[HN Gopher] Personal finance experts don't get wealthy by follow...
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Personal finance experts don't get wealthy by following their own
advice
Author : jrwan
Score : 199 points
Date : 2021-08-29 15:10 UTC (7 hours ago)
(HTM) web link (larryludwig.com)
(TXT) w3m dump (larryludwig.com)
| whoomp12342 wrote:
| can I point out that the person writing this article is making
| money by pointing you to their "how to make money" article, which
| is pretty much the exact thing they warn you about?
| dragontamer wrote:
| I dunno who his target audience is, but I assume that the
| majority around here are computer programmers with anywhere from
| $70k/year single income to maybe $500k/year dual income ?
|
| Financial advice in general sucks. But when we get into the
| specifics... such as any say $150k/year programmer or higher, the
| generic financial advice of 6 months saving + max out 401k plan
| works.
|
| -------
|
| The plan for people at average, 50k/year combined income is
| closer to the go to college and get some skills that will launch
| your career.
|
| What I do find amusing is our collective inability to talk about
| things that matter. Ex: the paycheck is the elephant in the room.
| And even though it is brought up in this post, the paycheck
| differences between families can lead to grossly different
| experiences.
| giantg2 wrote:
| Yeah, but the audience of those financial gurus are the general
| public. So sure, their advice might work for the top 5%, but
| the rest of people will never "get rich" using that advice.
| Even that top 5% could be better off if building passive
| income, businesses, etc.
| dragontamer wrote:
| But the irony is that the generic advice actually applies to
| the hacker news audience pretty well.
|
| People reaching 100k/year or so single income should be able
| to save comfortably. And a lot of programmers are on an
| appropriate career path to get there in a few years
| giantg2 wrote:
| I wish that were true for me.
|
| But I think you're missing the point. The advice for most
| people (the target audience of the gurus) is wrong. It's
| just a coincidence that this article is posted on HN and it
| would be disingenuous to examine it from only this
| position/context.
| zhdc1 wrote:
| > So sure, their advice might work for the top 5%, but the
| rest of people will never "get rich" using that advice
|
| The median household income in the United States is $79.9K.
| Assuming that a family of four can live on $50K (including
| taxes) in - most - locations, which is twice the poverty
| limit, they can theoretically save $30K a year in a mix of
| 401K, IRA, and general investment accounts.
|
| This amount, if invested over thirty years with a 7.5% annual
| return (which is lower than what the S&P has historically
| returned by a fair amount), would give them a nest-egg of
| $3M. If they only manage to save half of that amount, they
| would still have $1.5M by retirement.
|
| Now, this is a very feasible scenario for families in their
| twenties to late thirties, which is why many of the names
| mentioned in the article harp on the importance of investing
| early. It doesn't work nearly as well once you reach that
| point.
|
| However, the opposite - not saving or investing, and having a
| large amount of consumer debt - leads to significantly worse
| outcomes.
| giantg2 wrote:
| "The median household income in the United States is
| $79.9K. Assuming that a family of four can live on $50K
| (including taxes) in - most - locations, ... "
|
| I think the main problem here lies in assumption of the
| distribution over the various locations. $50k+ in
| Appalachia is good money and you might be able to save $30k
| out of $80k. One would not be saving and investing in many
| of the large cities and their suburbs (where more people
| live).
|
| One thing to note is that the $1.5M-3M is not inflation
| adjusted and would be worth much less than it is today. It
| will result in better outcomes, but it won't make people
| rich, like many claim. $1.5M is just enough to keep a
| couple out of poverty who will be retiring at 65 years old,
| 35 years from now. This is especially true _if_ people live
| longer and the cost of healthcare continues to increase
| much faster than inflation.
|
| "(which is lower than what the S&P has historically
| returned by a fair amount)"
|
| The next decade is supposed to be much lower. (Past
| performance is not an indicator of future returns).
| dragonwriter wrote:
| > The median household income in the United States is
| $79.9K.
|
| No, its not, that's the median _family_ income, which only
| counts groups of two or more people related by birth,
| marriage, or adoption living in the same home, whereas
| median family income includes single-member households and
| those whose members have no family relation, and thus is
| significantly lower, about $65K.
| fossuser wrote:
| The r/personalfinance and r/financialindependence subreddits
| are quite good and even cover more exotic details like the
| "mega back door roth" otherwise known as "after tax 401k
| contribution in plan conversions to roth" (which can let you
| add an additional 36k to a Roth IRA over the 6k limit each year
| in addition to the normal 19.5k for a traditional 401k).
|
| They're mostly bogleheads so are a little risk averse, but for
| most that's probably the right move anyway.
| sokoloff wrote:
| In the overall distribution of risk-aversion, bogleheads are
| more comfortable with risk than far too many savers. I've
| seen too many of my parents' generation squander decades of
| investment returns because of the idea that stocks are risky.
| Spivak wrote:
| I mean once you reach a certain age you really can't afford
| to just hold on to your investments for a few decades
| because of a financial downturn. That retirement money is
| also most people's emergency medical fund which can and
| does hit people in their 40s.
| sokoloff wrote:
| I'm not saying to put 100% of every liquid dollar you
| have into the market, but in your 40s, I think it should
| be the majority of your investment funds.
|
| Boglehead advice agrees, with an explicit principle of
| "Never bear too much or too little risk", suggesting
| 30-40% bonds in your 40s and the rest in stocks.
|
| I think more people underperform from being too risk-
| averse than under-perform from having too much equity
| exposure and having an unfortunate overlap of a large
| expense and a downturn in the market.
| spekcular wrote:
| The book "Lifecycle Investing," by Yale professors
| Nalebuff and Ayres, argues that a young person ought to
| invest 100% or even more (via leverage) in stocks. (More
| specifically, a young person with high future earning
| potential, which probably includes many people here with
| a career in tech.)
|
| I'm fairly risk averse and don't totally believe their
| leverage calculations. But it did convince me that any
| non-negligible bond allocation is probably suboptimal.
| ghaff wrote:
| Even just a few years back, some top-rated corporate
| bonds (e.g. Microsoft) weren't a bad investment--although
| equities of course ended up doing much better. These
| days? I'm not sure there's anything that's not one step
| away from putting money under the mattress that makes
| sense outside of equities.
| lodonnell9213 wrote:
| Not just parents generation, our generation. I don't play
| the stock market, I'm not skilled enough for it, but I do
| have a stocks/share ISA, but I'm also not against spending
| money to make it. Many people I know will happily continue
| to pay interest on an item, but have savings which is less
| than the interest on credit. They have a 20% credit card vs
| a 0.5% interest savings.
|
| And little things like that can help in the long run.
| andrepd wrote:
| Buying a mutual fund is precisely not "playing the stock
| market"
| paulpauper wrote:
| You don't have to be skilled. Just simple indexing will
| beat most of thepros anyway. Most active managers lag the
| market anyway.
| giantg2 wrote:
| $61.5k in yearly contributions is out of reach for most
| people. I can't even max out my 401k due to high cost of
| living (with a family) and mediocre income.
| foogazi wrote:
| TC?
|
| You talk about maxing out your 401k, but have looked into
| you maximizing your income to the be able to save more?
|
| (Of course money is not the only important thing in your
| life)
| waynesonfire wrote:
| i agree, mega backdoor seems to be a perk for staff / VP
| level employees.
| pbourke wrote:
| No, those are called deferred comp plans and they're a
| whole separate ballgame. MBDR is much more accessible to
| your average six-figure earning employee.
| giantg2 wrote:
| There's also 403(b)
| fossuser wrote:
| Totally - it was more of an example of the quality of the
| subreddits. If they're willing to get those details right
| then they have the earlier steps really well established.
| giantg2 wrote:
| It's definitely high quality. I guess I'm just jaded
| about being a loser.
| topkai22 wrote:
| You are contributing to a 401k and have a family. The two
| data points you've revealed contra-indicate loser status.
| ASinclair wrote:
| > The r/personalfinance and r/financialindependence
| subreddits are quite good and even cover more exotic details
|
| The great thing is you can read the subreddits casually for
| ~3 months and learn everything you need to know to autopilot
| your financial plan for decades if you go the boglehead
| route. After that you mostly need to pay attention to major
| changes in tax law and entitlements.
|
| I still read them all the time but I haven't learned anything
| new in years.
| opportune wrote:
| That also makes them less useful than they could be because
| they don't cover many advanced financial topics, like
| managing taxes, investments besides "VTSAX and chill".
| Everything is geared towards newbies.
|
| There's much better advice on /r/fatfire in terms of more
| advanced investing and tax stuff, but you have to sift
| through a lot of not-so-humblebragging posts. There is so
| much to learn outside of the "make a 100k-200k income and
| put everything into three securities" even if you don't use
| it. Real estate investing, entrepreneurship, angel
| investing, trusts, different corp-types, estate planning,
| etc.
| pushrax wrote:
| Owning a small slice of a business where you're employed can
| also help make you rich if it grows a lot. In the tech world
| there are probably more financially independent employees than
| founders, because of the growth of some massive companies over
| the last few decades and high salaries. Probably a different
| story in the UHNW category though, very few employees can get
| to that level.
| Nasrudith wrote:
| The obvious pitfall is that it is putting both your income
| sources in the same basket. Unless you have sufficient
| liquidatable savings that is a bit of a "flying jump kick" -
| if it lands it works great, if it doesn't you are left
| committed to a train wreck and pain will follow.
| pushrax wrote:
| Definitely true - usually you don't have a choice though
| due to vesting schedules and/or illiquid markets pre IPO.
| dheera wrote:
| > max out 401k plan works
|
| What are the advantages of 401k instead of say dumping it into
| half-VOO half-crypto and making millions one way or another?
| MattGaiser wrote:
| A 401K is a box, not a specific investment. You can put
| things like VOO in the box. Anything in the box is tax
| advantaged however.
