The Nine Circles of Financial Hell

Dante would have hated student loans.

Before we get into it, I have a request: if you’ve found this newsletter valuable in any way, shape, or form, please pre-order my book, Creative Money: New Financial Rules for Artists, Innovators, and Misfits. It comes out on November 10th and I think you’ll love it. It would mean so much to me if you’d show your support by pre-ordering it so it shows up at your door upon release.

After the third friend finished telling me about their year of renovation hell, I realized that renovating a home and the headache it creates is a form of punishment reminiscent of Dante’s Inferno. (Hey, this was actually a good use case for AI. I needed a refresher on the details of the nine circles of hell because it’s been about 20 years since I studied Dante’s work, and Claude reminded me of the twisted ways Dante imagines torturing people for eternity.)

In Dante’s nine circles of hell, the punishment for sinners matches their crime in some sort of twisted way.

The organizing principle is contrapasso: the punishment is a legible translation of the offense. Sometimes it works by resemblance. For example, the lustful, who got carried away with their desires, end up carried away by a wind that never sets them down. Sometimes the punishment works by inversion. The fortune tellers, who claimed they could see forward into the future, had their heads rotated on their necks so that they could only see behind them, and must walk backward for eternity, weeping down their own spines. The system is not sadistic so much as it is legalistic. Dante’s version of hell is petty and exacting.

What surprised me most on my review is how much of the Inferno is about money.

The entire fourth circle of hell deals with money, or greed to be more specific, and then it comes up again in the innermost ring of the seventh, and at minimum four of the ten ditches of the eighth circle, and if you count the sins that are money-related (selling church office, taking bribes, counterfeiting, theft) it’s mentioned in more of the poem than any other human failing. This is not an accident. Dante was a Florentine writing in the decades when Florence invented modern banking. Many centuries later, money still runs the world and it’s what gets most of us into trouble. But there are certain modern inventions, like the stock market, that I think require us to update Dante’s circles of hell.

So let me be your Virgil through the nine circles of modern financial hell.

First Circle: Uninvested Cash

In the first circle of financial hell we have those who sit on cash. Those who think they are being good savers by accumulating thousands of dollars in a checking account, when in fact, they have been letting inflation eat away at their nest egg for years.

You are quite literally lighting money on fire.

Their $200,000 is earning 0.002% interest instead of 4% at an online bank, or much, much higher in the stock market. They are riddled with anxiety, afraid of making the wrong move or investing in the wrong thing. Paralyzed, they sit on the sidelines in the liminal space between struggling and having enough. Some are accidental sinners, moving the cash into investment accounts but never completing the step of actually purchasing a fund. These are the saddest cases; they are blind to their own missed opportunity to build wealth.

How to escape this circle: make sure your emergency fund and any cash you’re saving for a large purchase is held at a bank paying an interest rate close to the federal funds rate (which today is targeted at 3.50%-3.75%)¹. Check your investment accounts (your IRAs, 401(k)s, brokerage accounts, 529 plans) and make sure the list of funds are actually made up of equities and bonds, not cash or something called a money market fund. I laid out the quick test for whether your savings account is actually high-yield in the very first issue of this newsletter.

Second Circle: The Renovation

“That home renovation went faster than expected and came in under budget,” said no one ever. Home improvement projects that get quoted at $30,000 and drag on for three months balloon to astronomical costs all the time. Renovations start with good plans and so often end up derailed. You wanted more house, so now you live inside the unfinished guts of one. Tarp where the roof was, dust in the coffee, and no end date.

How to escape this circle: This one is the hardest to escape. You need someone who isn’t living through your renovation hell to help you get out. You need someone to do a reality check. Sometimes, the damage is so great that it’s time to pack up and move on. Cut your losses, lick your wounds, and put the thing on the market unfinished. However, most people decide to barrel through it, draining retirement accounts and racking up debt, but I’m just letting you know there is another way, and that is to walk away.

