strong as we think we are, such spam unconsciously creates needs.

7. Pride - The Knowledgeable Ignorant

The biggest mistake you can make as a Personal Finance enthusiast is thinking you know it all. Because you go through blogs and watch a few videos you assume you know the market 

Remember that Monkeys have consistently outperformed fund managers. They generated higher returns for prospective clients. If you want to learn more about our Monkey Overlords I recommend this article.

By consistently taking more risks and assuming we know better we expose ourselves to great losses. I lack the knowledge to get involved with day trading and options. Therefore I avoid them entirely – they are akin to gambling.

It’s not to say that if you’re knowledgeable there is a lot of money to be made in that space!

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Tools against Pride

Be humble. It’s as simple as that. Accept that however figures you have in your accounts. There will always be someone more knowledgeable. If even Warren Buffet has been wrong in the past… How can we be certain of any decision? 

You’ll win some and you’ll lose some. Take risks appropriate to your knowledge, more importantly, ask for help.

Begone Personal Finance Sins

This article was long enough to warrant a short conclusion. Personal Finance sins are inevitable we all get caught up in them. Learn how to deal with them and every mishap will have a solution.  Never forget you must take your time!

Below are the Key Takeaways you found at the top of the article!

Key Takeaways

  • Take your time before any financial decision at minimum 24 hours
  • Never make big decisions when you are emotional
  • If it sounds too good to be true it is
  • Pay it forward, match every dollar spent on wants with a dollar invested
  • Be humble, you’ll never know everything about finance (or anything else for that matter)

What are your top tips when it comes to avoiding these 7 deadly sins? Are there any you would add?

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1 Comment

  1. I love how you broke down each sin and even created ways to combat each one as well. This is such an interesting way to reach people how to be patient, frugal, and make great decisions about their financial futures.

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