7 Deadly Sins of Personal Finance

When you look back at your personal finance life, do you recollect any of the 7 deadly sins being committed?

We are human and almost wired to fall for these sins from time to time.

As outlined in the guide to financial wellbeing, even though we know what we are supposed to be doing, it does not mean we always do it.

So, before we get started there is something you need to know.

If you have been guilty of committing any of these sins, there is nothing to be ashamed of.

Pretty much everyone around you is in the same boat.

I have had my own share of run-ins with each of these 7 deadly sins (and still do).

They become easier to deal with once you know of their existence and the actions you can take to minimise their impact on your personal financial life.

Let’s get started.

7 Deadly Sins of Your Personal Financial Life

The 7 deadly sins of your personal finance life are:

SLOTH – Procrastinating Financial Decisions

This probably ranks as the biggest sin when it comes to busy working professionals.

You work crazy hours to earn more money and then do very little to make that money work for you.

Most of the time, the money you have saved remains in a low interest saving account or ends up in an insurance linked product in a last-minute dash to save taxes.

You keep waiting for the day that you will finally start investing your savings into something more useful that will let your money grow.

Things like mutual funds, ETFs or real estate.

But that perfect day never seems to arrive.

There is always something else that takes priority over starting your investment journey.

How to Absolve Yourself

Admitting to this sin is winning half the battle.

Set yourself a deadline by which you are going to get started with your investing process and get your financial plan in place.

Don’t keep the starting date to yourself. That promise is easier to break.

Share it with your family and friends instead.

They will help you to stay accountable to your promise and you may actually get started this time after the many false starts in the past.

GLUTTONY – Collecting Multiple Financial Products

We live in a world that constantly tells us that more of something will makes us better off.

We are offered the chance to do unlimited binging when streaming videos, all-you-can-eat buffets or purchase-with-purchase offers at the supermarket.

It is no surprise then that we eagerly lap all of those up.

We continue the same behaviour in our financial lives too.

You end up collecting every new shiny financial product (card/ fund/ insurance/ loan/ investment scheme) that comes your way.

We give very little thought if this new financial product is really going to make a meaningful difference to our personal finance life.

How to Absolve Yourself

Letting go or saying NO can be really hard to do.

The only way around it is to adopt a minimalist money lifestyle.

No matter what your financial needs are, they can be satisfied with a limited number of financial products.

Make a review of all the financial products you have collected thus far and see which ones you can let go of.

There is sure to be a lot of duplication among them with many serving the same need.

In addition, be mindful of adding any new financial product into your financial life to avoid cluttering it up even more.

PRIDE – Not Asking for Financial Advice

Being successful in other parts of your life can easily lull us into a feeling of over-confidence when it comes to making financial decisions.

If you can pull off complex projects at your workplace, then how difficult can it be to make some personal financial decisions.

It is even more difficult if you are a guy – Don’t we just hate asking for directions when driving.

But sometimes even the best of us can go wrong when making financial choices.

While some poor choices may show up immediately, there are some decisions which can take a long time to tell us that we made a bad choice.

If you are risk averse by nature, imagine trying to invest for your retirement in a low interest bank deposit.

It might be years before you realise that you have picked the wrong instrument to save for retirement.

How to Absolve Yourself

Help is available all around you.

You can do your own research online if you are a DIY type of a person.

Alternatively, you can take the services of a qualified professional.

Even if you are confident of your financial choices, it won’t hurt to get a second (or even a third) opinion when making major financial choices in your life.

LUST – Falling for Get Rich Quick Schemes

Growing wealthy for most working professionals is a slow and painstakingly boring activity.

It involves saving some money each month from your salary, investing it and then letting it grow patiently.

But we are all wired for seeing some action instead of this boring routine.

We keep looking for ways to speed up this process.

There are scores of greedy salespeople out there who are more than happy to sell you some complex investment products which promise to make you rich overnight.

And more often than not it will be the person selling the product, not you, who ends up richer at the end of it.

How to Absolve Yourself

The process of getting rich is not supposed to generate excitement on a daily basis.

The level of excitement it generates should be on par with watching paint dry or watching grass grow.

If you crave excitement go bungee jumping or scuba diving.

Don’t use your investment choices to create excitement in your life.

If your investment decisions are generating excitement on daily basis, you are probably doing something wrong.

Sticking to the simple and easy to understand financial products will be good enough to make you wealthier over a period of time.

GREED – Choosing Short Term Consumption over Long Term Saving

It is said that human beings are the only species that can think far into the future.

No other species on the planet operates like this.

Irrespective of that, our primal instincts still give greater importance to consuming things now rather than delay gratification to a future date.

Consuming stuff releases dopamine in the brain that leads to immediate feelings of pleasure.

Our brain in turn prompts us to keep going after this repeated release of dopamine driven by the materialistic consumption of goods and services.

How to Absolve Yourself

Delaying your consumption today for some day in the future is not easy.

It requires persistence and will-power.

The world around us is full of temptations and the business world has to make sure you consume everything today and not wait for tomorrow.

After all, if everyone acted financially sensible, the economy would collapse.

Saving is a personal virtue and a public vice. 

Knowing this fact, aim to avoid rather than resist these temptations.

Keeping these temptations at bay is much easier than resisting them when they become up, close and personal.

In addition, find other activities that don’t require you to spend money but still help to release the required dose of dopamine.

Things like playing a sport, starting a new hobby or sharing your expertise with others.

ENVY – Spending Your Money to Impress Others

We are social animals, and it is natural to compare ourselves with others.

Someone else doing better in life can easily fill you up with envy.

Research has shown that our level of happiness is greatly dictated by how much we earn compared to the others around us.

There are many ways in which corporate life hurts your personal finances.

One of them involves signalling – i.e., spending your hard-earned money to show people how successful you are.

Envy is one these 7 deadly sins.

It leads you to make spending decisions that hurt your financial wellness.

How to Absolve Yourself

No matter how hard you try there will always be someone who will be richer or better off than you.

Rather than using your own money to compete with them in this race, do something different.

Change the race.

Choose the race that you want to be a part of.

Be with people and surroundings that are more closely aligned with your personal values and what you want to get out of life.

That will help you to get over envy.

WRATH – Blaming Others for Your Financial Condition

Blaming yourself for everything that goes wrong in your life is a recipe for depression.

As a result, we are naturally programmed for resilience by finding some external reasons for our failures.

You can easily rationalise and blame others for why your financial condition is not in a great shape.

You can get angry with others for putting you in your current condition.

It is easy to blame your boss for not getting a salary raise, a salesperson for selling you a bad investment product or your school for not teaching you how to handle personal finance issues.

How to Absolve Yourself

When it comes to financial wellness you will realise that most of the answers lie within you.

You (not others) are the one who can make the maximum impact on your financial life.

The threat and opportunities for your financial life come from within you and not from the external factors that we usually end up blaming for any financial misery.

Look in the mirror. That’s your competition.

Your own financial awareness, literacy, behaviour and satisfaction play the biggest role in the financial life you lead or end up with.

Taking some simple steps on each of these 4 pillars of financial wellness will significantly improve your personal financial life.

Conclusion

The 7 deadly sins of personal finance are the same that you encounter in other aspects of your life.

As these sins are easy to commit, most of us have been or will go down that path at some point.

Knowing what these sins are makes it easier to spot them in your own lives.

More importantly the suggestions outlined here should help you to absolve yourself of these sins before they do too much damage to your personal financial life.