8 ms·

Life at the Margin: How I got $25,000 in debt

40 points by adityaathalye 3y ago

pineapple_guy 3y ago
$360 for eight people in San Francisco? I would be a sucker to believe that.
- charles_f 3y ago
  "It's only money that I'll have to pay in the future, it's not real yet."
andsoitis 3y ago
> so getting into debt wasn’t the only way I could’ve funded my current lifestyle entitlement
hunson_abadeer 3y ago
I mean no disrespect, but this reads a bit like an over-confident take of a person who never went through a financial calamity. A bit like leveraged house-flippers of 2006. The value of your margin loan collateral can plunge suddenly. The rates and the terms of your credit card debt can change overnight. You can get hit by unexpected and urgent expenses - adverse judgments, emergency home repairs, etc - and that's bad news when you're already maxing out your credit lines. Debt is a useful tool, but it's also dangerous. It's one thing if you're using it to advance some important cause... you know, making a big bet on a business idea, making your dreams come true. But if you're taking risks for, as the author puts it, "consumption smoothing"... there's a good chance of ending in trouble for no good reason. Plus, we're not hyper-rational robots. Spending money is habit-forming. It's often about gratification, about social standing, about competing with peers. Especially for younger folks, and especially for people in the Bay Area, where we often look up to people who essentially won the startup lottery or ended up getting lucky in some other way. Instead of "consumption smoothing", it's often better to ask if that consumption is useful to begin with.
- xorbax 3y ago
  > a person who never experienced an unexpected financial calamity. That's what his parents are for
- c22 3y ago
  It all makes sense because he's going to make a lot more money later with his math degree. Very logical.
- nocoiner 3y ago
  I 100% agree with this take, and I say this as someone who has great respect for the use of debt (and, full disclosure, has a pretty fair bit of it to my name). It seems completely obvious that this strategy is predicated on never having lived through a fully seized-up financial system for longer than 72 hours in March 2020 or the Weekend of SVB in March of ‘23. The use of leverage probably feels pretty great right now, but what happens when there’s another Great Financial Crisis and every credit card issuer cancels accounts or cuts credit limits all at once? Sure, there’s plenty on the asset side of the ledger, but how good is it going to feel liquidating those stocks that were worth $75k a few weeks ago for $35k? It’s gonna hurt, and all those people who were eager to provide cheap liquidity will have turned off the taps. Even big corporations that have contractually committed credit facilities have had banks shut those down during times of crisis (basically saying “sue us” to the borrower) so no matter how solid the ability to borrow may appear, that kind of thing has a tendency to evaporate in a moment, just when it’s needed most. I have credit cards with a ridiculous aggregate credit limit, but in another 2008 scenario, anyone want to take bets on how long those credit limits stay high while unemployment is on its way to 14%? I would prefer not to. And regardless of earning potential or useful skills, the owners and managers of for-profit enterprises are going to be belt-tightening at the same time (out of necessity or caution or simply by never letting a crisis go to waste) and their appetite for bringing on a new entry level employee will be limited - just at the time the rest of the system is grinding to a halt. Someone in their 20s without significant financial or familial obligations is generally going to be well situated to make it through one of those crunches, but it doesn’t take a whole lot to bring the edifice crashing down.
  - 3y ago
xorbax 3y ago
Very thorough finance-bro autofellatio The part where he complained that his lawyer couldn't game his FAFSA to get him government-subsidized loans was particularly odious
- selimthegrim 3y ago
  If you read the footnote it says he filled out the FAFSA himself
  - xorbax 3y ago
    How delightfully prole
quickthrower2 3y ago
tl;dr: borrowed money to live because asset rich Even better might have been to borrow $25k more to buy the assets in the first place, then the interest is tax deductible possibly
- nocoiner 3y ago
  Well, yeah, if he’s a corporation.
  - quickthrower2 3y ago
    Not sure how US tax works but in Australia an individual can borrow to invest and deduct interest.
    - nocoiner 3y ago
      I believe from the facts that are known, he’s quite obviously not Australian, so alas, probably no deductibility for personal debt.
    - sgerenser 3y ago
      The U.S. also has an “investment interest expense” deduction[1]. Normally this is used with margin interest, but if any other type of loan (e.g. credit card advance) is taken out specifically to invest in securities, interest on said loan becomes deductible investment interest as well. [1] https://www.irs.gov/pub/irs-pdf/p550.pdf https://www.irs.gov/pub/irs-pdf/p550.pdf
- WinnieRallycar 3y ago
  The concept of borrowing against your investments is new to me, but it reminded me of debt recycling against your home. In principle, I can see the advantage, but like all debt it requires great discipline. With "only" $75k in assets, I agree with you that he'd be wiser to purchase more stocks than fund his lifestyle.
2Gkashmiri 3y ago