| whateveracct wrote:
| Tax advantages basically mean you make the dollars invested
| inherently worth more
| pushrax wrote:
| The variance in potential outcomes of holding VOO is much,
| much lower than the variance of holding crypto.
|
| Buying VOO buys a share of the profits of the work of many
| millions of people. It also speculates that other people will
| continue to want to buy those profits.
|
| Buying a token only speculates that more people will want to
| buy that particular token. It's much harder to project that
| people will continue to want it.
| dheera wrote:
| Oh yes. So that's why half-half.
| pushrax wrote:
| A risk parity approach would say more like 95% to 5%, but
| that works too.
| dheera wrote:
| Oh sure, one half can be bigger than the other half.
| zhdc1 wrote:
| Tax deferment and stability.
| paulpauper wrote:
| Its not bs but its incomplete. Putting money in index funds has
| proven to be a good way to grow wealth. Look at some of
| thefatfire and related threads on reddit.. a lot of ppl have
| amassed alot of wealth with indexing.
| bdcravens wrote:
| The biggest takeaway: it's easier to make money than it is to
| save it, and stacking cash, rather than aggressive budgeting, is
| the key to wealth.
| Denvercoder9 wrote:
| Isn't aggressive budgeting a way to be able to stack that cash?
| bdcravens wrote:
| Maybe (depends on your income and what expenses you currently
| have). However for many, pouring that energy into an income-
| creating task will create a larger amount.
| cardosof wrote:
| While I generally agree, I think for many people it's easier to
| cut 10% of their annual spending instead of getting better
| return rates or a salary raise.
| anigbrowl wrote:
| That's the sad thing though. While many people do spend their
| way to poverty, personal finance people almost never seem to
| address the question of how to negotiate/strategize to get
| more money in the first place. A lot of people semi-
| rationally conclude that the way to make money is to look
| successful by driving a new vehicle, wearing nice clothes,
| and 'fake it til you make it.'
| bdcravens wrote:
| For the readers of this forum, perhaps, but for the typical
| person making $40-50k it maybe easier to get a side hustle.
| PKop wrote:
| It is "easier" for people that are capable of becoming
| _wealthy_ to do so by making money and leveraging their skills
| to accrue wealth not by hours worked.
|
| It is unclear weather it is "easier" for everyone to do so, or
| possible. And if not, whether they are better off not trying,
| and instead saving and budgeting.
| brundolf wrote:
| It varies widely by person (some people are addicted to
| spending money), and by career (bumping salary up by a few
| percentage points is a lot harder in some industries than
| others), which is part of the problem
| bdcravens wrote:
| I think there's a distinction between out of control spending
| and someone with decent expenses. There definitely is no
| shortage of those with all the streaming services and a new
| iPhone every year, and less than $1000 in the bank, but I
| think that's not the portrait the article was trying to
| paint.
|
| Additionally, the article does point out that you may need to
| reevaluate your career and/or create a side hustle.
| mjklin wrote:
| > Six decades ago, Fred Schwed wrote a book called _Where Are the
| Customers ' Yachts?_ The title came from a story about a visitor
| in New York more than a century ago. After admiring yachts Wall
| Street bought with money earned giving financial advice to
| customers, he wondered where the customers' yachts were. Of
| course, there were none. There is far more money in providing
| financial advice than there is in receiving financial advice.
|
| > The title is as relevant today as it was back then. There are
| few industries that pay themselves so much for doing so little as
| financial services.
|
| https://www.fool.com/investing/general/2014/02/21/where-are-...
| [deleted]
| snarfy wrote:
| Of course they don't. If you want to know how, sign up for my
| seminar on personal finance. Hurry up, seats are running out
| fast.
| cascom wrote:
| This guy seems to be conflating "how to get rich/create wealth"
| with "how to not behave like a child financially". Basically only
| four groups of people get richer 1) business owners, 2) people at
| the apex of a profession (professional sports/media/actors,
| partners at banks/law firms/consultancies, etc. 3) a subset of
| investors (this is where some FIRE types focus). 4) inherit/marry
| wealth
|
| Most personal financial advice is not focused on getting rich,
| it's how to improve your financial health.
| magneticnorth wrote:
| A lot of these points are reasons why I like the Mr Money
| Mustache approach to financial independence.
|
| You can be "rich" by having the freedom to spend your time on
| what you want, and appreciating the cornucopia of luxuries that
| make up a typical American middle class life.
|
| You can get there by living (happily!) on a lot less than 100% of
| what you make, and saving the rest. With some simplifying
| assumptions about investment returns, the actual dollar amount a
| person makes doesn't matter; it's just the fraction of their net
| income that they need to maintain their lifestyle that informs
| how long until retirement. E.g. if you can save 50% of your
| income, you can retire in 17 years.
| https://www.mrmoneymustache.com/2012/01/13/the-shockingly-si...
| ball_of_lint wrote:
| I consider myself rich, I work for someone else, and I don't have
| a side hustle.
|
| I read Mr. Money Mustache's blog frequently when I was young; he
| has an important addition to what many of the mainstream personal
| finance books address. Being rich is more about freedom and
| personal happiness than it is having a lot of money. For many
| people, adjusting to slightly less nice but more affordable
| things is significantly easier than increasing their income by
| that same amount. Furthermore, every dollar you adjust to not
| needing is better than adding income - it compounds even faster
| because it goes into retirement with you and reduces your target
| savings amount.
|
| But, going back to the post there are a _lot_ of people in the US
| and around the world that don't have the income required to have
| any sort of savings, even after adjusting down their lifestyle.
| This is a systemic but tractable problem. The solution isn't "get
| a side hustle" it's "the full time minimum wage should support a
| reasonable life".
| foogazi wrote:
| > The solution isn't "get a side hustle" it's "the full time
| minimum wage should support a reasonable life".
|
| Ugh I saw you getting close and then miss it
|
| Why would you think the solution to the savings problem is
| _minimum_ wage?
|
| When is the minimum ever good enough? Frustrating how not
| enough people talk about increasing income way beyond the
| minimum
| politelemon wrote:
| For those of you in the UK, this flowchart has been particularly
| useful in terms of safely managing debt and growing wealth.
|
| https://ukpersonal.finance/
|
| The mods tend to update it regularly in line with changing
| economic conditions and laws etc.
| fallingknife wrote:
| > The average person: Has a salary of $49k Doesn't have enough in
| emergency savings --19% of Americans have $0 and 31% have less
| than $500 saved Spends 56% on their food budget Has over $5,700
| in credit card debt with a 17.89% interest rate Has only $150k in
| savings by retirement Relies on Social Security to fund most of
| their retirement
|
| Even in a high tax state, a single taxpayer with a 49K salary
| takes home about $40K. So you're telling me that this taxpayer
| spends $22.4K on food? That's $61 / day! Also, the median net
| worth in the US is about $120K, but this guy is telling us that
| 50% of Americans only have $500 in savings? What a load of
| bullshit!
| logicalmonster wrote:
| I think this is a pretty good article, though I'd think that most
| financial gurus aren't trying to lie, they're just trying to give
| advice that's feasible for a mass audience to try and learn.
|
| To give an example; the article mentions Dave Ramsey talking down
| to his callers and giving generic advice such as cutting up your
| credit cards. I don't follow Ramsey too closely and can't read
| his mind, but I'd bet he's optimizing his advice for the least
| common denominator within a mass audience of financially troubled
| people. A small percentage of financially desperate people would
| hear great advice about credit cards (only use cards to buy stuff
| you have 100% of the cash for, and pay them back instantly to get
| some cash and rewards back) and not internalize that as something
| like (it's okay to keep using my card because I'm getting money
| back as long as I try and pay my bill every month). For a mass
| audience, the safest advice on credit cards that might make an
| impact is to just tell everybody with a financial problem to stop
| using them. On an individual level, a financial expert can
| probably give better advice that's more suitable.
|
| If I had to give 1 bit of general financial advice though:
| develop your talent stack. It doesn't matter if it's learning a
| new programming language, wood-working, learning to fix cars or
| toilets, taking a foreign language class, learning how to paint,
| or growing a great garden. If you have multiple skills you have
| more opportunities to make money as well as combining those
| skills in unique ways to create new business ideas and concepts.
| And baring some health issue, nobody can ever take a skill away
| from you.
| JamesBarney wrote:
| > develop your talent stack. It doesn't matter if...
|
| I think its 100% matters which talent you pick. Some will on
| average pay out 1000x over others.
| tonyedgecombe wrote:
| I think logicalmonster is suggesting a much wider spectrum
| than just careers. There are so many everyday jobs that our
| grandparents did without a second thought that we have
| surrendered to specialists.
| jacquesm wrote:
| In the long run, you should just keep adding talents. So yes,
| you may end up adding a couple of 'duds', but you'd surprised
| how many of these initial duds turn out to have substantial
| value in the long run.
| meowkit wrote:
| Work to live. Doesn't matter if you make 10x, 100x, or even a
| 1000x more over a lifetime if you're miserable doing that
| job.
| ericmcer wrote:
| Everyone I know who has chose a career based on passion has
| grown to view it as work eventually, they still enjoy parts
| of it but monetizing something you love and doing it 40+
| hours a week turns it into work. I have friends who loved
| animation/art but actually working for a gaming company
| ended up being miserable. And 1000x would mean I could work
| for 1 month and make ~85 years of income so... I would be
| fine with that lol.
| paraph1n wrote:
| I love programming. Always have. Been doing it since I
| was 10 years old. It was my dream to do it for a living,
| even before I realized that it pays well too!
|
| But sadly, you're right. My 40 hr/week engineering job in
| big tech is miserable.
|
| I still code for fun/passion in my free time. But I cry
| on the inside every time I think about how much of my
| time and mental energy gets wasted at my day job.
|
| I hope that either (A) I am able to retire young, or (B)
| I find the mythical coding job that I can actually enjoy.
|
| Sadly, neither (A) nor (B) seems likely to happen.
