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In this article, we explore a better philosophy for approaching personal finance. Strongly recommended to start here before jumping into the The Financial Index article.

DISCLAIMER: I am not a CPA and the contents of this article should not be considered financial advice. The claims within are purely my own opinion. You should always do your own research.

The Problem with the Current Financial Ed Environment

There are so many articles out there talking about the benefits of maxing out your 401k, determining whether to rent or buy, or doing a backdoor Roth IRA. As useful as they are, they are often a bad place to start for the typical low to middle income american. Many such articles out there require big cognitive and temporal commitments from the reader, which is a big bar to meet in this day when attention is becoming our most scarce resourse.

This overabundance of sexy or ultra-specialized financial articles seems to be monopolizing people’s attention. When you have $5000 worth of credit card debt, an article comparing stock investment strategies on Robinhood will understably be tempting but ultimately irrelevant for you, and can lead you to make a bad investment that couldn’t possibly outpace your high-interest credit card debt. It’s a bit like trying to teach advanced calculus to a first grader. Not only are you missing the required pre-requisite knowledge, but it’s likely that the content is not applicable to you at this specific stage in your life.

Conversely, there is also a challenge of discoverability, focus and relevance in the personal finance space. The aforementioned ultra-specialized articles are likely mainly landed upon by people who know exactly what to look for, but how did they know what to google in the first place? In my own experience, much of my best financial “discoveries” were from random online discussions and simple word of mouth. A frighteningly small percentage of that was from books or articles. Maybe I’m just not looking in the right places, but it seems to me that there is a serious lack of general/introductory/holistic financial education online that provides the best bang for buck to the average citizen.

So what should we do instead? I’m glad you asked! I’d like to introduce you to a Computer Science concept that I believe is extremely helpful in formulating a more effective approach to personal finance.

Breadth-first Search vs Depth-first Search

Consider that you are looking for your friend’s house and all you know is which suburb they live in. What’s worse, you forgot your phone and the only way to confirm that you’re at the right place is to knock on each door until your friend opens the door for you. Once you get off at the bus stop, you have roughly two options:

1. Go down one street as far as possible, checking houses as you go. At the end of the street, backtrack to the last street you haven’t explored yet and then go down that street, again, as far as you can go. Once you’ve explored this first street and all streets that it’s connected to, you go back to the original starting point and choose a new street to explore. Repeat this process until you’ve found your friend’s house or checked all the houses unsuccessfully (yikes). This is called depth-first search.
2. Alternatively, from your starting point, start exploring all the houses closest to you, regardless of what street they’re on. Kind of like layers of an onion, you only start going farther out from your starting point after having checked all the houses in that layer. This is called breadth-first search.

Both techniques have their pros and cons, and we often intuitively know which approach is best, and often do a mix of both. The problem is that it’s easy to fall into a very depth-first search type of thinking, especially in the financial sphere. So how can we apply breadth-first search thinking to make the best use of our time and focus on the right areas?

A Better Approach

What I’m proposing is to approach learning about money (among other things) with a breadth-first search approach. That is, learn a little about a wide range of topics, only diving deeper once you’ve built a solid foundation. In other words, you must first graduate from Money-High before you can specialize at Wealth-U. Another metaphor for this (as if there weren’t enough already in this article) is to imagine personal finance as a pyramid, like the one presented below.

Figure 1. By combining concepts of breadth-first financial education with the relationship between advanced financial strategies and the foundational ones they build upon, we can visualize personal finance as a pyramid, similar to Maslow’s pyramid of needs. Part of the pyramid has been inspired from Visual Capitalist.

Case in point, I put a lot of effort into an article that espouses this philosophy, a compilation of a wide breadth of financial tips: The Financial Index. I plan to update it over time, so do check back on it occasionally. I hope that it is a good complement to this article, but if for whatever reason you skipped straight to this section, the content above is not a must-read for the Financial Index to be useful and immediately applicable.

Other Resources

If you’d prefer a more streamlined and curated experience, I strongly recommend the Financial Independence 101 course made by the ChooseFI Foundation. Although it is slightly opinionated in its philosophy to retire early (which isn’t for everyone), it still lays a great foundation with a mix of reading, videos and even simple exercises.

Another very valuable way of looking at personal finance is in the form of a decision diagram. Here’s a pretty good one from Reddit, and this format does a good job of addressing the problem of relevance: the order gives you an idea of where you stand on your path to personal finance mastery. However, the variability in people’s personal financial situations means that the imposed order might not be right for everybody, as the disclaimer in the corner admits. Furthermore, you can only convey so much information through a visual diagram — there isn’t much space for details and formatting. However, if you’re a visual person, I strongly recommend looking at it as an addition/complement to my Financial Index.

If you’d like to follow a more conventional approach to learn more about personal finance, I recommend The Simple Path to Wealth by JL Collins or other books on this list, although none of them seem to cover as wide a range of topics as I do, not to mention how not everybody has time to read a book these days.

Finally, I will leave you with this. There is no silver bullet to getting rich. Nothing beats knowledge. Read, watch YouTube videos, join subreddit, whatever works for you. There are millions of financial tricks freely available on the internet, and all you need to do is take the time to find them and put them to work.