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Hacker news readers often live in a bubble that is well insulated from the outside world. A world where everyone is very smart and money and opportunities are a

Hacker news readers often live in a bubble that is well insulated from the outside world. A world where everyone is very smart and money and opportunities are a dime a dozen. Overspending is very easy for the average person. I know someone making 80,000/yr who has basically no assets and are living paycheck to paycheck and always complaining how poor she is. If you are living paycheck to paycheck on $50k you tend to live paycheck to paycheck on $100k. Adding additional income does not help these people - also see The Two Income Trap. Finding out where your money is going is good for everyone. Budgeting (even if informality) is good for everyone. Finding out where your money really goes is really eye opening for many. Realizing that a reduction in income probably requires a reduction in spending/lifestyle. Realizing you aren't "entitled" to the things you want by virtue of birth, you have to have the money to afford them. This may seem obvious to some but in the world of advertising and media it isn't to many. The criticism of personal finance or "frugality" here and in general comes in where people become obsessed with not spending money in the long term+. When every choice is optimized for spending less and one cannot enjoy anything with becoming guilty they are spending money. They put too much effort into pinching every penny and lose sight of the bigger picture. It's easy to hate on these people. This group is the loudest, unfortunately. Personal finance should be all about optimizing money for maximum enjoyment and financial stability. Realizing money is a scarce resource and optimizing it, which can include working on obtaining more depending on your situation. Budgeting in for the things you enjoy, within your means, and saying "no" to more things that won't bring you long term happiness. Realizing the difference between needs and wants. It's trivial to do this for many, and it is natural, but difficult for many as well. I think personal finance is just as much psychology as it is math. + Being obsessed with not spending money (OK, not obsessed but making it a priority) can be good in the short term for several month in some cases. Examples are taking a break from consumption or working to pay off high interest debt. Of course one should consider all their options in this situation - including, say, adding additional income short term if possible.

vinceguidry 10y ago
> Hacker news readers often live in a bubble that is well insulated from the outside world. A world where everyone is very smart and money and opportunities are a dime a dozen. I was speaking specifically for that audience and not for the broader one. Of course my way of dealing with money only works for people like me. I refer specifically to the "upwardly mobile", which is generally taken to mean those who make more than the average and are still capable of climbing the social ladder. When you are climbing the social ladder, you develop skills that make you more useful to people. When you learn accounting, you are learning a skill that will keep you from shooting yourself in the foot financially. It will not make you much more useful to others except in that regard. Sure you can get a job accounting, or use it to help run a business, but the benefits are too limited to justify doing it yourself. Hire somebody and use the time saved to learn something more useful. I never intended to say that people should not have a handle on their spending. Accounting / budgeting is one mindset that will give you such a handle but not the only one.
- soundwave106 10y ago
  The problem IMHO is that your advice seems very black and white to me. It sounds like you are saying either don't track anything at all and rely entirely on career path for your financial security, or go full-on into a time consuming accounting mode where every penny is measured and fretted on. Tracking personal finance doesn't have to be terribly difficult. A simple spreadsheet with expenses and income often suffices. Maybe some simple divisions so that you know that x % of the paycheck will pay the mortgage and y % will be used for the insurance. Nothing too fancy or time consuming. Just enough to reveal patterns, and make sure you have enough "flex" in your bank account for things like personal emergencies. Although I know you are saying your advice is for the upwardly mobile only, my impression is that a lot of people are very bad with their finances -- that includes even some of the "upwardly mobile". Maybe you're good with your personal finance and have no need to track, but I personally think the general rule should be that most people should do some rudimentary tracking.
thanatropism 10y ago
> Hacker news readers often live in a bubble that is well insulated from the outside world. A world where everyone is very smart and money and opportunities are a dime a dozen. I think the main issue is having other mouths depend on you. I react favorably to his position because my personal finance strategy is having soft/fuzzy (as in "fuzzy set") targets, never spend more than I earn and set automatic transfers to a retirement account that look like expenses when I see the bottom number on my bank statement. But I see how that balance becomes disconnected from one's resolve and voluntary actions as your finances begin representing an entire (even if small) community. > Overspending is very easy for the average person. This is what I don't wholly get: doesn't the average person read the bottom number on their bank statement? I mean, cutting back on expenses is painful, but it's not a matter of tracking pennies anymore. If you have a negative balance you're spending too much money, and most of your choices regarding that are personal to the point of being existential -- what should I sacrifice, my yoga classes or my kid's GameNetwork subscription?
- infinite8s 10y ago
  You are forgetting about the easy access to credit. Most people not only live at their means but way over it because of credit card debt. I can't find the link but there was a survey recently where over 50% of respondents said they'd be hard pressed to come up with $500 for an emergency.
  - nommm-nommm 10y ago
    The thing about credit too - it can by manipulated to make someone feel like they can afford something when they really can't. If you stretch a car loan out for 8-10 years and only look at $200/month it looks like you can afford it, you don't think "I will be in car debt for the rest of my life." Repeat this a few times because each time it also appears affordable. Now you have no savings and are living paycheck to paycheck and can't get out of the debt cycle. You have some unexpected expense (furnace goes) and suddenly you are in massive financial trouble. This can sneak up on you if you aren't careful.