| zhdc1 wrote:
| > If I had to give 1 bit of general financial advice though:
| develop your talent stack.
|
| This is crucial, but having a relatively high savings /
| investing rate is as important.
|
| > And baring some health issue, nobody can ever take a skill
| away from you.
|
| Time absolutely can. Even someone in a sedentary job in a field
| where their expertise won't necessarily become outdated will
| eventually have to hang up their cleats for one reason or
| another.
| larryludwig wrote:
| Talent stacking (as Scott Adams coined it) I highly
| recommended even if you don't own a business. I mentioned
| this in another blog post.
| jacquesm wrote:
| > If I had to give 1 bit of general financial advice though:
| develop your talent stack. It doesn't matter if it's learning a
| new programming language, wood-working, learning to fix cars or
| toilets, taking a foreign language class, learning how to
| paint, or growing a great garden. If you have multiple skills
| you have more opportunities to make money as well as combining
| those skills in unique ways to create new business ideas and
| concepts.
|
| Seconded. When you are wasting time you might as well develop
| your skills. Fortunes are to be found on the intersection of
| almost any two skills, if you can add more to the pile you are
| adding more chances for capturing that value.
| oakfr wrote:
| You'll never get rich unless you start a business. Oh by the way,
| lucky you, I happen to be selling tips for making millions off a
| blog (just click this sponsored link. I made $6M with mine, I
| swear).
|
| Seriously, since when did HN decide to sponsor this kind of self-
| interested clickbait?
| jdlshore wrote:
| Exactly. This is a terrible article that's designed to prey on
| people's FOMO. The basic financial advice he derides _is_ solid
| advice. Do that first. Starting a business is very hard and
| often fails.
| SerLava wrote:
| APFEAL.
|
| Especially finance advice given to low-income people is just
| horrible. Like starting a savings account is a great way to lose
| all your money to fees when you need to withdraw everything in an
| emergency.
| astura wrote:
| >Dave Ramsey down-talks to his callers as if they were petulant
| children and tells you to cut up your credit cards. Dave says
| they are the work of the devil and you aren't mature enough to
| use them. Except we used our cards to make $3,624 in spendable
| cash last year, all while paying zero in interest -- because we
| paid the cards off in full each month.
|
| The big thing you have to know about Dave Ramsey is he has a
| biblical approach to debt, not practical. God says debt is bad so
| it should be avoided.
|
| This leads to some odd advice.
|
| Dave advocates working as much as possible during college to
| avoid student loans but neglects that, in the aggregate, the more
| hours a student works the poorer their grades and the less likely
| they will graduate.
|
| He also advocates stopping 401k contributions until you're out of
| debt (because he believes debt is evil). That's almost never a
| great move financially if your employer has a decent 401k match.
| A better idea is to drop anything above the match until high
| interest debt is paid off.
|
| His advice is very one sized fits all and he does have a point
| that many people can't control themselves with debt.
|
| I'm really not a fan of the way he talks to his callers calling
| them stupid either, especially when he doesn't realize he doesn't
| really understand his caller's situation. He got super
| belligerent with a woman who didn't know exactly her husband's
| pay (who was a servicemember) and basically said she needed a
| marriage counselor because she didn't have an exact figure. (She
| said "around $xyz") But it seems he doesn't understand a
| significant portion comes in the form of several different
| allowances that are tax free and change based on their current
| orders, POC, and rank, so it's totally normal to have a non-
| precise figure off the ttopof your head.
| foogazi wrote:
| I think there's a place for Dave Ramsey's advice. I don't care
| for the religious stuff- but the advice is solid to get out of
| debt
|
| He mostly talks to people that don't realize the stranglehold
| debt has on them.
|
| The first step is to acknowledge the problem
| astura wrote:
| Yeah, there probably is.
|
| I just don't know that people really understand that his view
| of finance is biblical based rather than empirical based and
| advice is extremely one sized fits all.
|
| At the same time it is the kick in the ass that already well-
| to-do-people with too many Lexusus who are deep in debt
| probably need. People who don't have much income? Not sure
| what they are going to get from Ramsey other than shame.
|
| For me, the best thing I ever did in my life was take out
| loans to live while in college so that I could devote 100% of
| my time to my studies. It's the only way I would be able to
| graduate, and I'm glad I didn't worship the altar of Dave
| Ramsey at the time because I didn't need extra stress or
| guilt.
| PKop wrote:
| Part of the discussion should be, can the 'masses' "Generate
| income not based on hours worked", "Minimize taxes", and
| "Leverage time and debt to become wealthy like the personal-
| finance gurus themselves did?"... in other words, is becoming
| wealthy possible?
|
| It is worth being honest about the false hope these authors are
| peddling about "becoming wealthy", instead of what they are
| really advising which is, to become above average / not poor. It
| is ultimately good advice for most while the crux of the issue is
| pretending everyone in America is a millionaire waiting to
| happen.
|
| I would add that much of the sensible advice provided by these
| types of authors is not taught in public schools as a basic
| necessity of general education.
| californical wrote:
| Definitely not everyone, but most people in America can become
| millionaires (inflation adjusted) within their lifetimes.
|
| Saving $100 per week should be possible for most households
| today. $100 per week over 40 years with an 8% return is $1.3m.
|
| If you think the market will be slower in the future, or higher
| inflation, or whatever, use the absurdly conservative 6% and
| it'll take 50 years instead of 40.
|
| Add in the possibility of home ownership giving an additional
| asset to add to the net worth over the investing lifetime,
| giving an extra few hundred thousand... and in forty years from
| now, we're well over $1m in assets, easy.
|
| Getting $100/week might seem daunting, but that's less than 10%
| of the median household income -- totally within reach of a
| majority of people with some small changes.
| carnitine wrote:
| The problem isn't that inflation will erode the return
| percentage, but that it will erode the value. $1.3m in 40
| years really doesn't sound like that much money.
| californical wrote:
| It's enough money to pay for perpetual retirement -- it
| would provide an inflation-adjusted $50k per year
| indefinitely, which is what that median-earner was making.
| So $1.3m is enough to never need to work, and that doesn't
| include social security.
|
| Throw in that extra $15-20k per year from SS and you're
| living a pretty wealthy life (especially if you've managed
| to pay off a house during your life, so no mortgage.
| Otherwise just put $300k of the 1.3 to pay cash for a
| house. Having no mortgage makes your money go even further,
| and you'll be rolling in money.)
| [deleted]
| sokoloff wrote:
| While not everyone's household has a practical probability to
| become a millionaire household, I think a quarter of them could
| without inordinate difficulty (around 10% already have and some
| of the 90% are well on their way, but are younger households
| and so have time and growth ahead of them)
| giantg2 wrote:
| I think an even deeper question is, is it possible for the
| masses to get rich and what would the macroeconomics look like?
| I would think competition and resource scarcity would prevent
| this.
| Nasrudith wrote:
| There is also a distinction I have seen ignored - everybody
| (any individual) vs everybody (all individuals).
|
| Take a group of randomly selected non-rich people 1 to N and
| assume you have a "dart board" of varied strategies and their
| return in this iteration. Take the normal distribution over
| time and the outliers at the right end of the bell curve you
| will find that some will become rich in the proper flux.
|
| You can't all just throw them at the same spot and get an
| absurd economic yield. It would in the end regress to both a
| standard distribution and the mean.
|
| Competition mostly diminishes the returns in a given
| investment faster. The price differentials close through the
| generation of profit and fulfillment of demand. You are being
| paid to be a servant of entropy lowering things to their base
| state. This isn't a bad thing but one specific plan will not
| last forever.
|
| Resource scarcity is weirdly peripheral to all of it and how
| you define rich in absolutes vs relative.
| californical wrote:
| It's not scientific, but MMM has an article on this that was
| insightful in how society could change for the better as a
| result:
|
| https://www.mrmoneymustache.com/2012/04/09/what-if-
| everyone-...
| giantg2 wrote:
| Did I miss it or did they not cover the effects of the easy
| money they talk about for loans? If the availability of the
| money is increased, usually you will get much lower
| returns. Not to mention, much of the market is built on
| speculation and this increased money is not actually going
| to companies on the stock market (because most of us don't
| have access to private equity).
|
| I do understand and agree with the part about increased
| productivity (decreased scarcity and cost) raising quality
| of life. I just don't see that applying to everyone equally
| (companies will keep some of that cost decrease as profit
| and return some to investors but not everyone can afford to
| be investors). I think there are a lot of finer points the
| article glosses over, especially around inefficiencies. And
| of course this is far from a settled topic as there are
| many economists debating this sort of thing.
| MattGaiser wrote:
| I would argue that middle class today is a lot richer than 50
| years ago. Larger average homes. More cars. More trips.
| Better healthcare. Food is cheaper as a percentage of income.
| giantg2 wrote:
| The middle class has also shrunk, right?
|
| Those advances are adjustments in quality of living driven
| by efficiencies in manufacturing, etc. This would be more
| on the resource scarcity side and less on the rich/income
| side. I would exclude food as an indicator since that is
| heavily subsidized. Healthcare has also increased
| substantially as a percentage of income.
| PeterisP wrote:
| The global middle class has grown but the USA middle
| class has shrunk due to some rebalancing/equalization
| with other countries.
| giantg2 wrote:
| Yeah, that rebalancing and equalizing was what I was
| mostly the effect I was wondering about or getting at.
| bbarnett wrote:
| If the masses got rich, inflation would set a new baseline.
| In short, if everyone is rich, no one is ... it's just normal
| wealth.
| cma wrote:
| But due to diminishing marginal utility of wealth, a more
| flat baseline like this scenario would still make everyone
| far more rich on average.
| giantg2 wrote:
| Exactly what I was getting at.
| bbarnett wrote:
| Yes, but laying it out can help the point.
| leetcrew wrote:
| it depends what counts as "rich". I can imagine a world where
| everyone has a structurally sound shelter, maybe even a large
| one. I can't imagine a world where everyone lives in a
| penthouse apartment overlooking central park (without killing
| billions of people first).
