Ten Defensive Tips to Win the Game of Personal Finance

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Thanks to the Pittsburgh Steelers and its legendary Steel Current defense, football wisdom in the 1970s could be summed up in one simple adage: “defense wins Super Bowls.”

Now, I don’t know if that adage holds true for the NFL today. I stopped caring about sportsball at least a decade ago. But I do know that a great defense still wins the game of personal finance. You avoid the ten financial mistakes outlined below, and the odds are you’ll do very well financially.

1. Don’t Have Kids You Can’t Afford

Kids are costly not just because they’re needy little buggers who aren’t shy about voicing their demands (we want more!). Kids are also costly because they’re a great time suck. If you have kids before you’ve completed your formal education or established a worthwhile career, you’re screwed. The time and energy needed to reverse your fortunes will be in short supply.

2. Don’t Commit Crimes

You don’t commit crimes first and foremost because a good person doesn’t prey on his or her fellow man. But you also don’t commit crimes because our judicial system exacts a terrible toll on the finances of the lawless. Lawyers are very expensive and it’s super hard to max out your 401(k) when you’re residing in a prison cell.

3. Don’t Smoke

Smoking is unkind to your current paycheck and cruel to your long-term health—which means smoking will be even more unkind to your future paycheck. The cost of a daily smoking habit + the costs of smoking-related healthcare = broke and miserable.

4. Don’t Party Like a Rockstar

Besides an injury that irrevocably enfeebles your brain, eyes, ears, or limbs, I can’t think of anything more harmful to your ability to remain employable than drug or alcohol addiction. Drink sparingly or not at all and avoid drugs altogether. And avoid people who don’t drink sparingly and don’t avoid drugs altogether.

5. Don’t Consider a Bachelor’s Degree Your Birthright

As many Americans have sadly discovered, a bachelor’s degree isn’t exactly a bullet train to Successville. I, for instance, studied sociology, journalism, and public administration throughout my desultory college career, and my degrees did little to advance my financial well-being. No employer on earth was willing to hire me to solve homelessness, scribble about the daily carnage on America’s streets, or administer the operation of some government bureaucracy. I did, however, find employers willing to hire me to mix cement, stock warehouse shelves, and pick up roadkill.

The ROI on a bachelor’s degree is very dicey for three main reasons:

1. It’s inefficient. In order to get a bachelor’s degree—a credential that allegedly proves to would-be employers that you have the requisite knowledge they’re looking for—you have to take and pass 40 courses. But of those 40 courses, only 12 to 15 will pertain to your major. Let that sink in. The knowledge necessary for an entry-level job in most fields can be obtained by taking and passing 12 to 15 courses. But colleges won’t certify your competency in your chosen major (i.e., award you a bachelor’s degree) unless you take and pass an additional 25 to 28 superfluous courses. In what other areas of life would we tolerate a business model that mandated such inefficiency? If you could adequately feed your family with a single large pizza pie, would you frequent a pizzeria that wouldn’t sell you a single large pizza pie—its minimum order was three large pies?
2. It’s rife with economically useless majors. Not all majors are economically equal. Someone with a chemical engineering degree has far more value in the labor market than someone with a sociology degree. This doesn’t mean, of course, that sociology is devoid of any intrinsic value. Studying sociology can make you a much more thoughtful human being. It just means that a sociology degree has little commercial value. Elon Musk isn’t hiring any sociology majors to man his battery factories. He is hiring chemical engineers, though.
3. It’s expensive. For my last semester at Buffalo University (Spring 1984), I took the standard five courses and my bill for tuition and fees totaled $540. I was literally able to cash-flow my education by working part-time in a movie theater (20 hours x $3.35 x 15 weeks  = $1,005). That’s not possible today. Tuition and fees at Buffalo University now total $5,262 per semester. Working part-time at a minimum wage job now only covers two-thirds of that cost (20 hours x $11.80 x 15 weeks = $3,540).

