6 ms·

The venn diagram of internet users that read about super specific financial products, decide to buy them, while not even understanding the need to keep an emerg

by vasco 5y ago

The venn diagram of internet users that read about super specific financial products, decide to buy them, while not even understanding the need to keep an emergency fund such that a move like this leaves them with under $200 in their account seems to be growing. It seems to be a weird mix of wall street cosplay and financial ineptitude.

bombcar 5y ago
To be fair this mystical 8.4% has been plastered everywhere as a “buy now” which is causing serious fomo. Also the blog clearly indicates they were going to poke the fate bear, poked said bear, and then went surprised pikachu.
- redisman 5y ago
  The investment is good and safe. I also bought I bonds and will buy more as I accrue cash. It’s not even really an investment as technically you make $0 in purchasing power. This is more of a UX and lack of emergency fund fail.
rockbruno 5y ago
I have witnessed this working at FAANG where people usually have the choice to allocate their grants into either risky options or safe, straight cash. The amount of people I see going all-in into the riskiest option and then proceeding to not understand why they lost their "compensation" (?) when the stock drops frightens me.
- phreeza 5y ago
  Do any faang still pay in options still? Google is mostly RSUs these days.
- jtc331 5y ago
  Options? Or RSUs?
  - rockbruno 5y ago
    Spotify has both RSUs and options, you can choose which one you want and I think they do a very good job of explaining the differences in risk. You can also choose to be paid in cash if you want zero risk (but also zero gain)
    - scarface74 5y ago
      And zero loss as I watch my unvested FAANG RSUs drop by a third. I’m glad at least the first two years were mostly a signing bonus I could use to stabilize my finances - pay off debt and build a cash reserve. My RSUs vest heavily on the back end. Yes I know, how do you tell someone where you work without telling them where you work.
- antihero 5y ago
  It's because in tech you are paid so fucking much that any ridiculous screw up you might do only affects you momentarily, you can still afford your bizzaro happy life, if you've fucked your savings money there's always more cash for rent, bills, enjoyment, on the horizon. Life become a fucking toy on some levels. There is no fear.
  - tmpz22 5y ago
    A lot of FANNG is non-software roles. A lot of FANNG are contractors. A lot of FANNG is over leveraged (house, random tax liabilities, supporting family members). I’m utterly convinced FANNG comp is overvalued due to selection bias on Blind and direct PR efforts by those companies.
    - scarface74 5y ago
      When someone talks about “people working for a FAANG”, realistically no one is referring to Amazon warehouse workers neither are people talking about Uber drivers. Mostly they are talking about software engineers and adjacent roles. Thats not meant to throw shade on warehouse workers as “lesser”. My dad is retired factory worker.
      - heartbreak 5y ago
        It’s not just warehouse workers and drivers. Accounting, marketing, legal, HR, etc. all exist.
        scarface74 5y ago
        Yes, and at least at Amazon, they all pay much more than the $130K that it takes to be in the 90th percentile income level in the US if you are at least a mid level (L5) employee.
- annoyingnoob 5y ago
  If you have ever been to any company 401K meeting, the 401K rep will always, always, encourage young people to make risky investments and encourage people closer to retirement to make conservative investments.
- _moof 5y ago
  Because recruiters love to go on and on about how "if the stock goes to a billion, you'll make a zillion," and they never, ever, ever mention that the stock might become worthless. The other thing is that we've had absolutely stellar economic growth since the 2008 crash, and no one under the age of 32 was working before 2008, so they really have no notion that the economy won't always be growing. It's just not on their radar.
JusticeJuice 5y ago
I work in the financial advice industry, and I honestly personally believe current legislation in most countries have truly failed to protect normal people from bad financial advice, despite that being their entire point. The problem is, giving financial advice en-masse is very expensive and risky for a company. You need to ask a lot of questions about the users situation (assets, debt, income, dependants, etc) to make an informed decision. If you give bad financial advice, your putting yourself at big legal risk. The language has to be very specific (aka hard to understand for normal humans). And often the advice comes out as rather un-opinionated and general, which for most people means it's hard to actually action and put in place. All in all, it's a big investment, big cost, stresses out your legal team - which means less companies choose to do it, which in turn make it less accessible. The alternative camp is very clearly just choosing to give 0 advice. Just giving access to investment products, with a full hands off 'make your own choices man' approach. Think robinhood. This is where people make mistakes. The weird thing is while legitimate companies are afraid of giving advice, anyone with a social media presence can get online and talk whatever smack they want, with very little worry of blowback. One of the biggest mistakes I see is somebody from one country (say AU) watching a youtuber talking about another country (say US) like it's a universal truth. Different financial systems have their own metas depending on government retirement schemes, importance of credit scores, mortgage systems etc. Most useful and practical advice is country specific. Legislation has just fully failed to protect consumers from bad advice, by making the barrier to entry so high for legitimate companies looking to inform at scale that it's not financially viable - compared to just doing the hands off 'not our problem man' approach. They've also done nothing to stop people taking advice from randoms online (not that they really could). Unfortunately visiting a personalised financial advisor in the same way you'd visit a doctor, is just expensive and not an option for most.
- pmontra 5y ago
  > And often the advice comes out as rather un-opinionated and general, which for most people means it's hard to actually action and put in place I agree with this. It seems that I have to make all the choices myself to shield the company from any responsibility so why should I pay some fee for the advice? No wonders that people get advice from random videos on YouTube or any equivalent source.
ttybird2 5y ago
Quite a few of them are just normal people trying to stay ahead of the inflation.
tjoff 5y ago
