9 ms·
First aid is good. Also general investing in index funds like VTSAX and VTIAX. It is so simple, yet most people I run into on a regular basis just save their m
by Moodles 7y ago
First aid is good.
Also general investing in index funds like VTSAX and VTIAX. It is so simple, yet most people I run into on a regular basis just save their money in a checking account earning 0.01% APY. Follow the reddit personal finance flowchart. Learn about Roth and HSAs and ESPP and the benefits of diversification. We’re literally talking about multiples of your net-worth over your life if you invest compared to saving in a normal bank account. No, it is not gambling. It is riskier not to invest in the long-term.
- tempsy 7y agoWhat crowd are you in where most people have all their money in a savings account? That is borderline financial suicide.
- Moodles 7y agoMy family. Women I’ve dated. I’m back in my hometown for Christmas now and talking to people I knew from school. The average person doesn’t know about this stuff (though most likely has some proportion invested through the default option in their 401(k)). I mean damn, my aunt’s husband died recently and we had to bail her out of 10k credit card debt where she was paying interest. The Hacker News crowd probably knows above average, though even then a lot of my colleagues could know more, e.g. haven’t heard of VTSAX, didn’t know our 401(k) does a mega backdoor Roth, etc.
- tempsy 7y agoDo they have 401Ks or pensions or other retirement accounts? Then they have stock or bonds.
- Moodles 7y agoYes, I know. They don’t understand what they’re doing very well though. Education will affect their net worth massively.
- tempsy 7y agoThere’s a difference if you’re sitting on $100K in cash earning nothing or a few thousand to use for living costs. If the latter then investing in stocks is actually not very prudent.
- Moodles 7y agoHence why I said to follow the flowchart.
- tempsy 7y agoI also think the reddit personal finance crowd is way too focused on how to invest their existing money when almost everyone would be better off figuring out how to make more money from their day job than worrying about whether they can make 4% here vs 5% there from their existing savings. Perhaps less true if you have a large savings of over $1M already, but otherwise no.
- thrower123 7y agoOr cutting extraneous expenses. It's cliche, but really, making your own coffee and packing lunch can save $20-25 a day. That adds up fast.
- tempsy 7y agoTrue, though I’m in the camp of “make enough money where I don’t have to feel guilty spending money on food”. If you’re more income strained then yes though.
- deleted 7y ago[deleted]
- mateo411 7y agoThis is true, but it's also a good thing to go to lunch or have coffee with other people. You'll get personal enjoyment out of it, and if you are talking shop, the relationship you build could offset the savings of packing your own lunch. For example it's common that you will regularly have lunch with a work colleague, and then later they will recruit you to work at another company. Or they will give you insight on how to get support behind your project at your current company.
- BeetleB 7y agoFYI less than half of American workers have access to a 401K plan. Less than 60% have access to any retirement plan.
- shantly 7y agoAnd for unfathomable (haha, well, is it really though?) reason retirement accounts are set up to mostly benefit people with very high wages whose employers (gotta have an employer, too, or arrange things so you're your own employer—man is this dumb, it's as if it's set up to disadvantage the poor and middle class) also provide a high match rate. Meanwhile most folks are lucky to get a 1 or 2% match, leaving them way under the max possible cap even if they put as much in as they can, personally, per year.
- esotericn 7y agoThere are caps for contributing to tax-advantaged savings and pension accounts in the UK too. I wouldn't say that that 'disadvantages the poor and middle class'. It's the other way around - it disadvantages the upper-middle and wealthy because they hit the limit and have to find other ways to accumulate wealth.
- shantly 7y agoThe way 401k retirement accounts are set up in the US, you can't get anywhere near the contribution limit on your own, you have to have huge amounts of employer contribution, beyond simple matching, even. It's like (cough) it's designed to mainly benefit top-tier professional class folks and non-owning-class upper managers while chaining people to traditional employment or complex personal tax arrangements. The other tax-advantaged account, the IRA, has a much lower total contribution cap. [EDIT] to be clear it's not an absolute disadvantage to the poor and middle class versus having no such system, it's just that the way it's structured the overwhelming bulk of the tax savings goes to people who are already very well off, and those "beneath" them cannot possibly, no matter how frugal or responsible or fairly-well (but not excellently) compensated, hope to touch the level of benefit the very-well-off derive from 401k accounts. It's impossible, thanks to the way they're structured. [EDIT EDIT] they're actually ideal for rich people who want to transfer ~$56k/yr to each of their kids (about $1.5m over 30 years), tax-free. I'd bet there's a further scheme one can work out to direct the investment of the fund such that the personal benefit is much greater than that, even (oh, kid of mine, you want to start a business? Funny, our 401k fund also "wants" to invest in it!). How? Employ them at one of your C or S corps (LLC or partnership won't let you get anywhere near the contribution limit, because... reasons? I dunno, it's a really dumb system if [cough] you're trying to make it broadly available to and useful for normal people) in one of the many positions near the top that're well-compensated but are so easy that lots of folks (stalk some from-money C-suite or "investor" types on Linkedin to see what I mean) seem to find time to hold one of them and also a few other "jobs" at the same time, so it won't look out-of-the-ordinary.
