The Standard Model Theory Of Personal Finance

Eventually it'll all make sense

Eventually it’ll all make sense


Like its particle physics counterpart, this has no elegance. It’s just a series of axioms and equations, biding its time until a Grand Unified Theory shows up to replace it. But the Standard Model works. Obey its component dictates, acknowledge its veracity, and while you won’t necessarily get rich you’ll avoid being poor; which is most people want anyway, even though they don’t necessarily know so.

Here are the axioms, in both descending order of importance and, not coincidentally, reverse chronological order.


You can’t have dessert until you finish your broccoli.

In other words, you can’t build wealth until you’ve erased all your negative wealth. Fat people can’t scale Everest, and broke people can’t climb whatever its financial counterpart is. Stop trying, until you’ve paid off all your debts.

There’s no effective way around this. If you owe more than you own, you’re going to have to wait. Don’t start until you’re in the black, and don’t even think about doing so. Unless you’re sophisticated enough, and have a stellar enough reputation with your lending institution of choice, you’re way over your head if you’re trying to turn a profit by borrowing money at 4% so you can get a 7% return on it. Save that for people who know what they’re doing.


Debt becomes exponentially less manageable as it grows.

Therefore, don’t let it grow. Better yet, don’t incur it in the first place.


Mortgages don’t count. Well, some of them do.

When we say “it” in the previous line we’re not talking about mortgages. Yes, when you borrow money for 30 years to buy a house you end up paying far more than the price of the house. That sounds discouraging, but it isn’t. It isn’t, because the alternative is to rent. People who complain that taking on a mortgage means that they spend more in interest than on the house itself are missing one critical point, which is that you have to live somewhere. If you’re renting, you’re not building wealth. Well, you’re building wealth, but for your landlord.

Adjustable-rate mortgages are like nitroglycerin. It’s too much work to know how to handle them safely. Get a fixed-rate mortgage and enjoy peace of mind.


You don’t need an advanced degree in mathematics. On the other hand, you do need to understand the basic operators and exponentiation.

Let’s start with an example: 


Having an emergency fund is dumb.

This is the shallowest yet most pervasive tip we’ve seen. Everyone from Dave Ramsey to Clark Howard says you need to save for a rainy day, which is a piece of homespun country wisdom that might have made sense back before America was a nation of debtors. Your Depression-era grandfather kept $300 in his mattress because he feared the bank might go under, not because he was worried about the slim possibility of a catastrophic medical bill. Also, back then there weren’t as many toys to spend money on. Grandpa wasn’t buying Xboxes and putting them on his credit card. Furthermore, he didn’t keep that roll of twenties sitting around while he owed somebody more than $300.

If you’re in debt, the emergency has already started. In fact, it’s hard to imagine a worse one. If other, inferior personal finance blogs are any indicator, it’s common practice to have both a $5000 emergency fund and an $11,000 credit card balance. Which is like having a fire extinguisher mounted on your kitchen wall, and a grease fire on your stove, but letting it do a controlled burn because the extinguisher is only for emergencies. If you can’t figure out what’s wrong with this, you don’t belong here. Go read a blog with “debt” in the title instead. They’re easy enough to find.


Indulging yourself while in debt is immature and counterproductive.

Grow up. Seriously, just grow up. You don’t need patches or gum to quit smoking, you just need the will power God gave you. Which is now buried under layers of discolored tissue, but that’s not His problem. Still, who cares: let’s watch those carcinomata grow! That you were the kind of person to light up in the first place means that your chances of survival were reduced to begin with.

Same deal with debt, the difference being that the latter is less fatal. Yet the comparison remains valid – smoking fewer cigarettes instead of no cigarettes means that you’re committing to an illusory goal. And if you buy only the occasional indulgence, instead of no indulgences, you’re not doing your finances any favors.

There are no shortcuts with this one, either. If you just want to “live a little”, or “preserve your sanity”, or “do something nice for me”, or however you choose to justify spending any extra dollars, you’ll stay poor that much longer.

Life is finite. To some people, that means live for today and worry about the consequences later. To us it means that you should spend as many of your remaining days as possible building wealth, rather than failing to build it.

This is one place where we agree with Control Your Cash soccer ball/punching bag Trent Hamm. Reusing your Ziploc bags and saving your dryer lint to create kindling sort of make sense when you’re broke. (The difference is that Trent continues to find ways to be superhumanly cheap even after he’s crossed 0 and has a positive net worth.) Which brings us to another point –


The rules change and become far easier to live by once you’re in the black.

It starts off hard and gets easier. When you’ve got money that doesn’t need to go to everyday expenses (and debt reduction), there lies opportunity. Chapter 6. You should have learned this in school, except no one teaches it. Speaking of which…


Even the people who are the world’s greatest at reading Shakespeare and contextualizing Aristotle aren’t getting rich at it.

Take those student loan application forms and shove them.

Unless you have both an aptitude and the discipline for the hard sciences, applied sciences, math or something similar. Don’t kid yourself into thinking that your sociology degree is ever going to pay for itself.

Some parents think they’re being responsible by telling their kids, “You’re going to college, and that’s that.” We hear this throughout society, to the point that it’s received wisdom – there’s no substitute for a college education, it opens doors, you’re lost without one, etc.

Bull. Parents who believe any of this should have their genitals cauterized. Besides, lots of parental advice is shaky. These are the same people who taught you either explicitly or by example that staying in a soul-crushing job is a smart decision, and that it’s healthy to mask residual anger for a tiresome spouse. Hell, they even indirectly told you that having kids is a good idea, so maybe they’re not the oracles that their positions of power would indicate.

Percentage of people who inherently understand that these truths are indisputable: 100.
Percentage of people who, if they read this post, would still ignore most of it anyway: 92.

This is why most people have financial problems. They want to. runs on the Genesis Framework

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