This move was calculated though. With incoming pay he knew that he'd be fine regardless. Sure, another emergency before the payback might suck but likely not catastrophic given the $10k coming back in a few weeks.
- msrenee 5y ago
  Oh, I didn't realize he had worked it out so that he could still cover bills, etc. I just caught the ~$300 in the savings account and didnt see the timeline on paychecks and bills.
- scarface74 5y ago
  Exactly, he wrote it as if it were more of a minor and semi amusing nuisance than a life altering mistake.
gHA5 5y ago
A Venn diagram is just a graphical representation of sets. You're thinking of an intersection (of sets).
- atombender 5y ago
  A Venn diagram visualizes operations between sets; that's the whole point. A diagram with two overlapping circles, for example, shows the sets and their intersection. Venn diagrams can also express unions and other logical relations.
fortran77 5y ago
You can take the money out of an ibond with a small penalty after a relatively short time. So it's not a huge risk if you have enough short-term credit, etc, for an emergency before the time comes when you can cash the iBond.
- mynameishere 5y ago
  Seriously, what the hell. Acting like this guy is blowing his future on a roulette wheel by getting some savings bonds. Is anybody else just sick to death of the term "emergency fund"? If you go to /r/personalfinance, every other comment is reminding people to stock up their emergency fund. Towelie says, "Don't forget to bring a towel!" I'll tell you about my real "emergency fund": In an actual, living emergency, every single dollar I have, in every account, even my IRA, and all my credit lines combined, are my emergency fund. That's the nature of an emergency. If I empty out some specially earmarked emergency fund, I don't tell the doctor to quit taking the bullets out of my spleen because I'm tapped. "Sorry, can't touch my HYSA!" (HYSAs are another butt bug of /r/pf) What people mean by "emergency fund" obviously is their "don't stupidly overdraft your checking account fund", but they never spell that out.
  - deleted 5y ago
    [deleted]
  - scarface74 5y ago
    I agree, I get downvoted merciless on r/personalfinance when I say that my only conceivable true “emergency” is a job loss. Anything else I can use credit to income smooth and cash flow. I keep one month of bills in savings More specifically, I have a HELOC and I’m always getting low and no interest balance transfer options from my bank.
    - UncleMeat 5y ago
      It is also worth understanding when you situation is far more stable than most people. If you've got a stable job and considerable assets then you can basically self insure. Yes, if you surprise need $40,000 and the market is down it will suck to sell a bunch of investments from your taxable brokerage account or rapidly get a HELOC but that case is rare enough that you are willing to eat the loss in that case for additional expected growth. Almost nobody has this. The r/personalfinance memes exist largely as "the very basics for people who don't have the first idea how to plan for their financial future." This is just another one of those benefits of being wealthy. On average, self-insuring saves money. But for a lot of people an emergency fund is a critical thing because they don't have access to liquid assets without gargantuan 401k penalties.
elzbardico 5y ago
People are desperate about the future. Gone are the times when having a good job, paying a reasonable mortgage for a reasonably paid house, saving a reasonable amount for retirement, while keeping a reasonable amount for emergencies (rare, before lay-offs become the knee jerk reaction of MBAs to fatten their bonuses). Due to the increasing financialization of the economy, more and more people feel like they need to become wannabe speculators to protect their situations. Thanks, Wall Street and Harvard Business School for fucking us all. And fuck the Uniparty for squashing any real option to them.
- Handytinge 5y ago
  Sorry, I'm not trying to be picky, but I cannot grok this sentence: > Gone are the times when having a good job, paying a reasonable mortgage for a reasonably paid house, saving a reasonable amount for retirement, while keeping a reasonable amount for emergencies (rare, before lay-offs become the knee jerk reaction of MBAs fatten their bonuses). Is there a word or half the sentence missing there? I cannot follow your meaning.
- scarface74 5y ago
  Isn’t buying a US backed bond the opposite of “speculation”?. The rate of return for a US bond has been called the “risk free rate of return” since I was in grad school over two decades ago.
  - deleted 5y ago
    [deleted]
  - everfree 5y ago
    In general, yes. However, unlike other bonds I-bonds have no secondary market, so there's no way to liquidate them in an emergency if you need them before their maturity date (1 year). With I-bonds you don't need to speculate on whether the bond will default, but it does force you to speculate on what your financial situation will be over the next year.
- ChrisLomont 5y ago
  >Gone are the times Those times never existed for the vast majority of people. Minorities, single women, most men...... None of them had this rose colored past. Statistically, more people now have more income in the US than ever before. Each income level is higher, some more than others (and this is a static snapshot, most people move around income quintiles throughout a career), options for goods are higher, items are safer (cars especially), and on and on. The "life used to be so easy to make a good pay and have a great life" views are not backed by the evidence.
stjohnswarts 5y ago
well he knew that he had a paycheck coming up so he was probably good. I'm not nearly that brave myself but it wasn't a totally awful situation.
maximus-decimus 5y ago
I have a colleague who just can't justify to themselves having an emergency fund while they still have debt to pay... yet buy a brand new 40k car and think about replacing it after 2 years even though they have nothing against it. I feel like a lot of people just can't stand having money standing there doing nothing as an insurance policy when they could be making money or buying something with it.
- dehrmann 5y ago
  > I have a colleague who just can't justify to themselves having an emergency fund while they still have debt to pay Depending on the interest rates, and assuming they can keep the line of credit if they lose their job, this might make sense since it's a choice between reducing debt now vs potentially increasing debt later. The second part is just silly, but it's probably the attitude they got them in debt in the first place.
- kube-system 5y ago
  > people just can't stand having money standing there doing nothing as an insurance policy And then, they pay more on their actual insurance policies to have low deductibles because they can’t afford a larger deductible because they don’t save anything.