| ng12 wrote:
| Personal finance is NOT about getting rich. It's about building a
| nest egg for retirement. The whole premise of this article is
| bunk.
| pbourke wrote:
| > You'll NEVER get rich by working for someone else
|
| Counterpoint: I know many people who have done just that. If you
| want to define "rich" as hundreds of millions of dollars, sure -
| start your own business. Otherwise, a few million and retiring
| before age 50 is a pretty good outcome and I have seen multiple
| software engineers do that, even before the most recent explosion
| in compensation.
| [deleted]
| BooneJS wrote:
| Can I apply this article to the theme of the site? You'll never
| get rich by joining a startup. Founders and investors have too
| much control writing the rules and making the decisions. Everyone
| hates bureaucratic institutions but the alternative with a
| startup is an oligarchy consisting of (often) inexperienced
| people playing the role for the first time. Even bad exits favor
| the founders over the employees.
| brighton36 wrote:
| Average People require average advice. Above average people can
| figure it out on their own. This piece is fine and good, and I
| appreciate that it was written. I agree with its thesis.
| PKop wrote:
| I agree with this. Not everyone can be above average and not
| everyone should pursue self-employment, passive income and
| leveraging debt to grow wealth. For many many people lessons on
| saving and budgeting are the best course of action.
| dtjohnnymonkey wrote:
| This is a mischaracterization of Ramit Sethi's class. I've taken
| it and it's the opposite of what the article claiming. It focuses
| on helping you build your business and income streams.
| foogazi wrote:
| Yeah, I read IWTYTBR back when it came out and even then he
| stressed how skipping the latte was not enough: you had to
| increase your income + assets
| amarghose wrote:
| Came here to say this. The author lost all credibility with me
| when including Ramit in the list as if he's actually paid any
| attention at all to what IWT says he'd realize that Ramit could
| have written the article he just published (and they would have
| been similarly condescending tones)
| FabHK wrote:
| Agreed. I haven't taken this class, but Ramit disparages the
| "skip a cappuccino a day and become rich" nonsense explicitly.
| jandrewrogers wrote:
| There are three levers for increasing wealth: increase savings
| rate, increase income, increase rate of return. For the average
| person, these are listed in order of difficulty, hence why most
| personal finance advice starts with increasing your savings rate.
|
| Owning a small business is a _chance_ at increasing rate of
| return. That 's playing personal finance on hard mode for the
| average person. If you are risk averse, you'll be much better
| served focusing on increasing your savings rate and income.
| sokoloff wrote:
| I think there's a large subset of the population who is in
| savings and checking accounts (often with meaningful amounts of
| money that sit there for a long time) who could trivially
| easily increase their rate of return by buying VTSAX with a
| portion of those funds.
| jandrewrogers wrote:
| That is a fair point. I was assuming a VTSAX-like return as
| the default low-effort path but many people don't even do
| that.
| brk wrote:
| I think most financial advisors target people with no impulse
| control, spending the bulk of their income each month, with a
| measurable part of it on non-essentials.
|
| Those kinds of people can budget to some version of wealth
| (especially when you consider the median net worth of their peers
| is most likely only barely a positive number).
|
| To get into "real" money (5+ million dollars in savings?), then
| you can't budget yourself to riches if you simply do not have the
| gross income, and time horizon for some amount of compounding
| interest. The financial advisors in this bracket are usually not
| telling you what to save vs. spend, but instead more commonly
| discussing investment diversification strategies, ways to
| (legally) avoid or defer taxes, etc.
| bradshaw1965 wrote:
| If by wealthy having 90th percentile investments 10 years before
| normal retirement age then these plans are well equipped to make
| you wealthy. Get rich slow totally works.
| WalterBright wrote:
| The basic strategy is:
|
| 1. stay in school
|
| 2. don't do drugs
|
| 3. don't commit crimes
|
| 4. learn a skilled trade or go to college. remember to google
| starting salaries for your major before committing.
| ixacto wrote:
| This is not the greatest advice. Something more akin to being a
| software developer or travel nurse and then FIRE would be a
| better message to preach...
|
| Then you get to retire at like 40 with a much higher probability
| of success.
| black_13 wrote:
| A great way to get wealthy is have wealthy parents
| tlogan wrote:
| There is a saying: "Do not think how you are going to spend the
| money. Think how you are going to make money."
| moltenguardian wrote:
| "Rich Dad Poor Dad" also made a similar point: you should look at
| what your advisor is doing, rather than taking their advice. If
| your financial advisor suggests a mutual fund, ask them if they
| themselves invest in it.
| magnuspaaske wrote:
| I've read Ramit's book and Tony Robbins' book. Both mention
| entrepreneurship. The latter mention taxes. Don't really see the
| big lie here.
|
| I'm most familiar with Ramit's work but he's also pretty clear
| that there's only so far you can go through savings but no upper
| bound on earnings.
|
| It seems to me a bit like a strawman argument he's making when in
| fact some (or all) of the other gurus do talk about
| entrepreneurship and earning more.
| umvi wrote:
| > Except we used our cards to make $3,624 in spendable cash last
| year, all while paying zero in interest -- because we paid the
| cards off in full each month.
|
| Yeah except the merchants probably marked up their prices 4% to
| cover card processing fees so really we are just paying more for
| goods than we otherwise would have with cash and the card company
| is giving us a tiny kickback.
|
| Let's not pretend credit card kickbacks are free money... The
| card companies are glutting themselves on merchant fees and we
| are all paying the price in the form of costlier goods in
| exchange for a small kickback.
| larryludwig wrote:
| As the author of this article, this isn't true. some comes from
| the merchant fees, many comes from the fact people don't pay
| off their cards every month and that far more subsidizes those
| payouts.
|
| Lastly have you tried paying with cash online? While Bitcoin is
| a neat idea we are far from yet mass acceptance of any digital
| currency yet.
| leetcrew wrote:
| 100% of the rewards don't have to come from transaction fees.
| they could also be funded in part from other customers'
| interest payments. I notice that the best rewards cards often
| have very high interest rates. this is also not a great state
| of affairs; you are essentially taking advantage (through an
| intermediary) of other people who can't manage their finances.
| but it's not quite paying into your right pocket by picking
| from your left.
| Nasrudith wrote:
| Some cities had an issue to even have to ban in person
| businesses from banning cash transactionss. Given the costs of
| cash handling taken for granted bizzarely it is possible that
| being charged a fee where there was none before will save
| merchants and consumers money net even while the credit card
| companies make money. Cash counting machines, time spent
| tracking physical money, safes, and armored car transports all
| cost money. The wire transfers of money and credit are a real
| service of real value.
| MattGaiser wrote:
| If everyone used cash, maybe, but since that isn't happening,
| those who don't use credit cards are paying for those who do.
| ghaff wrote:
| However, handling cash is not free. Now, most places still
| have to handle cash but it's a whole lot less than they would
| have to otherwise.
| cowpig wrote:
| I think both of these statements are true
| myfavoritedog wrote:
| That blog is a false dichotomy built on top of a strawman.
|
| The strawman is that it's all about "getting rich". Ramsey (the
| one I've heard talk the most) is mostly about just getting people
| to stop digging themselves deeper and deeper into debt where they
| will have no hope for even the basic stability that you need to
| build greater wealth upon.
|
| The false dichotomy is that you either need a side hustle
| business or you need to follow sound day-to-day money management
| discipline. Following sound money management discipline is what
| gets you to the point of having some discretionary income to
| build your own business.
| brandmeyer wrote:
| I agree entirely, but would phrase it differently. The baseline
| advice isn't about how to get rich, its about how to live a
| financially comfortable middle-class life.
| MattGaiser wrote:
| Yeah, Ramsey rich is being an "everyday millionaire" by the
| time you retire. It isn't really rich, but it is just having a
| comfortable retirement and a large financial moat.
| Spivak wrote:
| I feel like this is a pretty harsh take for what is good advice
| even if you do want to go down the starting a business route.
| Personal finance (i.e. managing your personal revenue, costs, and
| tax burden) is still necessary even when you're running a
| business. You just have more tools as your disposal to manage
| your tax burden when you have a business.
|
| I really don't think anyone believes they're going to get rich
| after reading a personal finance book. The hash reality if even
| if your expenses were $0 your total salary times x years still
| wouldn't make you rich is unavoidable and known to basically
| everyone. These books are for people who need to get a handle on
| their spending, pay down their debt, and start gradually
| accumulating positive net worth.
| dasil003 wrote:
| For a business owner this guy sure doesn't understand much about
| market economics. Those gurus made their money by appealing to
| average people. In no way is it possible for a majority of that
| audience to all start successful businesses. So while a lot of
| what he says is technically true, and these gurus might be
| encouraging a lot of wishful thinking and fantasy, the authors
| message is likely to be a lot more misleading at scale if half
| the country all started businesses with the hope of getting rich.
| ffggvv wrote:
| most financial "experts" made the bulk of their fortune by
| selling their advice. not actually earning wealth first then
| giving advice. like meet kevin or graham Stephan.
| BeetleB wrote:
| If you give "start a business" advice to people, the majority
| will end up poorer than the advice he is complaining about. Sure,
| you may have more options to invest and pay less taxes, but
| that's only if your business is making money, which most don't.
| hogFeast wrote:
| I agree with the thrust of the article. Most personal finance
| experts are...a bit weird (I have no idea why Tony Robins is an
| expert...he knows literally nothing, isn't he a motivational
| speaker...only in America could this be a job).
|
| But there is a reason why spend less is the best advice for
| most people: they can't start a business, they have limited
| scope to increase their earnings significantly, and you can
| actually become relatively rich if you just spend less.