vinceguidry 10y ago

> Hacker news readers often live in a bubble that is well insulated from the outside world. A world where everyone is very smart and money and opportunities are a dime a dozen. I was speaking specifically for that audience and not for the broader one. Of course my way of dealing with money only works for people like me. I refer specifically to the "upwardly mobile", which is generally taken to mean those who make more than the average and are still capable of climbing the social ladder. When you are climbing the social ladder, you develop skills that make you more useful to people. When you learn accounting, you are learning a skill that will keep you from shooting yourself in the foot financially. It will not make you much more useful to others except in that regard. Sure you can get a job accounting, or use it to help run a business, but the benefits are too limited to justify doing it yourself. Hire somebody and use the time saved to learn something more useful. I never intended to say that people should not have a handle on their spending. Accounting / budgeting is one mindset that will give you such a handle but not the only one.

soundwave106 10y ago
The problem IMHO is that your advice seems very black and white to me. It sounds like you are saying either don't track anything at all and rely entirely on career path for your financial security, or go full-on into a time consuming accounting mode where every penny is measured and fretted on. Tracking personal finance doesn't have to be terribly difficult. A simple spreadsheet with expenses and income often suffices. Maybe some simple divisions so that you know that x % of the paycheck will pay the mortgage and y % will be used for the insurance. Nothing too fancy or time consuming. Just enough to reveal patterns, and make sure you have enough "flex" in your bank account for things like personal emergencies. Although I know you are saying your advice is for the upwardly mobile only, my impression is that a lot of people are very bad with their finances -- that includes even some of the "upwardly mobile". Maybe you're good with your personal finance and have no need to track, but I personally think the general rule should be that most people should do some rudimentary tracking.

thanatropism 10y ago

> Hacker news readers often live in a bubble that is well insulated from the outside world. A world where everyone is very smart and money and opportunities are a dime a dozen. I think the main issue is having other mouths depend on you. I react favorably to his position because my personal finance strategy is having soft/fuzzy (as in "fuzzy set") targets, never spend more than I earn and set automatic transfers to a retirement account that look like expenses when I see the bottom number on my bank statement. But I see how that balance becomes disconnected from one's resolve and voluntary actions as your finances begin representing an entire (even if small) community. > Overspending is very easy for the average person. This is what I don't wholly get: doesn't the average person read the bottom number on their bank statement? I mean, cutting back on expenses is painful, but it's not a matter of tracking pennies anymore. If you have a negative balance you're spending too much money, and most of your choices regarding that are personal to the point of being existential -- what should I sacrifice, my yoga classes or my kid's GameNetwork subscription?

infinite8s 10y ago
You are forgetting about the easy access to credit. Most people not only live at their means but way over it because of credit card debt. I can't find the link but there was a survey recently where over 50% of respondents said they'd be hard pressed to come up with $500 for an emergency.
- nommm-nommm 10y ago
  The thing about credit too - it can by manipulated to make someone feel like they can afford something when they really can't. If you stretch a car loan out for 8-10 years and only look at $200/month it looks like you can afford it, you don't think "I will be in car debt for the rest of my life." Repeat this a few times because each time it also appears affordable. Now you have no savings and are living paycheck to paycheck and can't get out of the debt cycle. You have some unexpected expense (furnace goes) and suddenly you are in massive financial trouble. This can sneak up on you if you aren't careful.