by vasco 5y ago

bombcar 5y ago

To be fair this mystical 8.4% has been plastered everywhere as a “buy now” which is causing serious fomo. Also the blog clearly indicates they were going to poke the fate bear, poked said bear, and then went surprised pikachu.

redisman 5y ago
The investment is good and safe. I also bought I bonds and will buy more as I accrue cash. It’s not even really an investment as technically you make $0 in purchasing power. This is more of a UX and lack of emergency fund fail.

rockbruno 5y ago

I have witnessed this working at FAANG where people usually have the choice to allocate their grants into either risky options or safe, straight cash. The amount of people I see going all-in into the riskiest option and then proceeding to not understand why they lost their "compensation" (?) when the stock drops frightens me.

phreeza 5y ago
Do any faang still pay in options still? Google is mostly RSUs these days.
jtc331 5y ago
Options? Or RSUs?
- rockbruno 5y ago
  Spotify has both RSUs and options, you can choose which one you want and I think they do a very good job of explaining the differences in risk. You can also choose to be paid in cash if you want zero risk (but also zero gain)
  - scarface74 5y ago
    And zero loss as I watch my unvested FAANG RSUs drop by a third. I’m glad at least the first two years were mostly a signing bonus I could use to stabilize my finances - pay off debt and build a cash reserve. My RSUs vest heavily on the back end. Yes I know, how do you tell someone where you work without telling them where you work.
antihero 5y ago
It's because in tech you are paid so fucking much that any ridiculous screw up you might do only affects you momentarily, you can still afford your bizzaro happy life, if you've fucked your savings money there's always more cash for rent, bills, enjoyment, on the horizon. Life become a fucking toy on some levels. There is no fear.
- tmpz22 5y ago
  A lot of FANNG is non-software roles. A lot of FANNG are contractors. A lot of FANNG is over leveraged (house, random tax liabilities, supporting family members). I’m utterly convinced FANNG comp is overvalued due to selection bias on Blind and direct PR efforts by those companies.
  - scarface74 5y ago
    When someone talks about “people working for a FAANG”, realistically no one is referring to Amazon warehouse workers neither are people talking about Uber drivers. Mostly they are talking about software engineers and adjacent roles. Thats not meant to throw shade on warehouse workers as “lesser”. My dad is retired factory worker.
    - heartbreak 5y ago
      It’s not just warehouse workers and drivers. Accounting, marketing, legal, HR, etc. all exist.
      - scarface74 5y ago
        Yes, and at least at Amazon, they all pay much more than the $130K that it takes to be in the 90th percentile income level in the US if you are at least a mid level (L5) employee.
annoyingnoob 5y ago
If you have ever been to any company 401K meeting, the 401K rep will always, always, encourage young people to make risky investments and encourage people closer to retirement to make conservative investments.
_moof 5y ago
Because recruiters love to go on and on about how "if the stock goes to a billion, you'll make a zillion," and they never, ever, ever mention that the stock might become worthless. The other thing is that we've had absolutely stellar economic growth since the 2008 crash, and no one under the age of 32 was working before 2008, so they really have no notion that the economy won't always be growing. It's just not on their radar.