The flawed basic premise of this article assumes the person is a "going concern" so as to speak, will continue to earn constantly in order to fund this "smoothing" and whatever. As someone who does not live on a stable paycheck, it does NOT make sense to take on debt when you are not sure if next month you'll get to earn anything let alone enough to service loans. All the people in finance think "debt is cool" because they talk about theories "metcalfe life theory" like the article regarding going into debt to buy an air ticket to see an old friend. That's stupid as hell. Why not "save" money and go the next month? Sure you are an impusive debt addict but yeah, you can explain it off by theories. No thank you.
xereeto 3y ago
This blog post takes a lot of words to say “look at how smart I am! there’s no way this could possibly go wrong!” Maybe it makes me an asshole but I’m rooting for a rates hike or something to give this guy a dose of reality. But I think we all know mummy and daddy would get him out of it.
rhcom2 3y ago
> I know that if I really needed to, I could pay all my debt off in a couple of months (e.g. by getting a full-time software job). Instead of seeing the debt as $25,000, I think of it as a few months of work in tech The assumption that the jobs will always be there, and always pay this well
- steve_adams_86 3y ago
  I assumed something similar about a far smaller amount of debt, then I got laid off. The market has been brutal. Although I’ve been finding awesome consulting work, I haven’t come close to finding something stable with the income I’m accustomed to. I felt pretty stupid (well, I still do), but I was dealing with a fraction of this debt, in Canuckian tokens no less. Shrugging at 25k USD of debt and calling it a few months of work seems out of touch given the state of the global economy. I feel like 1.8% better about myself now.
cj 3y ago
Devil is in the details, which are most likely missing from this post. I could see myself writing a similar blog post 2 years ago, omitting the fact that 60& of my net worth was invested in 3x leveraged ETFs. No matter how many articles I read about leveraged ETF decay, I couldn't bring myself to believe it until I actually experienced it. "Why tbe hell would I buy SPY when I can buy SPXL and UPRO?????" Luckily, I was never really borrowing or investing (gambling) more than I could afford to lose. And luckily I HODL'd long enough to regain (nearly) the original investment. I'm supportive of people who want take these kinds of risks (they can pay off), as long as they take these risks with a solid understanding of what will happen if shit suddenly hits the fan without notice. I have a very high risk tolerance. Sounds like the author does, too. High risk tolerances are fine as long as you're comfortable with the worst case scenario and not convincing yourself that the worst case will never happen. It eventually will, in time.
charles_f 3y ago
> borrowing to finance my spending is more tax-advantaged than selling stocks, since there is no realization of capital gains This already told me all the short-sighted kind of stupid I needed to know. Author will need to make the gain one way or another to pay off the debt. Making it in their early years while being a student and in the probable lowest tax bracket of their life would actually be the tax-advantageous thing to do. Moreover financial gains are usually (and shamefully) less taxed than income. So, weird way to put it. Maintaining your estate rather than liquidating in the hopes that your return beats the interest rate is a "why not" (and that's still dubious given that part of the debt is on credit cards that are probably several digits of interest). Putting it out as a clever tax play is idiotic.
- hnfong 3y ago
  > that part of the debt is on credit cards that are probably several digits of interest Author says credit card debt is 0% in the first year or so. Which is fine, unless you hit a market crash right when the interest free period is over, at which point you have the choice of selling your assets at a huge loss at the dip, or you take on high interest rate debt in the hopes that the market recovers shortly.
  - s1artibartfast 3y ago
    Or take out another student loan, and hope it gets forgiven.
cbhl 3y ago
I remember receiving similar advice (take student loans, invest in stocks) from my high school accounting teacher. If "call your parents and humbly beg for $25k" is a valid "plan of last resort", then it's a lot less risky. A lot of people definitely should not try this. The levered gains quickly fall apart if you're not completely on top of deadlines for interest-free periods expiring and start owing 24.99%+ APY on five figure balances. If there's _any_ risk of that happening I'd stay the hell away from levered investments and reach for the automatic-monthly-credit-card-payments of Ramit Sethi's "I Will Teach You to be Rich". Another risk is the hedonic treadmill -- if you're used to an elevated standard of living in your early 20s, it can be hard to get out of levered spending later in life. Probably would need to choose friends carefully, and budget meticulously. But to the author's initial point -- I also do agree, in hindsight, that $25k of added consumption in my first years out of college would have materially made my life MUCH better -- a bit more travel/meals with friends that I "responsibly" chose to miss out on is not time that I will ever get back.
- fzeindl 3y ago
  > start owing 24.99%+ APY Why that specific number in your example. That looks like a supermarket price tag. Is that common in the US?
  - Jetrel 3y ago
    Yep; tons of credit cards do usurious bait-and-switch stuff like that, under the express hope to make it up on people who have occasional "slippages" where they miss it by one pay period. The "siren song" on those is the whole "if you're careful you can cancel" trick the users think they're pulling off. They may individually, but not in aggregate. These cards are often much easier to get approved for.
