This article was written in 2007, long before smartphones became budgeting tools, before interest rates hit historic lows (and then landmark highs), and before housing became a national crisis. Yet the idea still holds: financial habits matter more than the economy. The world has become more expensive and unpredictable, but the underlying principle remains: if nothing changes, nothing changes.
Too Long Didn’t Read (TL:DR)
I did a few articles a while ago, and I will be pointing to them along the way, but what the heck does Einstein and Finance have in common? Well, let’s first look at one of my favourite quotes from old “wacky hair”:
Insanity: doing the same thing over and over again and expecting different results.
Albert Einstein,
Now, what, you may well ask, does this have to do with financial planning, retirement planning, debt reduction, or any other financial art that I comment on? Everything!
How many times do you keep doing the same thing every month, hoping that your financial future will change? Have you changed anything at all? Then why do you expect different results?
- Make the same payments on your mortgage, and the interest rate does not change; it would be insane to think it would get paid off any faster.
- Continue using your credit cards and only pay the minimum each month; it would not be brilliant to think you would ever be able to pay them off.
- If you continue to spend more than you make, how are you ever going to pay anything off?
Was He Talking About Money?
Einstein may not have been speaking specifically about finances with this statement, but it is very applicable, folks. Remember, he is the father of Einstein Finance . Read about his rule of 72 and learn about how your money grows.
Einstein Finance Redux (TL:DR)
Einstein reminds us that math doesn’t lie even when we try very hard to ignore it. Most financial “messes” aren’t caused by one dramatic mistake but by repeating the same small behaviours: the daily tap-tap-tap of the credit card, ignoring statements, assuming future-you will deal with everything.
The power of breaking a pattern is immense. Making one different decision, automating payments, raising contributions by 1%, and avoiding lifestyle creep can change the curve of your financial life. Einstein built equations that did a lot of cool stuff; you can at least make a spreadsheet for your budget.
Einstein Finance FAQ
His quote about insanity: doing the same thing repeatedly and expecting different results; applies directly to financial habits. It applies especially to BAD financial habits.
Minimum payments barely touch the principal. You’re mostly feeding interest.
Yes. Without lifestyle and behavioural changes, debt regenerates like financial kudzu.
It’s a tongue-in-cheek idea: applying Einstein’s logic (and the Rule of 72) to understand how your money grows, or how debt grows against you.
Einstein and Finance
Really? You think those two go together? I think so.
Ha, that’s a good idea you tackle upon in this post! Einstein was really a genious to predict even us paying minimum payments and expecting to reduce debt…