JusticeJuice 5y ago

I work in the financial advice industry, and I honestly personally believe current legislation in most countries have truly failed to protect normal people from bad financial advice, despite that being their entire point. The problem is, giving financial advice en-masse is very expensive and risky for a company. You need to ask a lot of questions about the users situation (assets, debt, income, dependants, etc) to make an informed decision. If you give bad financial advice, your putting yourself at big legal risk. The language has to be very specific (aka hard to understand for normal humans). And often the advice comes out as rather un-opinionated and general, which for most people means it's hard to actually action and put in place. All in all, it's a big investment, big cost, stresses out your legal team - which means less companies choose to do it, which in turn make it less accessible. The alternative camp is very clearly just choosing to give 0 advice. Just giving access to investment products, with a full hands off 'make your own choices man' approach. Think robinhood. This is where people make mistakes. The weird thing is while legitimate companies are afraid of giving advice, anyone with a social media presence can get online and talk whatever smack they want, with very little worry of blowback. One of the biggest mistakes I see is somebody from one country (say AU) watching a youtuber talking about another country (say US) like it's a universal truth. Different financial systems have their own metas depending on government retirement schemes, importance of credit scores, mortgage systems etc. Most useful and practical advice is country specific. Legislation has just fully failed to protect consumers from bad advice, by making the barrier to entry so high for legitimate companies looking to inform at scale that it's not financially viable - compared to just doing the hands off 'not our problem man' approach. They've also done nothing to stop people taking advice from randoms online (not that they really could). Unfortunately visiting a personalised financial advisor in the same way you'd visit a doctor, is just expensive and not an option for most.

pmontra 5y ago
> And often the advice comes out as rather un-opinionated and general, which for most people means it's hard to actually action and put in place I agree with this. It seems that I have to make all the choices myself to shield the company from any responsibility so why should I pay some fee for the advice? No wonders that people get advice from random videos on YouTube or any equivalent source.

ttybird2 5y ago

Quite a few of them are just normal people trying to stay ahead of the inflation.

tjoff 5y ago

This move was calculated though. With incoming pay he knew that he'd be fine regardless. Sure, another emergency before the payback might suck but likely not catastrophic given the $10k coming back in a few weeks.

msrenee 5y ago
Oh, I didn't realize he had worked it out so that he could still cover bills, etc. I just caught the ~$300 in the savings account and didnt see the timeline on paychecks and bills.
scarface74 5y ago
Exactly, he wrote it as if it were more of a minor and semi amusing nuisance than a life altering mistake.

gHA5 5y ago

A Venn diagram is just a graphical representation of sets. You're thinking of an intersection (of sets).

atombender 5y ago
A Venn diagram visualizes operations between sets; that's the whole point. A diagram with two overlapping circles, for example, shows the sets and their intersection. Venn diagrams can also express unions and other logical relations.

fortran77 5y ago

You can take the money out of an ibond with a small penalty after a relatively short time. So it's not a huge risk if you have enough short-term credit, etc, for an emergency before the time comes when you can cash the iBond.