Third Circle: You Spent Money That Isn’t Yours

The freelancers who finally land the big client and have their first great income year often get hit with a hellish surprise: they owe way more in taxes than they thought. Business was booming, rent was still due, and hey, last year you only made $15,000 freelancing, so you didn’t owe very much in taxes. But this year you made $100,000 and your accountant just told you your tax bill is more than you even made last year. You owe $18,000. And lord knows you don’t have that sitting around in a bank account. You spent it. Not frivolously because you’re not an idiot. But you just spent it to live your life, pay your bills, and grow your business. But you owe the money. Taxes aren’t evil; you’re a citizen who gets taken to the hospital on paved roads when you break your leg, so you owe something back into the pile.

How to escape this circle: Please, please don’t bury your head in the sand. The worst thing you can do is ignore this problem. Not just from a money standpoint, that part should be obvious, because interest and penalties will pile up. But what I mean is to ignore this problem from an emotional standpoint. This innocent mistake has the potential to ruin your life. You may lie awake at night, sweating, thinking the IRS is going to throw you in jail. They won’t! But they will send you lots of letters, and it will start to become uncomfortable, and the worry will eat at you like a cancer. I’ve seen it so many times before. Your BEST option is what’s called an installment agreement. If you owe less than $50k, you can set it up easily online (use this IRS link that’s surprisingly hard to find). If you’ve been a very bad girl and owe more than $50k, you just have to call the IRS and set it up over the phone. Any accountant can also do this for you.

Fourth Circle: Mismatched Money Values in Marriage

Most people don’t talk about their financial values early on in their relationship. Usually attraction and love come first, and you sorta just take the rest for what it is. What often happens in marriages or any long-term relationship is that you have two people who think differently about money. Superficially, it may look like one frugal spouse in opposition to a spouse who loves to splurge, but what lies beneath is the clashing of two ways of thinking about money: that there will always be enough OR that there will never be enough. There’s a whole field of research on this, centered on the concept of a “money script,” a term coined by the financial psychologists Brad and Ted Klontz. And if you and your partner have different scripts (one thinks there will always enough, the other thinks there will never be enough) and are unwilling to have empathy for the other, you’re in for unpleasant fights about money over things small (should we order takeout or eat the leftovers we have) and big (should we move to a two-bedroom when the baby is born). If you are of the belief that there will never be enough money, you have the tendency to save it, or in many cases, hoard it. The compulsion to keep saving and live well below your means is admirable and can create financial stability, but it’s a very hard value to unlearn. When do you stop squirreling it away and instead start to spend it?

How to escape this circle: Have regular conversations, have a lot of empathy, and get a financial planner. You need a third party to guide you to the middle to avoid resentment. I went deeper on this in The Most Important Investment You’ll Ever Make: Your Romantic Partner.

Fifth Circle: The Lock-Up

This particular circle of hell recently gained a bunch of new members from SpaceX. Here we are talking about employees at companies that go from privately held to publicly traded. Many of these employees have been waiting years for their company stock to actually be worth something, and now, FINALLY, it is! When a private company begins trading on a public market, it’s called an IPO (Initial Public Offering). So for employees who are often paid part of their salary in company stock, the IPO is the first chance they have liquidity and can actually sell their stock and make some money…except, not exactly. There’s something called a “lock-up” which is so often applied to newly public companies: it is a ban on employees of the company actively trading any stock. It usually lasts six months and the wait is HELLISH. As an employee, you watch your stock go up and down in value, and your hands are tied; you’re locked up and can’t buy or sell anything.

How to escape this circle: careful planning! If your company is still private and they announce something called a “tender offer” that’s a great opportunity to sell before an IPO and lockup. I wrote a whole essay on this, Private Company Equity Is Not Cash, which was the genesis for the hardest chapter in my book to write.

Sixth Circle: The Layoff

Sometimes you see it coming, but so often it blindsides you: the layoff.

Your position has been eliminated.

These are terrible, awful, no good, very bad words to hear. Maybe you get some cash severance from your company, maybe you’ll get to keep your health insurance for a bit, but mostly getting laid off is just a jarring experience and you’re locked out of your company laptop. In this particular kind of hell you go from having a job as part of your identity to not. It’s destabilizing and potentially financially damaging.

