5 ms·

As much as everyone likes to discredit traditional values, such savings and thrift, they win out in the long run. The 'millionaire next door' is nothing more

by zhdc1 5y ago

As much as everyone likes to discredit traditional values, such savings and thrift, they win out in the long run. The 'millionaire next door' is nothing more than consistently living on less than you earn (Elizabeth Warren has great savings guidelines), investing what you save (read John Boggle), and taking advantage of compounding interest. It's simple and doable for a large majority of western society. It's not easy though, but that was as true in 1996 as it is today.

Aaargh20318 5y ago
> As much as everyone likes to discredit traditional values, such savings and thrift, they win out in the long run. Are those 'traditional values' still relevant in today's economy ? For example: > taking advantage of compounding interest. In my savings account, interest is set at 0.01% for accounts with less than €100k in them, and for accounts with more than €100k the interest is -0.5%. Yes, that's negative interest. So if you're saving up each year, you start losing money, not making it.
- lixtra 5y ago
  Did you miss the reference to John Boggle? Did he recommended to put the majority of your assets in a savings account?
  - Aaargh20318 5y ago
    Returns on my investments (through both my mortgage and pension) are negligible as well, and considerably more risky.
    - zhdc1 5y ago
      Most pensions aren’t going to give you more than 1-2% over the risk free rate. You’re better off aiming to save another x% more of your after tax income and investing through your pillar 3 equivalent (IRA in the states) and, once your tax advantaged plans are maxed, through your own account.
    - horrified 5y ago
      MSCI world hat positive returns in all but three years since 2007: https://www.msci.com/documents/10199/178e6643-6ae6-47b9-82be-e1fc565ededb https://www.msci.com/documents/10199/178e6643-6ae6-47b9-82be... Granted the -40% in 2008 were brutal, but even that would have been compensated in a few years.
- sokoloff 5y ago
  If you’re saving for some purpose more than five years out, putting the money into a productive asset (most commonly stock of one or more companies) will beat inflation handily over time. It’s still using the power of compound interest; it’s just not using a passbook savings account.
- smcameron 5y ago
  Use the stock market, not the bank.
- zhdc1 5y ago
  Don’t put your money in low interest savings accounts. You can average 7.5-10.5% a year by investing in low fee index funds. Even with the market as inflated as it is, you should still see returns significantly higher than what you will get from a bank.
kiba 5y ago
It's true that people can live below their means and save enough to get rich but it's also true that forces conspires to make it difficult. Housing market and the lack of public transportation almost assuredly made living more expensive than it has to be.
r0fl 5y ago
Being thrifty, not having the latest iPhone, not driving a Tesla and not having 3 meals delivered to your door is not fun. People rather say the millionaire next door dream is dead than admit they don't have the discipline to put off instant gratification.
- zhdc1 5y ago
  The funny thing is that all of those things aren’t that gratifying either once the newness wears off. Ok, maybe the Tesla is, but anyway.
zhdc1 5y ago
Amazing. Thrift, savings, and investing are now apparently triggers for the HN downvote brigade.
- EEREPRESENT 5y ago
  hah noticed the same thing - unbelievable tbh
acdha 5y ago
Who are the “everyone” in your first sentence? Being out of debt is a goal for most people — but it’s not true that it’s just as doable as it used to be, particularly in the United States. Middle-class wages started falling behind in the Reagan-era, and a number of costs are more daunting than they used to be: education is both more a requirement and far more expensive than it was then, in many areas housing is hard for younger people to get into with a lack of affordable starter housing and commute costs are significant due to the transportation system having been rebuilt around expensive mostly single-user vehicles which spend 90% of the day idle (15% or more of the average American’s income). Healthcare costs are an especially American barrier to savings: far higher than anywhere else in the world, and they tend to carry over disproportionately to non-rich families — maybe you’re young and healthy, but you end up helping older relatives instead of saving or you inherit nothing when they die. I’ve always lived well below my means but I’m also appreciative of how much that depended on advantages not everyone has. That can be small things (e.g. as a white male programmer, I didn’t have to spend many hours of work on business formal clothing as did many people I’ve known in various office and sales jobs) to big things: I became a homeowner with no family assistance at age 20 thanks to the dotcom economy - people I know who weren’t in tech at that point or who lived in a place like SF where public policy has favored keeping housing expensive instead spent years paying a higher percentage of their income in rent or paying significantly more time and money on long commutes. I mention all of this because there’s a key factor to savings: a realistic chance of seeing real benefits from doing so. There are always people who are irresponsible or have problems but quite often when you see something you think is irresponsible there’s more going on than you might think. For example, I heard people of my father’s generation comment to the effect of “black people spend too much on their cars” – which was true from what they saw because the invisible part was redlining and less structural racism meant that they were competing for fewer houses and paying higher mortgage rates to do so, and if you are frozen out of the housing market a car is probably the biggest thing you can invest in.
- zhdc1 5y ago
  Stagnant median household income in the US is largely a myth. It hasn't increased as fast as it probably should have (54k in inflation adjusted 2019 Dollars in 1984? -> 69k in 2019), but it has gone up a fair amount. Expenses have increased, but the bulk of the impact is on higher income households. If you're lower middle class or middle class and stick with CC -> state college, your healthcare insurance premiums are capped by law and college is still comparably expensive, but certainly not the debt trap it's made out to be. What has changed is how much easier it is to make stupid financial decisions. You didn't have access to easy debt in the 60s and 70s. This is a structural issue, but it's also a behavioural issue. If you make the right choices, you still can absolutely succeed financially.