|
| Personal financial advice really isn't about attempting to
| become rich, it is about stopping people doing things that make
| no sense. We aren't talking about becoming Jeff Bezos...that
| isn't the goal for most people, the aim is to help people
| retire with dignity. Telling everyone to start their own
| business is terribly unhelpful because it won't improve
| anything as most people will fail (this is why personal finance
| experts exist...because most people think in these unreasonable
| ways i.e. the only way I can become rich is by taking huge
| risks...rather than just not buying stupid shit I don't need,
| ppl reason in very weird ways).
|
| To say this another way, most people do not understand the
| long-term value of a $1 saved today. Obviously, exactly how you
| calculate this is a little complicated but if people realised
| that $1 now was worth $4 or $6 or $8 in 30 years then they
| would consider what they do today more carefully (and even
| then, some people are just weird...they will say: I am going to
| die before then, or I don't care...then they will get to
| retirement and everything is fucked).
|
| Btw, I used to work in this industry, I have seen people who
| didn't consider any of this. We had a client who worked all his
| life in a decent paying job but had little savings, took to
| drink, wife divorced him, lost his job in his late 60s, got
| drunk one day, fell down the stairs when he was on his own in
| his rented house (he lost his house a few months before), died.
| This all happened within a few months. It will happen. You will
| get old. You can't control everything in life but something
| that is relatively easy to control is your spending. I try not
| to give people specific advice but the number one thing that
| everyone can do is: control your spending, think about what you
| need, you can't avoid some expenses but the peace of mind later
| down the road from small changes is huge.
|
| This kind of thing is unfashionable as hell though because it
| does put that pressure back onto the individual. Lots of young
| people today have this attitude of: everything is rigged,
| telling me to change anything when X person is so wealthy makes
| you an oppressor, etc. Unsurprisingly, this attitude tends to
| be linked with taking decisions that are unwise, and abrogating
| all responsibility for the consequences.
| leetcrew wrote:
| > To say this another way, most people do not understand the
| long-term value of a $1 saved today. Obviously, exactly how
| you calculate this is a little complicated but if people
| realised that $1 now was worth $4 or $6 or $8 in 30 years
| then they would consider what they do today more carefully
| (and even then, some people are just weird...they will say: I
| am going to die before then, or I don't care...then they will
| get to retirement and everything is fucked).
|
| I think for most people the idea that $1 will grow a lot in
| thirty years just isn't very motivating. I hear that as
| saying I could either have chipotle today or a fancy dinner
| in thirty years. okay, but thirty years is a long time and
| chipotle is still pretty tasty.
|
| personally, I find it much more motivating to frame it
| explicitly in terms of passive income. every time I spend
| $20, I am forfeiting $1/year in perpetuity. every time I _don
| 't_ spend $20, I've added $1 to my yearly budget in
| retirement. instead of delaying material gratification, I am
| eliminating my need to work.
| MattGaiser wrote:
| The goal of most personal finance experts is not to teach you to
| be mega rich, but rather to be average and while still being
| pretty average in terms of income, hours worked, and capability,
| remarkably comfortable to peers.
|
| > Yet you almost never hear the financial experts recommending
| that you start a business.
|
| Is the average business owner any better off? I know that there
| are plenty of successful business owners, but we tend to
| completely ignore the many that filed bankruptcy after taking
| cash advances on credit cards to live one more month.
|
| > Nor do these guys tend to mention the importance of
| understanding how taxes work.
|
| Only really matters if you make a lot of money. My Dad is a tax
| accountant. We optimize the heck out of our personal taxes. But
| at our 100Kish incomes, it doesn't make a big difference beyond
| what the personal finance people say.
| folkhack wrote:
| > Is the average business owner any better off?
|
| Obviously anecdotal, but not really IMO. I've bounced back and
| forth between being in business for myself and working for the
| man.
|
| Between healthcare, saving for retirement, etc. things are
| really optimized against someone "pulling themselves up by the
| bootstraps" in this way. I've listened to the politicians in
| the US scream how important small business only to vote against
| that very interest (tax cuts for rich + corporate tax breaks).
|
| I can't get good healthcare unless it's tied to my employment
| here. The healthcare I get independently is of lower quality
| for much, much more money out of pocket... Lord help you if you
| do something stupid and show a profit on your books... etc
| etc... The first 2-3 rungs of the "small business owner" ladder
| are missing by design.
|
| If I had a family I would likely never consider being a
| business owner again due to the health implications, financial
| risk, and time commitment.
|
| 100% the average working Joe is better off.
| mgkimsal wrote:
| "small business" to national politicians typically means you
| employee under 500 people. Almost no one considers "self-
| employed" or "1-3 people" as "small business" when crafting
| tax legislation. _I_ certainly consider "self-employed" and
| "I have a couple folks on payroll" to be "small business",
| but it's just not in the same league as the local brewery
| employing 85 people, for example.
|
| Perhaps we need the term "micro business" to gain more
| traction? I suspect that's where more work is heading.
| sokoloff wrote:
| I think micro-business as a term exists (and depending on
| the exact definition is typically 0-4 full-time employees,
| including the owner).
| darkwizard42 wrote:
| Starting a business is complicated, requires discipline, and
| then requires a decent amount of luck to even keep it afloat...
|
| It can be used as a good tax harvesting vehicle but again this
| requires so much knowledge and ultimately I think running a
| business (even at a strategic loss) requires more depth of
| knowledge than the average saving/investing tips.
|
| Would definitely agree that starting a business is a path to
| becoming RICH, but definitely not a path to being financial
| stable/above average
| rossdavidh wrote:
| From his own article: "I'm not suggesting the advice the gurus
| are giving is outright wrong. Their recommendations will make you
| modestly successful. You'll more than likely live an OK life and
| have an above-average net worth."
|
| In fact, Suze Orman and the like are talking exactly to this
| audience, and their advice is in many cases a lot better than
| what they are doing now.
|
| Also, being married to a small business owner who knows a lot of
| other small business owners, there's a "dirty little secret" that
| this article doesn't mention: most of them never get paid a dime
| by their own business. They are spending their way through a
| business loan, or they have family money, or some other source.
| Yes, there are people who get rich from starting a business, but
| if popular finance experts told everyone to start their own
| business, that would be a lot worse advice than what they are
| saying.
| zhdc1 wrote:
| > there's a "dirty little secret" that this article doesn't
| mention: most of them never get paid a dime by their own
| business. They are spending their way through a business loan,
| or they have family money, or some other source
|
| Over fifty percent of generic small businesses survive for more
| than five years, so it's unlikely that a majority of them are
| completely subsisting on government loans, investors, or family
| money.
|
| The most common outcome (for the small businesses that last) is
| to turn into something that creates just enough revenue to
| support the owner and a handful of employees. The owner takes a
| small salary and uses the rest of the cash flow for float or
| reinvests it into the business.
|
| However, depending on the country, tax laws can be fairly
| advantageous for small business owners (e.g., higher limits on
| tax-deferred retirement accounts). There's also the benefit of
| building net worth in the business, which isn't something that
| employees benefit from. So, while the owner may not be getting
| paid all that much, they still benefit in a bunch of other
| ways.
| dionidium wrote:
| > _However, depending on the country, tax laws can be fairly
| advantageous for small business owners_
|
| My wife is a loan officer at a mortgage company. It's a
| running joke that it's a pain in the ass to qualify small-
| business owners, because so many of them claim so little
| actual income on their tax returns, even when they're quite
| obviously wealthy.
| rossdavidh wrote:
| They may well be cheating on their taxes, but they may also
| in many cases be wealthy in spite of, rather than because
| of, their small business.
| ghaff wrote:
| Many years ago, I had a small side software business. My
| revenue would be almost pocket change category for me today
| and honestly wasn't all that much for the effort I put into
| it at the time. But one nice thing was that it wasn't even
| a stretch to bring to income down to just over zero by
| offsetting various computer and office expenses (in
| addition to the costs the business incurred directly, which
| weren't much).
| jstummbillig wrote:
| Are you alleging that most small business efforts fail before
| they make _any_ profit -- as in +50%? That seems rather
| unlikely but if anyone has strong numbers on that I 'd be very
| interested.
| rossdavidh wrote:
| I cannot say the percentages, but my wife has been shocked to
| hear from business owners who ran their store for over a
| decade, that they never made a dime. This kind of confession
| usually only happens after they have given up and closed. I
| don't know of any trustworthy numbers on it; I would not be
| surprised if it was far larger than most people believe, but
| the difference between businesses that "fail" after two years
| and ones that last for five years or more, is often how
| stubborn they are or how much money they have from other
| sources to keep trying. I would not be surprised if it were
| over 50%, but I know of no source for strong numbers on it.
| Nasrudith wrote:
| That strikes me as eminently unsurprising personally. By
| definition if you fail then you weren't making enough revenue
| to sustain it. There are two nasty pitfalls which I have
| heard often snaring them - either paying for tools and other
| assets when they lack demand or failing when demand saturated
| due to being unable to scale up correctly.
|
| Revenue and profit are conflated but are not the same thing.
| edoceo wrote:
| Data from the BLS shows that approximately 20% of new
| businesses fail during the first two years of being open, 45%
| during the first five years, and 65% during the first 10
| years. Only 25% of new businesses make it to 15 years or
| more.
| hesdeadjim wrote:
| Tldr, you'll only get rich by starting a business. Great advice
| for the tiny population of people who have the skills, the means,
| the discipline, and the time.
|
| That person he describes with $50k annual income, little or no
| savings, and significant credit card debt sure as hell isn't
| starting a successful business, especially since they most likely
| have children and are working hard hours.
|
| He's dismissive of being "less poor", but for anyone who has
| actually been in or witnessed this average scenario, less poor is
| way the hell closer to rich than not.
|
| The real problem on display here is the capitalist dystopia we
| live in. Fifty years ago that average person would have been able
| to support a family, buy a house, and not live under the constant
| threat of bankruptcy from a surprise medical bill.
|
| But yea, start a business!
| bbarnett wrote:
| This may be true, but to be fair...
|
| 50 years ago, 70 years ago, an enormous series of treatments we
| now have, did not exist.