- piyh 3y ago
  25k of added consumption saved would be 43k of interest gains in 15 years in his "line always go up" world view. 43k is over 6 month living expense for me, and I get to keep the initial 25k. I wish I would have spent more money in my 20s, but not 25k worth.
lxe 3y ago
This definitely warrants criticism, but these comments are way over the top. If you want to use margin as an instrument for whatever you're doing, that's fine. It's not a terrible advice. There's a lot of useful stuff you can do with these sort of loans, just like you can with borrowing against your 401k, using things like HELOCs and even bouncing around credit card debt using balance transfers. Think of debt as a power tool - learn how to use it, rely on common sense it, use plenty of PPE, and don't get unnecessarily hurt.
- esalman 3y ago
  The comments seem way over the top because we're in a bull market. Things would be quite different if it was a 2008 crash situation. That's all the comments are saying.
- hnfong 3y ago
  > rely on common sense What does that mean here? > If you want to use margin as an instrument for whatever you're doing, that's fine. It's not a terrible advice. The author is effectively buying GOOG on a margin through various cute tricks. That's all to it. With the volatility of GOOG and its current P/E I personally wouldn't do it, but I could be wrong about this, and I don't think anyone who buys GOOG on margin is necessarily stupid. But the parts about "consumptions smoothing", the assumptions about the stock market returning 7-9%, and the confidence of being able to pay the debt back in a couple months of work is just self-rationalization bullshit. Not because they're necessarily wrong, but they aren't even remotely connected to the fact that he's just very simply buying GOOG on margin. The only real concern about buying stocks on margin is what happens when the price of your assets drop and you get a "margin call" (not in the usual form since he borrowed money in various ways). When you get a margin call, it doesn't matter whether you think you can earn more money in the future or whether stocks have outperformed interest rates by 3% in the past couple decades, or whether you've been living frugally or not. I totally get it that the author is just some random dude figuring out life, and I shouldn't be too harsh on him (the person). But the "advice" is honestly terrible, the worry is not that he might ruin his life (as others have mentioned, he's probably privileged enough to be fine), but the audience here on HN might actually be misled and the advice might end up ruining more lives..
TechBro8615 3y ago
You're unemployed and have $25,000 in credit card debt. This is some impressive post-hoc rationalization, but it would have more credibility if you wrote about it before you went into significant personal debt. Otherwise it just reads like cope. And btw, I've been where the author is, so I recognize the signs. Let's check back in three years. My advice: get a job. (I see the author is currently an intern in college. So I'll amend that advice to be: line up a job for after graduation.)
Joel_Mckay 3y ago
YMMV, but I often advise my friends up north: 1. open a First Home Savings Account (FHSA) as it doesn't trigger a tax event when matured [tax free income capture] 2. open a Tax-Free Savings Account (TFSA) [tax free capital gains] when a Registered Retirement Savings Plan (RRSP) [deferred income tax] event can hit you harder later 3. The returns on Guaranteed Investment Certificates (GICs) are now well over 5.4%/18 months. Some report these near zero-risk products hitting over 6.2% in some places. Highest we've seen these in several decades, and a good choice to hold in a tax-efficient account if you don't have time to manage portfolios. 4. Chartered Banks have depositors insurance limits. If you are stuck with cash around for various reasons, than you will end up having accounts in each of these banks eventually. (lending institutions are a different risk, as they usually focus on insurance sales.) If you have the cash issue burning value due to inflation, than you may want to consider these options till you figure out a safer plan. If you have under $1m in a registered self-directed RRSP trading account (stocks/bond purchases), than the stock-market statistics are simply not in your favor. A legally bonded fiduciary financial advisor is the only people who are obligated to be honest with you, and can help match ETF/index-funds to your risk exposure profile. After many years, one will determine evil and or stupid people often affect your pocket book in pretty much the same manner. Always talk with a few people before triggering a financial commitment: your lawyer, commercial accountant, and __bonded__ __fiduciary__ financial advisor. It would be crass to suggest all banks externalize risky garbage-products on customers, but I have yet to meet one that didn't try. Best of luck, =)
jeepers6 3y ago
All the smartest college students I know have flashy blogs, shiny new cars, fiveor six figures of unsecured high-interest debt and zero income. Looks like Nate is a real winner!
schemescape 3y ago
This article did not adequately cover the risks of margin loans. Even assuming you don't hold anything that gets removed from the marginable securities list and you don't get caught off guard by changes in margin requirements (they probably change at the worst possible time, during high volatility), the Interactive Brokers agreement appears to state that they can just immediately liquidate your margined securities if you fall below their margin requirements -- there might be no margin call or opportunity to add funds. I'm sure there are other risks that I haven't even considered, but the above are enough to steer me away.