How to escape this circle: Well, first of all…and now I’m starting to sound like a broken record…plan ahead. Have a layoff plan that is built around a 3-6 month cash emergency fund. Explore your options for health insurance and potentially paying for COBRA. You can start the slog of a job search, but make sure to take a solid few days of stress-free relaxation. Or weeks if it’s time for a big pivot.

Seventh Circle: The Collections Calls

Perhaps you’re like me and have a $413 hospital bill from 2022 that insurance was supposed to cover, but then the debt was sold and resold, disputed and removed, and back on the report fourteen months later at its original amount. They keep calling you, and you keep ignoring their calls. You know you don’t owe it, and you just don’t want to deal with it.

How to escape this circle: stop answering the phone and start using paper. Send a written debt validation request within 30 days of the collector’s first contact. Under the Fair Debt Collection Practices Act they have to stop collecting until they produce actual documentation that the debt is yours and that they own it. A lot of debt collectors never do, because the file has been sold three times. Send your request via certified mail and keep the receipt.

Then pull your credit report at annualcreditreport.com, which is free. A $413 medical collection should not be on there at all. The three bureaus stopped reporting medical collections under $500 back in 2023, so if it reappeared fourteen months later at the original amount, that is a reporting error and you can dispute it directly with the bureau. They have 30 days to investigate. It costs nothing and takes about twenty minutes online.

What keeps people in this circle is the belief that engaging with the debt is what makes it real. It’s already real. It’s on your report. Twenty minutes of paperwork is cheaper than four more years of screening calls from area codes you don’t recognize.

Eighth Circle: Identity Theft

Somebody is wearing you. A return has already been filed under your number, so the government is holding two of you with no way to tell which is real, freezes both, and issues a PIN you will have to type in every April for the rest of your life. This really sucks. This one sucks because you didn’t do ANYTHING. You didn’t make money, you didn’t go to the doctor, you didn’t marry a frugal dude, you are just a poor unfortunate soul and a random victim of a crime.

How to escape this circle: file Form 14039, the IRS Identity Theft Affidavit, and file your real return on paper. Then go to IdentityTheft.gov, the FTC’s site, which walks you through a recovery plan and generates an official affidavit you can send to creditors. Freeze your credit at all three bureaus. It’s free, it takes about ten minutes each, and you can thaw it temporarily any time you actually need to apply for something.

Ninth Circle: Family Money

It seems ideal from the outside: an unlimited fountain of wealth. Never having to worry about rent again. You have the safety net most people dream of. But as we have seen from shows like Succession, wealth does not make people happy and family wealth mostly just comes with backstabbing and hatred. In this particular kind of hell, you wake up in 800-thread count sheets but your mother is still drunk from last night and yelling at your father in the other room. It is an elegant home, but it is an unhappy home. Then there’s the inheritance, the expectation that at some point, you’ll get control of the money. That the strings that were once attached get cut. But it’s never that easy. Probate, which is what happens when someone dies and their assets get distributed can run nine to eighteen months and nothing moves forward during that time: you cannot sell the house, settle the account, or distribute anything. Plus, there’s messy emotions of who deserves what and who works harder than who. There’s also resentment among siblings and between generations. More money is certainly more problems.

How to escape this circle: Well, you can’t, but you can make it less painful by having estate planning conversations with family members. Most of what makes probate agonizing is assets that have to pass through it, and most assets don’t have to. Retirement accounts, life insurance, and bank and brokerage accounts can all name a beneficiary or be registered as transfer-on-death, and those moves can be done in days, without a court.

A revocable trust can do the same job for a house. What this requires is that somebody bring it up while everyone is still alive, which is the hard part and is also the reason this one is the worst circle of all.

Getting Out

Dante and Virgil get out of hell. They climb down the frozen body of Satan himself, and at the bottom the direction reverses, and they come up on the other side of the world at dawn and see the stars. With some careful planning and patience, you too can avoid financial ruin. I spent a lot of the last two years writing about exactly this, which is what my book Creative Money is about. More on that soon.

1. This is really fun and an important number to understand and follow https://www.newyorkfed.org/markets/reference-rates/effr