|
| And even disease treatment options, even knowing how some
| diseases worked? Nope.
|
| So medical care was less costly, because, there was literally
| less to be done. And people died at home more often too, as a
| result.
|
| So naturally medical care was less costly.
|
| And housing, the average family did not have a ginormous,
| 6000sq foot house. Try 1000 sq foot, 1500 sq foot as a norm.
|
| So sure, less cost.
|
| Same with all these fancy dodads.
|
| Yes, 100% housing is more expensive due to low rate mortgages,
| and other reasons.
|
| But in non-crazy priced locations, you can still build a small
| 150k, 250k house with land all in.
|
| Some of it is indeed changing wages vs costs, but some is
| "more" vs wage.
| chillwaves wrote:
| The US has per capita healthcare spending that is multiple
| times that of their peers in the western world.
| folkhack wrote:
| I see the "we got more things and they got more expensive"
| point brought up constantly and it still doesn't change my
| opinion (same as above commenter):
|
| > Fifty years ago that average person would have been able to
| support a family, buy a house, and not live under the
| constant threat of bankruptcy from a surprise medical bill.
|
| I want to circle back to this. I read your comment assuming
| you are arguing that now things are "more" (cost++) this
| ideal is now less obtainable or unobtainable.
|
| Do _you_ think that the average person (median wage earner)
| should be able to support themselves in this way? Should we
| let go of this ideal as "old fashioned"?
| bbarnett wrote:
| _Should we let go of this ideal as "old fashioned"?_
|
| No, although "old fashioned* was a very brief, 30 to 50
| year period in US history.
|
| Instead, I think that buying massive mansions (as per how
| people in the 50s may think of it), could be part of the
| problem.
|
| Buying huge houses, means more people need mortgages. That
| saving for a down payment means less. That means higher
| monthly payments.
|
| Outside of huge cities, a 1500 sq foot house and land just
| isn't that expensive. The problem is due to more than one
| source, it's also about trying to have a house, in some of
| the most expensive areas for real estate on the planet.
|
| And other factors, cell phone, cable, internet, tablet,
| laptop, gaming system, monthly fees can run hundreds in
| some households, with hardware costs amortized, even a
| thousand per month for a family!
|
| Do you think people in the 50s had all that? Even middle
| class families often didn't have a TV!
|
| Do you know how many people I've seen with maxxed out
| credit cards, yet they have all those toys above?
|
| How'd they get those toys?
|
| Many people didn't even have medical insurance in the 50s.
| Why? I provided one possible reason prior.
|
| But I agree, then isn't now. I don't know what to do about
| medical care, but I do know my grandparents couldn't
| believe all the things my parents were buying, when I was a
| kid.
|
| I wonder what they'd say, every time I use credit to buy
| coffee, dinner, an electronic gizmo, or a paid service.
|
| I wonder what they'd say, when they also saw me paying 2x,
| or 3x for it, after years of paying credit card compound
| interest?
|
| More than anything, credit is the big problem.
| folkhack wrote:
| I mean I've read this comment about 3-4 times now and I
| get that you start with "No" in regards to my original
| comment... but I was super weirded out on the overall
| direction. I'm talking about median wages and you
| immediately jump into talking about "mansions"...? As-if
| the majority of folks today having troubles finding an
| affordable place are looking for "mansions".........?
|
| > Instead, I think that buying massive mansions (as per
| how people in the 50s may think of it), could be part of
| the problem.
|
| You draw this comparison of what people in the 50's would
| think of our world today when in all reality the cost of
| everything has skyrocketed since the 50's. The dual-
| earner expectation is a new thing since then, the post-
| WW2 credit boom happened, the expectations of higher
| education to enter careers is different, housing markets
| are night and day, etc... Anyone who's looking at this
| modern world through the lens of the 50's _ideals_ must
| realize that this is an incredibly skewed /distorted way
| to think about today. Or at least I would hope they
| realize this.
|
| > And other factors, cell phone, cable, internet, tablet,
| laptop, gaming system, monthly fees can run hundreds in
| some households, with hardware costs amortized, even a
| thousand per month for a family!
|
| > How'd they get those toys?
|
| Much of that isn't a toy in this day in age... I would
| argue that cell phone and internet are _utilities_ NOT
| toys. I would argue that a laptop /tablet/phone is a
| requirement to stay relevant in even entry level
| positions... and sure - I can understand not subsidizing
| TV and video games as they're pure entertainment. But, I
| would very much argue that folks who are worried about
| improving conditions for wage earners are not advocating
| for everyone to get a free Xbox and 42" LCD.
|
| > But I agree, then isn't now.
|
| I'm at odds with this too - when you spend so much time
| drawing comparisons between the 50's and today I am left
| to wonder, "where does this person draw the line of
| 'then' and 'now'? Do they believe in 50's ideals being
| exercised today? And if so, which ones?"
|
| All of these comparisons you've drawn make me feel like
| I'm suppose to feel guilt for having purchased things
| with credit as well... admittedly things like TV's, etc.
| I've never paid "2-3x" for something as I've never fell
| for that trap... but I have purchased expensive things
| like computers and used my credit to spread that hurt out
| over a year...
|
| And... oh god... if I get a house how do I live with
| myself knowing it's a mansion or not...? I guess I should
| stay within the arbitrary <= 1499 sqft limit and move
| away from any population centers or I may accidentally
| end up with a mansion in the eyes of someone from the
| 50's!
|
| > I wonder what they'd say [...]
|
| My grandparents and parents are not involved in my
| finances. They're all dead now, but they lived a life _so
| very different_ than mine that I really don 't care what
| they'd say... my answer to that is "So what?"
|
| > More than anything, credit is the big problem.
|
| Credit/debt is the basis of any capitalistic society -
| it's literally in the blueprints. If you truly believe
| this I would argue you have a fundamental issue with
| capitalism as well.
|
| Also, hard disagree which is why I asked you the original
| question. Wage stagnation and commodification of
| everything we need to live is the "more than anything"
| problem.
|
| I do not disagree that credit is a problem. But it is
| _not_ the "more than anything" problem. Actual livable
| wages for everyone willing to work is the "more than
| anything" problem.
| thewebcount wrote:
| It's funny because there was an article here a few weeks ago
| slamming "The Millionaire Next Door." Yet, that is one of the
| financial advice books that does tell you to start a business. Or
| at least it points out the same things as this article, namely
| that that's how most rich people got there.
|
| Also, despite what the article says, I've made a ton more money
| working for the man than I ever made working for myself. I'd
| probably be considered rich by most Americans' standards. So it
| absolutely can happen, though there's a lot of luck involved. I
| used to own a business, and while I manages to keep it alive for
| 5 years, it didn't make much money. I sold it to a competitor and
| went to work for the man (not the company I sold it to). I kept
| getting royalties for a couple years, and by the time that ran
| out, my stock units were starting to vest, and that's when things
| took off. The business helped make the transition smoother and
| faster, but I'd have made money on my stocks and higher salary
| either way.
| imtringued wrote:
| Yeah I find it a bit ironic that people complain that "rich"
| people aren't trying to sell their own story and instead think
| about how to help a non rich mortal. Of course it is a bit
| hypocritical because they may not know much about the middle
| class or below but the point is that they are trying instead of
| assuming that you just walk down the golden path you were born
| into.
| markus_zhang wrote:
| I think those low-middle "financial advisors" are generally BS. I
| have been a low level one for a few years and talked to middle
| level advisors from time to time. We didn't know much TBH.
| codyswann wrote:
| This article is laughable.
|
| 1) Most of the personal finance experts he lists aren't telling
| you how to get rich. They're telling you how not to be poor.
|
| 2) Most people do need a coach or a mom or whatever to tell them
| they can't afford something. Most people don't even know how to
| balance a checkbook or calculate the real interest rate of a
| credit card.
|
| 3) Most people don't know how compounding interest works.
|
| 4) There's no definition of "rich"
|
| 5) I know plenty of people making mid-6 to low-7 figure incomes
| while "working for someone else" and some retired in their
| late-40s, early 50s
|
| 6) Most businesses fail
| jstummbillig wrote:
| > I know plenty of people making mid-6 to low-7 figure incomes
| while "working for someone else" and some retired in their
| late-40s, early 50s
|
| Plenty to satisfy what? Why would you bring anecdotes to a gun
| fight?
| codyswann wrote:
| Author said "no one gets rich working for someone else" - I
| would consider all of these people rich.
| luckylion wrote:
| It's not to be taken literally. Someone might offer you
| some dessert and, if you don't accept, say "no one ever
| died from eating some sweet dessert", but that's not a
| claim that literally no one ever died from eating sweet
| dessert. I'm sure more than one person choked on it and
| died in the history of humanity.
|
| It doesn't mean that, it means "very very few people get
| rich working for someone else".
| civilized wrote:
| Very few people get rich period. Many more get to the
| upper middle class, say the top 10-20% of income. And the
| vast majority of those do so by ordinary employment, not
| starting a business.
|
| If we go by the numbers and the odds rather than pithy-
| but-misleading slogans, the easiest, safest path to a
| higher income is probably acquiring skills that are more
| rewarded in the labor market.
|
| Which is still far from easy, but there is no easy way to
| make a lot of money. That much I agree with the article
| writer on.
| Mvandenbergh wrote:
| The challenge with any writing for a general audience is that
| unlike actual advice, which is tailored to the person receiving
| it, it just goes out into the aether for anyone to see so will be
| inapplicable for at least some people.
|
| Sure, some mass-market dude with a radio show (I don't know
| anything Dave Ramsey or Suze Orman beyond their wikipedia pages)
| is going to have advice that "technically" doesn't make sense or
| that doesn't apply to some people. A very large number of people
| are deeply in consumer debt, have secured vehicle debt for more
| expensive cars than they should really have, and may well have
| taken the advice to get the biggest mortgage they could for a
| house in a place that requires that they maintain the whole
| shebang or go bust.