40 points by adityaathalye 3y ago

pineapple_guy 3y ago

$360 for eight people in San Francisco? I would be a sucker to believe that.

charles_f 3y ago
"It's only money that I'll have to pay in the future, it's not real yet."

andsoitis 3y ago

> so getting into debt wasn’t the only way I could’ve funded my current lifestyle entitlement

hunson_abadeer 3y ago

I mean no disrespect, but this reads a bit like an over-confident take of a person who never went through a financial calamity. A bit like leveraged house-flippers of 2006. The value of your margin loan collateral can plunge suddenly. The rates and the terms of your credit card debt can change overnight. You can get hit by unexpected and urgent expenses - adverse judgments, emergency home repairs, etc - and that's bad news when you're already maxing out your credit lines. Debt is a useful tool, but it's also dangerous. It's one thing if you're using it to advance some important cause... you know, making a big bet on a business idea, making your dreams come true. But if you're taking risks for, as the author puts it, "consumption smoothing"... there's a good chance of ending in trouble for no good reason. Plus, we're not hyper-rational robots. Spending money is habit-forming. It's often about gratification, about social standing, about competing with peers. Especially for younger folks, and especially for people in the Bay Area, where we often look up to people who essentially won the startup lottery or ended up getting lucky in some other way. Instead of "consumption smoothing", it's often better to ask if that consumption is useful to begin with.

