7 Deadly Financial Sins

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As a high school student, I was a bit of a nerd (I still am today!). Though I was well-rounded – a decent athlete and very active in music and student government – I rarely went anywhere without a book in hand. I read a wide variety of authors, including Rand, Twain, Chaucer, Dante, and Steinbeck, among dozens of others.

In hindsight, I enjoyed reading so much because of the fascinating characters and moral dilemmas contained in each book. After learning about the Seven Deadly Sins – hubristic pride, greed, lust, malicious envy, gluttony, wrath, and sloth –  in ninth grade honors English, I began to take greater notice of character development and general character flaws. I also began to notice how these flaws manifested themselves in my friends and even my own life.

Money Sins

As a financially-conscious adult, I now see that these sins are ever present in the day-to-day financial decisions of the average person. Rather than attempt to isolate direct correlations between the aforementioned Seven Deadly Sins and common financial mistakes, I wish to present seven of the top financial sins which have been on my mind in recent weeks.

Payday loans. I grew up in an area of the Midwest which painted an accurate picture of the lives of the “haves” and “have nots.” My family fell somewhere in the middle as an average middle class family. However, the occasional trip through the seedy parts of town provided shocking glimpses of life on the other side: low income housing, gang violence, pawn shops, and payday loan centers.

I am optimistic that predatory payday loans may soon be a thing of the past, given Google’s crackdown on payday loan advertisements. Finally, awareness is growing about this criminal cycle of debt and the outrageous interest rates charged by payday lenders. You can read more about this problem here.

Spending more than you earn on a long-term basis. This needs little explanation, as the math is quite simple. Unless you are poised to receive a large inheritance or other similar windfall, a negative savings rate is a sure-fire to place yourself in financial peril.

Borrowing money from a retirement account. Unless you are facing bankruptcy or foreclosure, borrowing money from your 401k or other retirement accounts can be disastrous. In doing so, you are failing to make financial progress, continuing to overspend, and weakening one of the greatest partnerships of all: time and compound interest.

Failure to have a will in place. I dislike being the bearer of bad news, so I will make this very brief: There is a 100% chance that you will die, and getting a will in place won’t change these odds in any way. Given this undeniable fact, it is borderline inexcusable for anyone with typical assets and liabilities not to have a will.

Buying or leasing brand-new vehicles. Unless you are a millionaire or otherwise financially-independent (FI), purchasing a brand-new vehicle represents a significant and immediate loss the moment you drive off the lot. Most new vehicle purchases are motivated by pride or jealousy. There is nothing wrong with purchasing a nice, well-maintained used vehicle.

Related: The Car Lease: A Formidable Villain

Whole life insurance. In my opinion, whole life insurance is a scam. On the surface, a slick salesperson can make it sound like a great deal by dropping words and phrases like “cash value” and “guaranteed to remain in force.” However, term life insurance is a much greater value. For most healthy adults, a sizeable 20 year term policy is available for little more than the cost of a meal at Applebee’s. The best part: low monthly premiums will allow you to invest the money you save and become self-insured by the time your term ends.

Lack of a financial plan. In many ways, I am an open book when it comes to discussing my finances. Mrs. Superhero and I are believers in stealth wealth, which means you won’t find us disclosing our incomes our value of assets any time soon. However, I am always willing to discuss our financial game plan with others. By being transparent in this way, we have learned a lot from other people, made changes to our plan after careful consideration, and hopefully helped a handful of people be more intentional with their finances.

At the same time, I am continually amazed by the number of people I speak with who do not have a defined financial plan. To make matters worse, these people are typically unaware that this is a problem. With automated tools like Mint and Personal Capital, among countless others, there is no excuse for the failure to have a financial plan in place.


Readers, what other financial sins should be added to this list? Which one do you think is the worst?

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13 thoughts on “7 Deadly Financial Sins

  1. A great list. I’d add not having an e-fund. Not having cash saving on hand just forces you to go into debt when life happens, and adds stress. There is such peace of mind knowing you have money availabile to cover the unexpected.

  2. Pay day loans and rent-to-own furniture were popular in the poor place I was raised. I would love to see them gone. Especially now that IKEA can get you nice enough stuff for lower prices.

    Great list.

  3. Great list FSH, and each one a blog subject in its own right. Hey, there’s your upcoming seven posts taken care of!! As Brian says, this list can’t be limited to only 7 deadly sins as the list could fill several pages. Not paying off your credit card in full each month is another one.

    I have to admit, I bought a brand-new car late last year. I think every person should strive to have a new car once in their life. I justify it using your criteria by saying that I am financial independent and I do crack the million dollar mark in investment assets. However, it will be the last NEW car I ever buy. But I do love it.

  4. Other sins could be

    Not investing as from paycheque one.
    Not understanding your risk appetite
    Not sticking to the plan.

    I look forward to reading a post o each of these!

    A will is a must do for us. OR at least review our marriage contract

  5. Hey Hero, very good points. We try to avoid all of those sins in our lives.

    I think not investing is one of the biggest sins that you haven’t mentioned. Compounding is the strongest financial force, don’t fight it – grow with it.

    Tristan

  6. Very good list. We unfortunately took to the mindset of needing the best up until about 20 months ago and now are on the path of minimalism. I think the list is great and eye opening. A financial plan is absolutely necessary for a successful future. This may sound a bit crazy, but we have actually borrowed from our 401K, not because of emergency but for our real estate investing business. I know it is taboo, but we paid the money back and we made our money work for us. That was the way we decided to get into real estate investing and it worked for us. Great blog Superhero!

  7. Another one:

    Student loans. Not dischargable in bankruptcy. Most people won’t pay it back in full due to unemployment or underemployment. Just watch.

    Anyways, I browsed through a few of your posts — mainly looking at your writing style. I am very impressed. I like the clarity, spiced by your personality and stories. It seems all the reading you did while young paid off. Keep it up and you’ll be the next Financial Samurai.

    1. Excellent addition, Alex. Unfortunately, the article could easily could have been 700 Deadly Financial Sins. 🙂

      My sincerest thanks for taking the time to read through a few of my posts and offer feedback. While I don’t quite know if I have what it takes to be the next Financial Samurai, I am humbled to be compared to Sam.

      After reading through several of your posts, I am very motivated to keep honing my craft. I think the most important thing a blogger can do each day is to read others’ writing.

    1. Thanks for stopping by, John. There certainly many financial sins, but these are the ones that make my blood boil. 🙂

  8. It makes me smile to think I’m handling my money in an *almost* superhero-like way. Great article! I love your writing, David.

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