Since the ROI on a bachelor’s degree is very dicey, you can’t be willy-nilly when it comes to higher education. If you go to college to “find yourself” or gain the “college experience,” you’re doomed. Skill-wise, your 22-year-old self will be no different than your 18-year-old self. Money-wise, you’ll be much worse off. Your 18-year-old self had no student loan debt.

So how does one improve one’s ROI on a bachelor’s degree? By adhering to my four groovy rules for higher education:

1. If you don’t have top 20 percent intelligence, as measured by the SAT or ACT, a four-year college isn’t for you. You’d be much better off going to community college or trade school, joining the military, or just entering the workforce. Remember: Much like a football coach can’t make a slow football player fast, a college professor can’t make a pedestrian college student smart. If you don’t have the innate ability to handle calculus or organic chemistry, there’s nothing a college professor can do to change that.
2. If you do have top-20-percent intelligence, and you do decide to attend a four-year college, the non-STEM major isn’t for you. You can’t have a good ROI on your bachelor’s degree if your degree is economically useless. GO STEM OR GO HOME!
3. Prefer the local four-year college to the far-off four-year college. Room and board ain’t cheap. At Buffalo University, the current cost of room and board is $14,648 annually (see here and here). The cost of room and board at your parents’ house annually is zero.
4. Prefer the public four-year college to the private four-year college. Tuition and fees at Buffalo University, a public four-year college, total $10,524 annually. Tuition and fees at Syracuse University, a private four-year college, total $54,270 annually. Is Syracuse’s STEM education really five times better than Buffalo’s?

6. Don’t Be Useless

“Give, and it will be given to you.”

It’s not that complicated, people. Find a legal and ethical way to serve your fellow man, become competent at that task, and your fellow man will reward you with an income.

7. Don’t Be Complacent

Competency equals wealth. The more competent you become at your job, and the more competent you become at managing your finances and investing, the more wealth you will build. It’s an unassailable law of money. Competent workers rarely go without work, competent money-managers rarely spend more than they make, and competent investors rarely get spooked by market volatility. In other words, competent people set themselves up for decades of working, saving, and investing—the three key ingredients for building a big fat nest egg.

So how does one become competent at managing one’s career, finances, and investment portfolio? By not being a total bum. Complacency is the enemy of competency. You can’t become competent at something by using all of your free time to vegetate in front of a television. You have to be humble and industrious. You have to admit to yourself that you still have much to learn, and you have to be willing to wage battle against your vast ignorance on a daily basis.

The good news is that once you become ashamed of your ignorance, the path to competency is far from arduous. I, for instance, became a data analyst guru at my last job by honing my SQL skills every night for half an hour. That’s a pretty remarkable ROI if you think about it. A half-hour a night + a couple of years = super valuable employee. And the only thing I had to sacrifice for my increased job security and a couple of promotions was one less King of Queens rerun per night.

8. Don’t Be a Glutton

First principles! Always ask yourself what the essence of something is and what’s the bare minimum necessary to achieve that essence. For instance, what’s a kitchen? A kitchen is nothing more than a place to store and prepare food. Now let’s see what is needed to make a kitchen a kitchen. You need…

• Surface areas to prepare food
• Drawers for eating and cooking utensils
• Shelves for cups, plates, and bowls
• Shelves or hanging hooks for pots and pans
• A sink and faucet for water
• A refrigerator to store perishable food
• Shelves to store non-perishable food
• A stove to cook food

Okay, what’s the bare minimum necessary to achieve the above functionality? Do the shelves for your cups, plates, and bowls need to be encased in mahogany cabinetry? Or can these shelves rest openly on a wall? Does the water for your pasta need to be boiled by a Sub-Zero stove? Or can it be boiled by a hotplate?

Take a look at the below picture. It’s a picture of the workbench I made in my garage. Now imagine we swap out the miter saw with a sink and faucet and complete the drawers and roll-outs. What do we have? We basically have half a kitchen. All we need to do to complete the kitchen is place a basic refrigerator and stove on an adjoining wall and surround those appliances with more shelving and benching. You could literally achieve the essence of a kitchen with plywood, two-by-fours, casters, sliding-drawer hardware, marine varnish, a basic refrigerator, a basic stove, and a basic sink and faucet combination. And if you do the labor yourself, it might cost you $3,000.