xorbax 3y ago
> a person who never experienced an unexpected financial calamity. That's what his parents are for
c22 3y ago
It all makes sense because he's going to make a lot more money later with his math degree. Very logical.
nocoiner 3y ago
I 100% agree with this take, and I say this as someone who has great respect for the use of debt (and, full disclosure, has a pretty fair bit of it to my name). It seems completely obvious that this strategy is predicated on never having lived through a fully seized-up financial system for longer than 72 hours in March 2020 or the Weekend of SVB in March of ‘23. The use of leverage probably feels pretty great right now, but what happens when there’s another Great Financial Crisis and every credit card issuer cancels accounts or cuts credit limits all at once? Sure, there’s plenty on the asset side of the ledger, but how good is it going to feel liquidating those stocks that were worth $75k a few weeks ago for $35k? It’s gonna hurt, and all those people who were eager to provide cheap liquidity will have turned off the taps. Even big corporations that have contractually committed credit facilities have had banks shut those down during times of crisis (basically saying “sue us” to the borrower) so no matter how solid the ability to borrow may appear, that kind of thing has a tendency to evaporate in a moment, just when it’s needed most. I have credit cards with a ridiculous aggregate credit limit, but in another 2008 scenario, anyone want to take bets on how long those credit limits stay high while unemployment is on its way to 14%? I would prefer not to. And regardless of earning potential or useful skills, the owners and managers of for-profit enterprises are going to be belt-tightening at the same time (out of necessity or caution or simply by never letting a crisis go to waste) and their appetite for bringing on a new entry level employee will be limited - just at the time the rest of the system is grinding to a halt. Someone in their 20s without significant financial or familial obligations is generally going to be well situated to make it through one of those crunches, but it doesn’t take a whole lot to bring the edifice crashing down.
- 3y ago

xorbax 3y ago

Very thorough finance-bro autofellatio The part where he complained that his lawyer couldn't game his FAFSA to get him government-subsidized loans was particularly odious

selimthegrim 3y ago
If you read the footnote it says he filled out the FAFSA himself
- xorbax 3y ago
  How delightfully prole

quickthrower2 3y ago

tl;dr: borrowed money to live because asset rich Even better might have been to borrow $25k more to buy the assets in the first place, then the interest is tax deductible possibly

nocoiner 3y ago
Well, yeah, if he’s a corporation.
- quickthrower2 3y ago
  Not sure how US tax works but in Australia an individual can borrow to invest and deduct interest.
  - nocoiner 3y ago
    I believe from the facts that are known, he’s quite obviously not Australian, so alas, probably no deductibility for personal debt.
  - sgerenser 3y ago
    The U.S. also has an “investment interest expense” deduction[1]. Normally this is used with margin interest, but if any other type of loan (e.g. credit card advance) is taken out specifically to invest in securities, interest on said loan becomes deductible investment interest as well. [1] https://www.irs.gov/pub/irs-pdf/p550.pdf https://www.irs.gov/pub/irs-pdf/p550.pdf
WinnieRallycar 3y ago
The concept of borrowing against your investments is new to me, but it reminded me of debt recycling against your home. In principle, I can see the advantage, but like all debt it requires great discipline. With "only" $75k in assets, I agree with you that he'd be wiser to purchase more stocks than fund his lifestyle.

2Gkashmiri 3y ago

The flawed basic premise of this article assumes the person is a "going concern" so as to speak, will continue to earn constantly in order to fund this "smoothing" and whatever. As someone who does not live on a stable paycheck, it does NOT make sense to take on debt when you are not sure if next month you'll get to earn anything let alone enough to service loans. All the people in finance think "debt is cool" because they talk about theories "metcalfe life theory" like the article regarding going into debt to buy an air ticket to see an old friend. That's stupid as hell. Why not "save" money and go the next month? Sure you are an impusive debt addict but yeah, you can explain it off by theories. No thank you.

xereeto 3y ago

This blog post takes a lot of words to say “look at how smart I am! there’s no way this could possibly go wrong!” Maybe it makes me an asshole but I’m rooting for a rates hike or something to give this guy a dose of reality. But I think we all know mummy and daddy would get him out of it.

rhcom2 3y ago

> I know that if I really needed to, I could pay all my debt off in a couple of months (e.g. by getting a full-time software job). Instead of seeing the debt as $25,000, I think of it as a few months of work in tech The assumption that the jobs will always be there, and always pay this well

steve_adams_86 3y ago
I assumed something similar about a far smaller amount of debt, then I got laid off. The market has been brutal. Although I’ve been finding awesome consulting work, I haven’t come close to finding something stable with the income I’m accustomed to. I felt pretty stupid (well, I still do), but I was dealing with a fraction of this debt, in Canuckian tokens no less. Shrugging at 25k USD of debt and calling it a few months of work seems out of touch given the state of the global economy. I feel like 1.8% better about myself now.