|
| Telling those people "cut up your credit cards" and "if you don't
| have the cash, don't buy it" is actually good advice. The
| "snowball" thing that Ramsey is into is innumerate but may be
| just the thing for someone struggling to see their way through
| all their debts. I would no more tell someone with serious
| struggles with consumer debt that clever use of credit cards
| could increase their income overall than suggest a killer wine
| pairing to a recovering alcoholic.
|
| I also don't think that it's a very fair categorisation of Sethi.
| He's never made any secret of the fact that these days most of
| his wealth has come from his writing and despite the name of his
| book, the advice he gives is more "I will teach you to be a
| financially prudent member of the upper middle class (if you are
| a well paid professional)" they just couldn't get that on the
| cover.
| zrail wrote:
| Not going to claim to be an expert, but if you struggle with the
| nuts and bolts of personal finances (ex: bounced rent checks even
| though you're a highly paid software developer) you might be
| interested in my radically simplified and fully automated system:
|
| https://www.petekeen.net/automatic-finances
|
| I've been using it for about three years now and, modulo a couple
| tweaks, it's substantially identical to that write up and
| requires ~zero manual intervention.
| Rd6n6 wrote:
| Speaking of starting a business, it's really hard to find
| reliable information on how to do this in Canada from a
| paperwork, legal, and accounting point of view. It's a real chore
| sorting out all your requirements and responsibilities
| larryludwig wrote:
| Thanks for the mention!
|
| As I expected from this audience, some of the comments are funny
| and completely miss the mark of my article. But such is life.
| mgkimsal wrote:
| "Yet you almost never hear the financial experts recommending
| that you start a business."
|
| And... many times when I do hear people recommend "start a
| business", it's "for the tax write-offs". Or at least that's the
| one bite-size thing some folks internalize. Have seen friends and
| neighbors get in to "business" - like various MLMs - and talk
| about "write offs". Naive at best, and dangerous at worst, I'm
| not surprised more people aren't specifically pointing out "start
| a business" to mass audiences - I'm not sure most people can do
| that responsibly. But most people _can_ enroll in a company 401k
| and save a bit of money for later. The biggest damage they may do
| is lock up some money until they 're 59. "Start a business"
| without much thought can lead to a lot more problems for folks.
| larryludwig wrote:
| Without question, not everyone should start a business. That
| wasn't the point of the article. It's about the advice you get
| and how they themselves not follow that same advice.
| wincy wrote:
| This seems like a good place to be vulnerable and ask for advice.
|
| I am 35 and still spend like in a teenager. I grew up really poor
| where if the money didn't get spent right away it would just sort
| of disappear, into drugs or beer or whatever my mom and stepdad
| were spending it on. My only real asset is my house which has
| appreciate significantly in value, but all it would take is one
| job loss to get me behind on that. I take Adderall because it
| makes me an effective engineer and I've really struggled for
| multi year periods where I've tried to stop it, but my life gets
| measurably worse. I cashed out my $5,000 at one point and blew it
| on I don't even know what, but it was something stupid I'm sure.
|
| I guess the real enemy is future me. I don't feel like I can
| consistently trust myself to make good financial decisions so the
| me of right now acts as if future me will just blow all my
| savings irresponsibly anyway. It's depressing just writing it
| out.
|
| I wish I could put money into an account that would then only
| disburse small amounts of it over the year, and I couldn't
| override that.
|
| I'm really ashamed of it but end up paying the mortgage with one
| biweekly paycheck, paying all my bills with the next biweekly
| paycheck, and despite making a very good salary for where I live,
| I'm living paycheck to paycheck.
|
| I don't really know how to develop impulse control, I spend hours
| and hours scrolling Amazon and websites trying to think of things
| to buy.
|
| I know the answer is "just act like an adult" but I guess
| spending has become a coping mechanism because I've got a
| disabled kid, I don't really know how to enjoy things that aren't
| going to Costco or buying a new 3D printer or a shiny new
| computer.
|
| Is there anyone here who has gone from being extremely
| irresponsible with money to having savings? How do I get over the
| trauma of my grandparents losing millions of dollars in the 2008
| financial collapse, which happened right as I came of age? How do
| I stop "shopscrolling" Amazon until 2 in the morning?
|
| I know it's pathetic, and I feel like this is a place I might get
| an answer that's actionable.
| ta988 wrote:
| That's exactly the kind of things I've seen CBT (Cognitive
| Behavioral Therapies) do miracles in short periods of time. It
| requires some dedication but I've never thought it would work
| so well on my friends and relatives.
| wincy wrote:
| I have a cognitive behavioral therapy workbook sitting unused
| on my bookshelf, maybe I'll make use of it. Thanks.
| crunchyfrog wrote:
| You're trying to cure the symptom, not the disease. You need a
| therapist, not financial advice.
|
| You know what you're doing is unhealthy but you can't stop. A
| good mental health professional can help you deal with the pain
| you're trying to cover up with buying junk.
| skybrian wrote:
| I think it's worth a try, On the other hand, figurng out how
| to deal with symptoms also counts as helping the patient.
| tommiegannert wrote:
| And in this case, paying for the therapy is both an expense
| and an investment, which is probably a great combination.
| zetsurin wrote:
| I never had your problem, so this might not work well for you,
| but maybe it will:
|
| Write everything you spend money on down in a single place
| before you buy it. If you buy a book and pen to do this they
| can be your first entry.
|
| Creating an awareness of what you spend money on gives you a
| chance to ask if you will value the thing as much as your
| impulses are telling you.
|
| This goes generally, lots of self help people suggest keeping a
| diary, and reviewing it.
| nmhancoc wrote:
| I think you've already got a lot of advice related to the
| mechanics of saving money (401k which has withdrawal penalties,
| maybe an IRA for greater friction, etc.)
|
| On the emotional management / discipline front, I'd suggest
| also exploiting the similarities between personal finances and
| healthy living. If money is particularly painful for you, try
| forming simple habits like going on a 10 minute walk each
| morning, or eating healthy 1 day a week.
|
| Small actions like that will help you prove to yourself that
| you can make changes, and you can ride that proof emotionally
| to make bigger changes incrementally over time.
|
| An example would be 1 day a week of not eating out, which
| becomes a $10 per week saving habit, then moving to 2 days and
| $20.
| wincy wrote:
| I did lose 50 pounds in the last year. I know I can manage my
| health properly, but during that same time didn't manage my
| finances well at all.
|
| Maybe thinking about it the same way is key, thanks.
| tormeh wrote:
| > I wish I could put money into an account that would then only
| disburse small amounts of it over the year, and I couldn't
| override that.
|
| I think this is called a trust:
| https://en.m.wikipedia.org/wiki/Trust_law
|
| Also, if you are so inclined, check if you can replace your
| habit of trawling Amazon for stuff to buy with trawling Amazon
| looking for stuff to buy _in the future_. Personally, looking
| forward to buying the thing is at least 60% of the enjoyment.
|
| Anyway, try seeing a psychotherapist. Someone serious with a
| degree. Your money problems seem to be at least partially
| learned, so they can be unlearned.
| phantom784 wrote:
| I'd say at least, if you think you want to buy something, at
| least wait 24 hours and see if you still want it.
| wincy wrote:
| I nickel and dime myself into poverty. My wife and I just
| end up with a lot of fast food charges for $30-40, a family
| of 4 eating fast food is crazy expensive. I know it's not
| good, but it's addictive in convenience especially with a
| kid who is disabled.
| adamsb6 wrote:
| > I wish I could put money into an account that would then only
| disburse small amounts of it over the year, and I couldn't
| override that.
|
| Work for a company with stock trading blackout periods. Setup a
| 10b5-1 plan to periodically sell your company stock, then when
| the blackouts are lifted invest the money you want to save into
| your company stock.
|
| This has the drawback of being undiversified, but undiversified
| savings may be preferable to no savings at all.
| etempleton wrote:
| I would put money in a 401K or IRA that has a real penalty of
| withdrawing and takes time to withdraw as to deincentivize
| yourself from spending. Remove yourself from your financial
| equation. If you have a significant other and they are better
| with money have them manage both of your finances.
|
| You need to have money removed from your account and into
| investment accounts automatically before you have a chance to
| spend it. Money in checking or saving will get spent.
| ghaff wrote:
| My one caveat is that you really want some savings that you
| have reasonably ready access to. As someone else mentioned it
| may be possible to setup a direct deduction to a brokerage
| firm to put it in some sort of index fund or funds. That's at
| least somewhat higher friction than they money being right in
| a checking account.
| mortenlarsen wrote:
| I can sell and have the money in my account in 2-4 days. It
| would off cause be a bit sad to sell at a loss right after
| a "crash" or correction of the market. But in an emergency,
| I could. I also keep 2 years worth of spending in the bank
| (we spend very little, so it is not as extreme as it
| sounds).
|
| It should not really be needed, as I would get money from
| the government (enough to live on) if lost my job, and we
| have universal health-care where I live. But it gives me
| peace of mind.
| ghaff wrote:
| My comment was mostly about 401K/IRAs in that, once you
| put money in those, you mostly can't, without penalty,
| pull it out again before retirement. Even though regular
| brokerage accounts aren't instant, they're fine for an
| emergency fund.
| cowpig wrote:
| What you're describing sounds to me like a mental health issue.
| Sounds like you've hacked a dopamine reward loop and now can't
| stop it.
|
| Have you tried therapy?
| wincy wrote:
| I have. Maybe I haven't found the right one. I think
| cognitive behavioral therapy might help.
| pcthrowaway wrote:
| > I wish I could put money into an account that would then only
| disburse small amounts of it over the year, and I couldn't
| override that.
|
| This isn't financial advice, but what you want is definitely
| possible with defi and smart contracts. I'm not sure what in
| the ecosystem has this capability, but there's a good chance
| you can get a bit of interest too.
|
| Just stay away from USDT if you're planning to have payouts
| happen over the long term; USDC would be a safer bet.
