5 ms·

My radically simple approach to finances is a result of simple living. I spend maybe 1-2 hours a month thinking about money and finances. - I don’t budget. -

My radically simple approach to finances is a result of simple living. I spend maybe 1-2 hours a month thinking about money and finances. - I don’t budget. - I don’t use spreadsheets or finance apps. - I don’t have any credit cards, loans, or debt. I don’t care about my credit score because I’m not ever going to get a car loan, electronics lease, or mortgage. - I don’t own a car. If I did I would buy it with cash and purchase only what was necessary to get from point A to point B safely, with the best gas mileage. - I have reduced expenses as much as possible, and only buy essentials: Rent, utilities, health insurance, and groceries. I don’t spend money on new gadgets, entertainment, or other things. I read books from the library, I go to the park instead of the movies, etc. I don’t go “shopping” whether online or offline. I don’t buy a new laptop or phone unless my old one breaks and cannot be easily and cheaply repaired (still using MacBook from 2014). - At the beginning of the week I go to my bank and withdraw cash, and only buy things with this cash. I don’t buy much online except toiletries and cooking oil. - Instead of budgeting food, I have a simple rule that if I’ve eaten out already in that week, I avoid eating out until the next week. I avoid buying groceries until I’ve eaten most of what’s in the kitchen. - At the end of every month I log into my bank, check how much money came in, and subtract how much went out. I then invest whatever I feel like out of that month’s profit into a mutual fund. I choose mutual funds as my method of saving because they are liquid, free of management, and simply taxed (capital gains). I have them setup to automatically reinvest earnings. I don’t use IRAs. - I’m happy with my income now, but in the past when I felt like I didn’t have enough money, I simply focused on the easiest way to earn more money (changing jobs, learning a new skill to change jobs, taking another job, etc.).

dmerrick 7y ago
I was with you until you mentioned you don't use IRAs. Tax advantage is important!
- alexmingoia 7y ago
  I don’t use IRAs mainly because they aren’t liquid. I can’t withdraw without a penalty. An IRA is not necessarily tax advantageous because gains are taxed as income when withdrawn, which is higher than capital gains. The choice to use IRAs is not straightforward. It's also hard to plan for any of this because tax rates can and do change. Capital gains and income tax rates may change, so I generally prefer to pay taxes earlier than later where possible. I have generally found it more financially rewarding to focus my time on increasing income rather than on finagling my finances to save money. Same reason I don’t own a credit card just to get the cash back or other incentives.
  - okr 7y ago
    I like the approach of focussing on increasing the income. I do budgets myself and set goals. If they do not match up with what i make, i go back to trying increasing the income.
  - newnewpdro 7y ago
    > I have generally found it more financially rewarding to focus my time on increasing income rather than on finagling my finances to save money. Same reason I don’t own a credit card just to get the cash back or other incentives. Diverting some of your income into a tax-deferred investment account will not significantly affect your ability to focus on increasing income. They're not mutually exclusive. My approach largely resembles yours, but there's no effective difference between increasing income and reducing how much of it is taken from you in the form of taxes. If your priority is to increase your income, deciding to throw some of it into a tax-deferred investment account can be seen as a very efficient use of your time spent increasing your income.
    - alexmingoia 7y ago
      Tax deferring doesn’t necessarily equate to reduced taxes. IRAs just mean paying taxes later, at an unknown rate. All income from IRAs are taxed, principle and gains. A traditional IRA has gains taxed as income, which is higher then long-term capital gains on ETFs. Assuming tax rates don’t change, a traditional IRA will cost more taxes if the withdrawal and contribution taxable income is over roughly 40k, correct me if I’m wrong. That’s assuming income tax isn’t higher in the future, which is quite a gamble as historically income tax has been going up, and historically there’s just been more and more taxes. Don’t forget that deductions for contributions don’t matter, because you will pay income tax on that principle when you withdraw. If tax rates increase, the tax cost of deferring could be even worse. It really depends on if you’re going to be earning income when you withdraw and how much is going to be withdrawn. It’s complicated and practically impossible to estimate total final tax obligations at retirement. IRAs are not a cut and dry “just put money in an IRA” decision. Another problem with IRAs is the lockup. If you withdraw before retirement there’s a hefty 10% penalty unless it’s for a mortgage or health insurance.
marshallant 7y ago
Sounds horrible. I don't get why people want to go through life like this.
jaclaz 7y ago
JFYI: https://news.ycombinator.com/item?id=14594858 https://news.ycombinator.com/item?id=14594858

dmerrick 7y ago

I was with you until you mentioned you don't use IRAs. Tax advantage is important!

alexmingoia 7y ago
I don’t use IRAs mainly because they aren’t liquid. I can’t withdraw without a penalty. An IRA is not necessarily tax advantageous because gains are taxed as income when withdrawn, which is higher than capital gains. The choice to use IRAs is not straightforward. It's also hard to plan for any of this because tax rates can and do change. Capital gains and income tax rates may change, so I generally prefer to pay taxes earlier than later where possible. I have generally found it more financially rewarding to focus my time on increasing income rather than on finagling my finances to save money. Same reason I don’t own a credit card just to get the cash back or other incentives.
- okr 7y ago
  I like the approach of focussing on increasing the income. I do budgets myself and set goals. If they do not match up with what i make, i go back to trying increasing the income.
- newnewpdro 7y ago
  > I have generally found it more financially rewarding to focus my time on increasing income rather than on finagling my finances to save money. Same reason I don’t own a credit card just to get the cash back or other incentives. Diverting some of your income into a tax-deferred investment account will not significantly affect your ability to focus on increasing income. They're not mutually exclusive. My approach largely resembles yours, but there's no effective difference between increasing income and reducing how much of it is taken from you in the form of taxes. If your priority is to increase your income, deciding to throw some of it into a tax-deferred investment account can be seen as a very efficient use of your time spent increasing your income.
  - alexmingoia 7y ago
    Tax deferring doesn’t necessarily equate to reduced taxes. IRAs just mean paying taxes later, at an unknown rate. All income from IRAs are taxed, principle and gains. A traditional IRA has gains taxed as income, which is higher then long-term capital gains on ETFs. Assuming tax rates don’t change, a traditional IRA will cost more taxes if the withdrawal and contribution taxable income is over roughly 40k, correct me if I’m wrong. That’s assuming income tax isn’t higher in the future, which is quite a gamble as historically income tax has been going up, and historically there’s just been more and more taxes. Don’t forget that deductions for contributions don’t matter, because you will pay income tax on that principle when you withdraw. If tax rates increase, the tax cost of deferring could be even worse. It really depends on if you’re going to be earning income when you withdraw and how much is going to be withdrawn. It’s complicated and practically impossible to estimate total final tax obligations at retirement. IRAs are not a cut and dry “just put money in an IRA” decision. Another problem with IRAs is the lockup. If you withdraw before retirement there’s a hefty 10% penalty unless it’s for a mortgage or health insurance.

marshallant 7y ago

Sounds horrible. I don't get why people want to go through life like this.

jaclaz 7y ago

JFYI: https://news.ycombinator.com/item?id=14594858 https://news.ycombinator.com/item?id=14594858