by zhdc1 5y ago

Aaargh20318 5y ago

> As much as everyone likes to discredit traditional values, such savings and thrift, they win out in the long run. Are those 'traditional values' still relevant in today's economy ? For example: > taking advantage of compounding interest. In my savings account, interest is set at 0.01% for accounts with less than €100k in them, and for accounts with more than €100k the interest is -0.5%. Yes, that's negative interest. So if you're saving up each year, you start losing money, not making it.

lixtra 5y ago
Did you miss the reference to John Boggle? Did he recommended to put the majority of your assets in a savings account?
- Aaargh20318 5y ago
  Returns on my investments (through both my mortgage and pension) are negligible as well, and considerably more risky.
  - zhdc1 5y ago
    Most pensions aren’t going to give you more than 1-2% over the risk free rate. You’re better off aiming to save another x% more of your after tax income and investing through your pillar 3 equivalent (IRA in the states) and, once your tax advantaged plans are maxed, through your own account.
  - horrified 5y ago
    MSCI world hat positive returns in all but three years since 2007: https://www.msci.com/documents/10199/178e6643-6ae6-47b9-82be-e1fc565ededb https://www.msci.com/documents/10199/178e6643-6ae6-47b9-82be... Granted the -40% in 2008 were brutal, but even that would have been compensated in a few years.
sokoloff 5y ago
If you’re saving for some purpose more than five years out, putting the money into a productive asset (most commonly stock of one or more companies) will beat inflation handily over time. It’s still using the power of compound interest; it’s just not using a passbook savings account.
smcameron 5y ago
Use the stock market, not the bank.
zhdc1 5y ago
Don’t put your money in low interest savings accounts. You can average 7.5-10.5% a year by investing in low fee index funds. Even with the market as inflated as it is, you should still see returns significantly higher than what you will get from a bank.

kiba 5y ago

It's true that people can live below their means and save enough to get rich but it's also true that forces conspires to make it difficult. Housing market and the lack of public transportation almost assuredly made living more expensive than it has to be.

r0fl 5y ago

Being thrifty, not having the latest iPhone, not driving a Tesla and not having 3 meals delivered to your door is not fun. People rather say the millionaire next door dream is dead than admit they don't have the discipline to put off instant gratification.

zhdc1 5y ago
The funny thing is that all of those things aren’t that gratifying either once the newness wears off. Ok, maybe the Tesla is, but anyway.

zhdc1 5y ago

Amazing. Thrift, savings, and investing are now apparently triggers for the HN downvote brigade.

EEREPRESENT 5y ago
hah noticed the same thing - unbelievable tbh

acdha 5y ago

Who are the “everyone” in your first sentence? Being out of debt is a goal for most people — but it’s not true that it’s just as doable as it used to be, particularly in the United States. Middle-class wages started falling behind in the Reagan-era, and a number of costs are more daunting than they used to be: education is both more a requirement and far more expensive than it was then, in many areas housing is hard for younger people to get into with a lack of affordable starter housing and commute costs are significant due to the transportation system having been rebuilt around expensive mostly single-user vehicles which spend 90% of the day idle (15% or more of the average American’s income). Healthcare costs are an especially American barrier to savings: far higher than anywhere else in the world, and they tend to carry over disproportionately to non-rich families — maybe you’re young and healthy, but you end up helping older relatives instead of saving or you inherit nothing when they die. I’ve always lived well below my means but I’m also appreciative of how much that depended on advantages not everyone has. That can be small things (e.g. as a white male programmer, I didn’t have to spend many hours of work on business formal clothing as did many people I’ve known in various office and sales jobs) to big things: I became a homeowner with no family assistance at age 20 thanks to the dotcom economy - people I know who weren’t in tech at that point or who lived in a place like SF where public policy has favored keeping housing expensive instead spent years paying a higher percentage of their income in rent or paying significantly more time and money on long commutes. I mention all of this because there’s a key factor to savings: a realistic chance of seeing real benefits from doing so. There are always people who are irresponsible or have problems but quite often when you see something you think is irresponsible there’s more going on than you might think. For example, I heard people of my father’s generation comment to the effect of “black people spend too much on their cars” – which was true from what they saw because the invisible part was redlining and less structural racism meant that they were competing for fewer houses and paying higher mortgage rates to do so, and if you are frozen out of the housing market a car is probably the biggest thing you can invest in.

zhdc1 5y ago
Stagnant median household income in the US is largely a myth. It hasn't increased as fast as it probably should have (54k in inflation adjusted 2019 Dollars in 1984? -> 69k in 2019), but it has gone up a fair amount. Expenses have increased, but the bulk of the impact is on higher income households. If you're lower middle class or middle class and stick with CC -> state college, your healthcare insurance premiums are capped by law and college is still comparably expensive, but certainly not the debt trap it's made out to be. What has changed is how much easier it is to make stupid financial decisions. You didn't have access to easy debt in the 60s and 70s. This is a structural issue, but it's also a behavioural issue. If you make the right choices, you still can absolutely succeed financially.