cj 3y ago

Devil is in the details, which are most likely missing from this post. I could see myself writing a similar blog post 2 years ago, omitting the fact that 60& of my net worth was invested in 3x leveraged ETFs. No matter how many articles I read about leveraged ETF decay, I couldn't bring myself to believe it until I actually experienced it. "Why tbe hell would I buy SPY when I can buy SPXL and UPRO?????" Luckily, I was never really borrowing or investing (gambling) more than I could afford to lose. And luckily I HODL'd long enough to regain (nearly) the original investment. I'm supportive of people who want take these kinds of risks (they can pay off), as long as they take these risks with a solid understanding of what will happen if shit suddenly hits the fan without notice. I have a very high risk tolerance. Sounds like the author does, too. High risk tolerances are fine as long as you're comfortable with the worst case scenario and not convincing yourself that the worst case will never happen. It eventually will, in time.

charles_f 3y ago

> borrowing to finance my spending is more tax-advantaged than selling stocks, since there is no realization of capital gains This already told me all the short-sighted kind of stupid I needed to know. Author will need to make the gain one way or another to pay off the debt. Making it in their early years while being a student and in the probable lowest tax bracket of their life would actually be the tax-advantageous thing to do. Moreover financial gains are usually (and shamefully) less taxed than income. So, weird way to put it. Maintaining your estate rather than liquidating in the hopes that your return beats the interest rate is a "why not" (and that's still dubious given that part of the debt is on credit cards that are probably several digits of interest). Putting it out as a clever tax play is idiotic.

hnfong 3y ago
> that part of the debt is on credit cards that are probably several digits of interest Author says credit card debt is 0% in the first year or so. Which is fine, unless you hit a market crash right when the interest free period is over, at which point you have the choice of selling your assets at a huge loss at the dip, or you take on high interest rate debt in the hopes that the market recovers shortly.
- s1artibartfast 3y ago
  Or take out another student loan, and hope it gets forgiven.

cbhl 3y ago

I remember receiving similar advice (take student loans, invest in stocks) from my high school accounting teacher. If "call your parents and humbly beg for $25k" is a valid "plan of last resort", then it's a lot less risky. A lot of people definitely should not try this. The levered gains quickly fall apart if you're not completely on top of deadlines for interest-free periods expiring and start owing 24.99%+ APY on five figure balances. If there's _any_ risk of that happening I'd stay the hell away from levered investments and reach for the automatic-monthly-credit-card-payments of Ramit Sethi's "I Will Teach You to be Rich". Another risk is the hedonic treadmill -- if you're used to an elevated standard of living in your early 20s, it can be hard to get out of levered spending later in life. Probably would need to choose friends carefully, and budget meticulously. But to the author's initial point -- I also do agree, in hindsight, that $25k of added consumption in my first years out of college would have materially made my life MUCH better -- a bit more travel/meals with friends that I "responsibly" chose to miss out on is not time that I will ever get back.

fzeindl 3y ago
> start owing 24.99%+ APY Why that specific number in your example. That looks like a supermarket price tag. Is that common in the US?
- Jetrel 3y ago
  Yep; tons of credit cards do usurious bait-and-switch stuff like that, under the express hope to make it up on people who have occasional "slippages" where they miss it by one pay period. The "siren song" on those is the whole "if you're careful you can cancel" trick the users think they're pulling off. They may individually, but not in aggregate. These cards are often much easier to get approved for.
piyh 3y ago
25k of added consumption saved would be 43k of interest gains in 15 years in his "line always go up" world view. 43k is over 6 month living expense for me, and I get to keep the initial 25k. I wish I would have spent more money in my 20s, but not 25k worth.

lxe 3y ago

This definitely warrants criticism, but these comments are way over the top. If you want to use margin as an instrument for whatever you're doing, that's fine. It's not a terrible advice. There's a lot of useful stuff you can do with these sort of loans, just like you can with borrowing against your 401k, using things like HELOCs and even bouncing around credit card debt using balance transfers. Think of debt as a power tool - learn how to use it, rely on common sense it, use plenty of PPE, and don't get unnecessarily hurt.