Now contrast the cost of a first-principles kitchen with an HGTV kitchen. My cousin recently remodeled his kitchen with high-end appliances and finishes and it cost him $160,000. A first-principles kitchen is a fraction of that cost—less than two percent. A first-principles kitchen is also a fraction of the cost of a typical kitchen remodel. According to the National Kitchen and Bath Association, a typical kitchen remodel costs $34,000. Our first-principles kitchen comes in at nine percent of that cost.

There’s nothing wrong with an HGTV kitchen—providing you can afford it, of course. If you have a three-month emergency fund, devote 15 percent of your income to your retirement, pay your credit card bills in full every month, and saved enough money to cash-flow your HGTV kitchen, then by all means, install that HGTV kitchen. You deserve it. But if you don’t have your financial house in order, and you still insist on having an HGTV kitchen, you’re being gluttonous.

This same analysis can be applied to anything we humans buy. There’s a first-principles SUV (a used Honda CRV) and a gluttonous SUV (a new Mercedes Maybach). There’s a first-principles cellphone (a Tracfone LG Rebel) and a gluttonous cellphone (an iPhone 12 Pro). And there’s a first-principles college education (commuting to the local state college that most people never heard of) and a gluttonous college education (attending a brand-name private college that’s in another state and has an awesome football team).

Again, anything under the sun that we possess has a first-principles, get-the-job-done version, and a gluttonous, blow-your-socks-off version. And most Americans get themselves into financial trouble because their first-principles paychecks and financial circumstances don’t stop them from buying gluttonous stuff.

9. Don’t Be Stingy When It Comes to Spending on Your Future Self

Imagine you’re a 60-something white male who works for corporate America and is strapped financially. A cop in a far-off city badly mishandles an arrest and a minority citizen winds up dead. A moral panic ensues and your CEO decides that all white employees need “implicit bias” training. You know such training is racist as hell—your CEO would never assume that all black or Hispanic employees are weak in math and require them to take “implicit innumeracy” training—but you submit to the infamy and renounce your “whiteness” before your white co-workers and some phony-baloney consultant. Your financial weakness has rendered you easy prey for corporate tyranny.

But what if you weren’t financially strapped? What if you started saving for retirement right out of college and you were financially independent. You wouldn’t need your job, of course. And you would thus be able to tell your CEO to shove his or her implicit bias training.

And that’s the moral of the story. Financially strong employees don’t have to eat crap. Financially weak ones do.

Don’t allow your future self to be easy prey for cruel or idiotic bosses. Start saving for retirement now.

10. Don’t Be Afraid of Paper Losses

Finally, being kind to your future self means investing in the market. And if you’re going to invest in the market successfully, you need to prepare yourself for paper losses. At the beginning of November, for instance, my stock portfolio’s value dropped $167,000. I guess the election and the surge in Coronavirus cases made investors jittery.

Now, if I wasn’t accustomed to the slings and arrows of market volatility, I would have panic-sold a chunk of my stock portfolio and locked in those paper losses. Fortunately, I’ve seen this kind of market sell-off at least a dozen times before and the market has always come back. And sure enough, as of today, my stock portfolio has regained 87 percent ($146,000) of its early-November drop.

Big paper losses are part of the investing game. You have to condition your brain to see market plunges as buying opportunities. When they occur, you simply maintain your monthly contribution to your retirement account or you rebalance your portfolio. Either way, you’ll be buying stocks on sale. And if you can maintain this steely attitude over the course of several years, you will be handsomely rewarded. I’ve played the investing game with this steely attitude since I began investing in earnest in 2006, and now I look at my portfolio and wonder where the hell all that money came from.

Final Thoughts

Okay, groovy freedomist, that’s all I got. What say you? Is a great defense still key to financial success? And if it is, did I nail the ten most important things you need to defend yourself against? Let me know what you think when you get a chance. Peace.