mynameishere 5y ago
Seriously, what the hell. Acting like this guy is blowing his future on a roulette wheel by getting some savings bonds. Is anybody else just sick to death of the term "emergency fund"? If you go to /r/personalfinance, every other comment is reminding people to stock up their emergency fund. Towelie says, "Don't forget to bring a towel!" I'll tell you about my real "emergency fund": In an actual, living emergency, every single dollar I have, in every account, even my IRA, and all my credit lines combined, are my emergency fund. That's the nature of an emergency. If I empty out some specially earmarked emergency fund, I don't tell the doctor to quit taking the bullets out of my spleen because I'm tapped. "Sorry, can't touch my HYSA!" (HYSAs are another butt bug of /r/pf) What people mean by "emergency fund" obviously is their "don't stupidly overdraft your checking account fund", but they never spell that out.
- deleted 5y ago
  [deleted]
- scarface74 5y ago
  I agree, I get downvoted merciless on r/personalfinance when I say that my only conceivable true “emergency” is a job loss. Anything else I can use credit to income smooth and cash flow. I keep one month of bills in savings More specifically, I have a HELOC and I’m always getting low and no interest balance transfer options from my bank.
  - UncleMeat 5y ago
    It is also worth understanding when you situation is far more stable than most people. If you've got a stable job and considerable assets then you can basically self insure. Yes, if you surprise need $40,000 and the market is down it will suck to sell a bunch of investments from your taxable brokerage account or rapidly get a HELOC but that case is rare enough that you are willing to eat the loss in that case for additional expected growth. Almost nobody has this. The r/personalfinance memes exist largely as "the very basics for people who don't have the first idea how to plan for their financial future." This is just another one of those benefits of being wealthy. On average, self-insuring saves money. But for a lot of people an emergency fund is a critical thing because they don't have access to liquid assets without gargantuan 401k penalties.

elzbardico 5y ago

People are desperate about the future. Gone are the times when having a good job, paying a reasonable mortgage for a reasonably paid house, saving a reasonable amount for retirement, while keeping a reasonable amount for emergencies (rare, before lay-offs become the knee jerk reaction of MBAs to fatten their bonuses). Due to the increasing financialization of the economy, more and more people feel like they need to become wannabe speculators to protect their situations. Thanks, Wall Street and Harvard Business School for fucking us all. And fuck the Uniparty for squashing any real option to them.

Handytinge 5y ago
Sorry, I'm not trying to be picky, but I cannot grok this sentence: > Gone are the times when having a good job, paying a reasonable mortgage for a reasonably paid house, saving a reasonable amount for retirement, while keeping a reasonable amount for emergencies (rare, before lay-offs become the knee jerk reaction of MBAs fatten their bonuses). Is there a word or half the sentence missing there? I cannot follow your meaning.
scarface74 5y ago
Isn’t buying a US backed bond the opposite of “speculation”?. The rate of return for a US bond has been called the “risk free rate of return” since I was in grad school over two decades ago.
- deleted 5y ago
  [deleted]
- everfree 5y ago
  In general, yes. However, unlike other bonds I-bonds have no secondary market, so there's no way to liquidate them in an emergency if you need them before their maturity date (1 year). With I-bonds you don't need to speculate on whether the bond will default, but it does force you to speculate on what your financial situation will be over the next year.
ChrisLomont 5y ago
>Gone are the times Those times never existed for the vast majority of people. Minorities, single women, most men...... None of them had this rose colored past. Statistically, more people now have more income in the US than ever before. Each income level is higher, some more than others (and this is a static snapshot, most people move around income quintiles throughout a career), options for goods are higher, items are safer (cars especially), and on and on. The "life used to be so easy to make a good pay and have a great life" views are not backed by the evidence.

stjohnswarts 5y ago

well he knew that he had a paycheck coming up so he was probably good. I'm not nearly that brave myself but it wasn't a totally awful situation.

maximus-decimus 5y ago

I have a colleague who just can't justify to themselves having an emergency fund while they still have debt to pay... yet buy a brand new 40k car and think about replacing it after 2 years even though they have nothing against it. I feel like a lot of people just can't stand having money standing there doing nothing as an insurance policy when they could be making money or buying something with it.

dehrmann 5y ago
> I have a colleague who just can't justify to themselves having an emergency fund while they still have debt to pay Depending on the interest rates, and assuming they can keep the line of credit if they lose their job, this might make sense since it's a choice between reducing debt now vs potentially increasing debt later. The second part is just silly, but it's probably the attitude they got them in debt in the first place.
kube-system 5y ago
> people just can't stand having money standing there doing nothing as an insurance policy And then, they pay more on their actual insurance policies to have low deductibles because they can’t afford a larger deductible because they don’t save anything.