- jimhefferon 7y agoIf it ever comes up that you talk to them about it there are many sources of good information. But just to name one, https://www.iwillteachyoutoberich.com/ https://www.iwillteachyoutoberich.com/ is pretty good, I think. (Not associated.) There is a book that I gave my kids.
- AznHisoka 7y agoWhat if that account offers 2% interest?
- glial 7y agoExcellent for an emergency fund, not good for long-term savings or retirement.
- astura 7y agoThey have all their money in checking probably because they don't have nearly enough money to invest. Those people would be much better off learning to either spend less, earn more, and get out of debt instead of learning about how to invest hypothetical money that they'll never have with their habits. I certainly didn't know a damn thing about index funds, investments, stock markets, etc until I actually had the extra money to invest. Now people come to me for advice.
- Moodles 7y agoIn many cases they have enough to invest something but don’t. I also recommended the flowchart in my post above, not just index funds.
- war1025 7y agoI have multiple friends that spend their money on junk they don't need because "It's better than earning half a percent interest in a bank account." And since that is their benchmark, they justify it all as a prudent financial practice.
- arjie 7y agoIf you have over $200 spare from operational expenses and the cushion then you can use Robinhood and buy the ETF versions of Vanguards mutual funds.
- wenc 7y agoThe crowd that is saving for a downpayment for a house or similar short-term goal. You essentially need those funds to be risk-free. A flexible CD is another easy option. The default best option isn't always to invest except for long-term goals like retirement. It depends on what you want to do. (Reddit flowchart agrees with this) Also, some of us don't believe in retirement. It's a concept more applicable to blue-collar workers (whose decline in physical ability in old age prevents them from continuing) or people who want to kick-back and relax after a certain age, or be financially independent to pursue certain dreams. But some of us (especially cerebral types) really love our jobs and are reinventing ourselves every decade or so in order to do new things within our professions. My learning rate is actually accelerating with age because knowledge pays compound interest and I've finally built up a large enough knowledge base for this to be happening at an appreciable clip. I'm in my 5th decade, and I'm no longer as quick with computational tasks but my knowledge acquisition and processing abilities are surprisingly much sharper than they were in my 20s. I can't see myself ever retiring unless my health completely fails (in which case I have buffer funds for that, but I don't call it a "retirement fund"). My parents have been retired for years and in my opinion they are declining faster than if they didn't.
- thraxil 7y agoProbably most working class people in the US if they even have savings. In 2015, in the US, only 40% of the population spent less than they earned in a year and only 39% said that they could come up with $2k in an emergency: https://www.usfinancialcapability.org/downloads/NFCS_2015_Report_Natl_Findings.pdf https://www.usfinancialcapability.org/downloads/NFCS_2015_Re... Those numbers sound optimistic when I look at the rural, low income town that I grew up in where my family still lives. If those numbers don't seem to match what you see in your social group, you probably live in a bubble.
- MrFantastic 7y agoI know a few women that make $100k+ with $200k in a savings account. No equity in anything. They are too scared to invest.
- JshWright 7y ago"In the long term" is the important point there. Index funds are not a replacement for FDIC insured accounts. You should be using both.
- timwis 7y agoDo you have a link to the reddit flowchart?
- Insanity 7y agoNot USA, but if you have a KBC in your country (a Belgian bank, but you'll find them in other EU countries) they offer a quite easy way to start investing in index funds. Essentially, each time you use your debit card, they round up the amount you owe the shop, and put that in a special account. For each 10 euro in that account - they invest it. So for example, let's say I go to the shops and pay 9.30 for groceries. Then I'd end up paying 10 euro to the shop, and 70c will go to the investment account. Once the investment account reached a multiple of 10 - it gets invested. It's a way to slowly build up owning more funds. Of course, you can also just put X euro in it to start of instead of waiting for the initial 10 euro. :P edit: typos
- eswat 7y agoI wonder if this can have a detrimental effect for compulsive buyers: “Oh I shouldn’t buy this widget but a chunk of it will go towards my retirement anyway!”
- Insanity 7y agoMh, that seems like a weak excuse because at most 99 cents would get "saved"
- thekyle 7y agoIn the U.S. there is a company called Stash that does this. https://www.stashinvest.com/ https://www.stashinvest.com/
- lozaning 7y agoAlso another one called https://www.acorns.com/ https://www.acorns.com/
- soygul 7y ago> reddit personal finance flowchart Woa it's really good. Didn't even know that it existed. For future wanderer: https://www.reddit.com/r/personalfinance/wiki/commontopics https://www.reddit.com/r/personalfinance/wiki/commontopics
- rayhendricks 7y agoIt’s a good explanation for someone who is just trying to understand how personal finance works. What I think would be more valuable would be to list college majors by future earnings perennial and also the idea of compound interest. So many people who graduate college still don’t have any idea about this. But as a society we’ve been drilling into everyone’s heads that going to college is a good idea when most people it is questionable at best.