esalman 3y ago
The comments seem way over the top because we're in a bull market. Things would be quite different if it was a 2008 crash situation. That's all the comments are saying.
hnfong 3y ago
> rely on common sense What does that mean here? > If you want to use margin as an instrument for whatever you're doing, that's fine. It's not a terrible advice. The author is effectively buying GOOG on a margin through various cute tricks. That's all to it. With the volatility of GOOG and its current P/E I personally wouldn't do it, but I could be wrong about this, and I don't think anyone who buys GOOG on margin is necessarily stupid. But the parts about "consumptions smoothing", the assumptions about the stock market returning 7-9%, and the confidence of being able to pay the debt back in a couple months of work is just self-rationalization bullshit. Not because they're necessarily wrong, but they aren't even remotely connected to the fact that he's just very simply buying GOOG on margin. The only real concern about buying stocks on margin is what happens when the price of your assets drop and you get a "margin call" (not in the usual form since he borrowed money in various ways). When you get a margin call, it doesn't matter whether you think you can earn more money in the future or whether stocks have outperformed interest rates by 3% in the past couple decades, or whether you've been living frugally or not. I totally get it that the author is just some random dude figuring out life, and I shouldn't be too harsh on him (the person). But the "advice" is honestly terrible, the worry is not that he might ruin his life (as others have mentioned, he's probably privileged enough to be fine), but the audience here on HN might actually be misled and the advice might end up ruining more lives..

TechBro8615 3y ago

You're unemployed and have $25,000 in credit card debt. This is some impressive post-hoc rationalization, but it would have more credibility if you wrote about it before you went into significant personal debt. Otherwise it just reads like cope. And btw, I've been where the author is, so I recognize the signs. Let's check back in three years. My advice: get a job. (I see the author is currently an intern in college. So I'll amend that advice to be: line up a job for after graduation.)

Joel_Mckay 3y ago

YMMV, but I often advise my friends up north: 1. open a First Home Savings Account (FHSA) as it doesn't trigger a tax event when matured [tax free income capture] 2. open a Tax-Free Savings Account (TFSA) [tax free capital gains] when a Registered Retirement Savings Plan (RRSP) [deferred income tax] event can hit you harder later 3. The returns on Guaranteed Investment Certificates (GICs) are now well over 5.4%/18 months. Some report these near zero-risk products hitting over 6.2% in some places. Highest we've seen these in several decades, and a good choice to hold in a tax-efficient account if you don't have time to manage portfolios. 4. Chartered Banks have depositors insurance limits. If you are stuck with cash around for various reasons, than you will end up having accounts in each of these banks eventually. (lending institutions are a different risk, as they usually focus on insurance sales.) If you have the cash issue burning value due to inflation, than you may want to consider these options till you figure out a safer plan. If you have under $1m in a registered self-directed RRSP trading account (stocks/bond purchases), than the stock-market statistics are simply not in your favor. A legally bonded fiduciary financial advisor is the only people who are obligated to be honest with you, and can help match ETF/index-funds to your risk exposure profile. After many years, one will determine evil and or stupid people often affect your pocket book in pretty much the same manner. Always talk with a few people before triggering a financial commitment: your lawyer, commercial accountant, and __bonded__ __fiduciary__ financial advisor. It would be crass to suggest all banks externalize risky garbage-products on customers, but I have yet to meet one that didn't try. Best of luck, =)

jeepers6 3y ago

All the smartest college students I know have flashy blogs, shiny new cars, fiveor six figures of unsecured high-interest debt and zero income. Looks like Nate is a real winner!

schemescape 3y ago

This article did not adequately cover the risks of margin loans. Even assuming you don't hold anything that gets removed from the marginable securities list and you don't get caught off guard by changes in margin requirements (they probably change at the worst possible time, during high volatility), the Interactive Brokers agreement appears to state that they can just immediately liquidate your margined securities if you fall below their margin requirements -- there might be no margin call or opportunity to add funds. I'm sure there are other risks that I haven't even considered, but the above are enough to steer me away.