| JamesBarney wrote:
| > I wish I could put money into an account that would then only
| disburse small amounts of it over the year, and I couldn't
| override that.
|
| You can do this with a trust or annuity. Have you looked into
| them?
| wincy wrote:
| I haven't, this sounds like a potential idea though. Thank
| you, I'll look into it.
| kiba wrote:
| I don't have complete answers, so I only give out solutions
| that has worked for me:
|
| 1. I set up a goal to only have one meal eating out per week
| and I did it by keeping track of whether I go to a restaurant
| that day. I used uHabit, an open source ads free android app to
| help me do this.
|
| 2. I also keep a spreadsheet for a certain aspect of my life:
| electronics and crafting. Each time I buy something craft
| related, I entered the expense. I have an expense goal that I
| try to keep it under per month.
|
| These two strategies has allowed me to save me a lot of money
| and sometime I would go on for months without spending much
| money at all.
|
| Also, it is likely that your spending habit is an emotional
| problem, not a discipline issue. I think it may be prudent to
| talk to a mental health professional.
| auslegung wrote:
| I agree with others that therapy is going to help you fix this
| problem (and others) more thoroughly than trying to muster up
| the willpower to do what you know you should be doing. You
| aren't a screwup, you aren't stupid. But you did get dealt a
| crappy hand and you're (naturally) struggling to improve it.
|
| That being said, the number 1 thing that helped move me out of
| a situation similar to yours financially (grew up in poverty,
| poor impulse control, etc) was listening to the Dave Ramsey
| podcast every day. It probably doesn't matter if you listen to
| Dave Ramsey or one of the others mentioned in the article, so
| just go with someone. Though I will say that once every episode
| Dave Ramsey has someone come on and do their Debt Free Scream
| where they tell their story of getting out of debt, and then
| they shout at the top of their lungs, "I'M DEBT FREE!!!" And
| that was incredibly motivating, and at times emotionally moving
| and I even cried sometimes.
|
| Anyway, listen to it as often as you can: on your commute, in
| the shower, while working out, while cooking, while eating,
| etc. Get it in to your bones.
|
| What this did for me was it began changing the way I think
| about money. As I listened to hours of Dave Ramsey tell people
| everyday that saving money was cool, paying off debt is cool
| and the best way to financial freedom, that the 7 baby steps
| are achievable, my thoughts around money slowly changed, and so
| did my behavior. At first I disagreed with Ramsey a lot,
| especially how he treated some callers (that has improved a
| fair amount over the years, thankfully). But eventually I saw
| the wisdom in what he was saying.
| magneticnorth wrote:
| So first suggestion is that it sounds like you could benefit
| from talking to a therapist. You're self-sabotaging, and it
| sounds like you know that, and this is a super, super common,
| normal behavior that a therapist will likely be able to help
| you talk through.
|
| As for money advice: Can you automate some saving, and have
| that happen before your money hits your bank account? E.g. if
| your workplace offers a 401k, you should definitely be maxing
| that out, and that means your employer will save that money
| before you have access to it, and doing that for long enough
| will set you up for retirement even if you mis-manage the rest
| of your pay.
|
| If you can set up more systems like that, you should! You may
| be able to set up an after-tax account at fidelity or vanguard
| or similar that automatically gets a portion of your paycheck
| deposited in, and you can set it up to automatically buy
| stocks/bonds/reits on a regular schedule. That money would
| still be accessible, but you'd have to sell your investments
| and wait a few days to transfer into a checking account, which
| might be enough friction to help keep it saved.
| bittercynic wrote:
| For the scrolling till 2am thing I have been using this
| strategy:
|
| 1. Before opening the laptop I decide how much time I want to
| spend, and what I will do immediately after.
|
| 2. Set a timer that I'll have to get up to turn off.
|
| 3. Do the thing I had decided to do. It can be a little thing,
| like washing 1 dish, taking out the trash...
|
| I tried many strategies before finding one that works, and will
| still try to develop more so I'm not completely sunk if/when
| this one stops working.
| anigbrowl wrote:
| Well you're being somewhat responsible already in that you're
| paying your bills straight away, so yay for you.
|
| Regarding your shopping habits, it sounds like you're acquiring
| more tools but not making good use of what you have. Switch to
| buying used things,a nd spend more time sweating over the
| things you bought figuring out how to use them effectively.
| This will probably be an emotionally painful and initially
| unsatisfying process. Make something with your 3d printer. Be
| disappointed. Make something marginally better, continue being
| disappointed. Repeat until one day you unexpectedly feel
| pleased with the results.
|
| It takes about 3 months to shift behavior patterns, even with
| the help of something like Adderall, which is totally fine to
| use.
| fartingflamingo wrote:
| Therapy.
|
| Also, one short term hack I haven't seen explicitly mentioned
| yet. Try to enjoy a healthier kind of buying: buy your house
| piece by piece. In other words, pay off your mortgage early. If
| you can direct some of your impulse buying towards early
| mortgage repayment like that, that would be a win!
|
| Try to experience the process of increasing your ownership as
| close to your senses as possible:
|
| - Can you make the repayments cash transactions instead of
| online?
|
| - Make these early repayments as frequent as possible. If the
| bank allows monthly, quarterly or annually only, arrange for a
| trusted friend to collect weekly or even daily.
|
| - Visualise your progress: - Make a
| drawing/real life 3d model/photo/lego model of your house.
| - Colour the bits of the drawing you now own. - Move
| the lego bits over from "the bank" to "mine/ours". -
| Mark individual stones or pieces of siding as your own versus
| the bank's. - ...
|
| Just don't forget about finding a good therapist!
| jeremysalwen wrote:
| Ironically, I think the advice of "Personal Finance experts"
| (which are derided in this article) is probably perfect for
| you. Maybe someone else will have a specific suggestion of who
| to check out, but I think they are mainly trying to help people
| with the psychological problem of spending too much money.
| zhdc1 wrote:
| > Is there anyone here who has gone from being extremely
| irresponsible with money to having savings? How do I get over
| the trauma of my grandparents losing millions of dollars in the
| 2008 financial collapse, which happened right as I came of age?
| How do I stop "shopscrolling" Amazon until 2 in the morning?
|
| Partner with someone who is disciplined, such as a potential
| spouse/partner, a friend, or even a support group of people in
| the same situation.
|
| I know that recommendations are frowned upon here, but also
| take a look at Brian Johnson/Optimize. Discipline is one of the
| things they touch on a lot, and unlike other places, they have
| advice that actually seems to work.
| wincy wrote:
| My wife said she had savings before she met me. Apparently I
| have a very dominating personality. She owned her house
| outright which we sold so we could put a down payment on a
| much larger house.
|
| Her and I have been talking today and I think having her
| approve purchases could help. I'm nervous about giving up
| control like that though, and thinking about it more I
| definitely get pleasure in buying new gadgets. But I need to
| trust her that she has my best interests in mind (which she
| does, but it's hard to convince some part of me deep down of
| that).
| ball_of_lint wrote:
| There's already a bunch of great advice here. I have just one
| thing to add:
|
| > the me of right now acts as if future me will just blow all
| my savings irresponsibly anyway.
|
| I know this horrible feeling, but it isn't really true. It's a
| self fulfilling prophecy. It may take some work and time to
| change yourself and your habits, but it is possible. Even just
| commiting to yourself that you're going to work on this can go
| a long way to easing your feelings about it and breaking the
| cycle.
|
| And if you can't do it alone, don't! Therapy is an option.
| Consider it splurging on your retirement.
| anonuser123456 wrote:
| I have a friend like this. She is successful, has an Ivy League
| degree in engineering and has very high income. But she grew up
| poor and makes terrible financial decisions. They largely seem
| outside of her control.
|
| I speculate that growing up in poverty is not the cause of
| behavior; rather it's the reverse. Her family behaves in
| particular ways that make them poor and she has inherited those
| traits, either biologically or environmentally. From talking
| with her about how her family operates, this seems to be true.
| They have very low income but buy a new 4K HD TV every year
| along with trading up their vehicles to new models. They manage
| everything by an ever expanding debt load collateralized on
| their house/credit cards. I don't think these behaviors are
| 'breakable' because they aren't habits. It's almost like they
| are built into the default mode network.
|
| In situations like this, when you can observe your behavior as
| something beyond your control, the best bet is to influence
| your environment rather than your behavior. Put your money
| beyond your easy reach (401k, IRA, pay down mortgage early
| etc.)
|
| I personally struggle with eating behavior that is beyond my
| control. The only way I've been able to successfully control it
| is to put a lock on my kitchen cabinet that I don't have the
| combo to. This acts as a big moderator that gets me through the
| self destructive impulse periods.
| sokoloff wrote:
| Your biggest enemy is your present self. It's also your biggest
| ally for recognizing your risk of self-defeat and asking for
| help.
|
| In addition to the advice to use accounts with penalties for
| early withdrawals, I'd consider if setting a fun money budget
| would give you a metered amount of "yeah, no one's perfect"
| escape valve but then have other accounts that are harder to
| readily access.
|
| Consider splitting your direct deposit (after 401k deferral)
| into multiple accounts, some of which you don't have ready
| access to. Put $100/check into an emergency fund account,
| $150/check into a travel or big fun account, $400/check into a
| house/car repairs account, $X/check to an after-tax Vanguard
| account, and the rest into your daily usage account.
|
| You'll have setbacks over the years, just as your grandparents
| did. But over the long run, there's never been a 15-year run of
| negative nominal returns on the broad based US stock averages.
| Bet with that trend to continue, including there being some
| 5-year losing periods ahead.
|
| You can do this, it won't be easy but setting in place a few
| mechanisms to support, not letting the wheels come off the bus
| entirely if you skip up a little, and just committing to being
| better every year than the last probably has positive
| correlation with an ok outcome.
| oramit wrote:
| This is a really honest comment and my thought reading through
| it is that there isn't going to be "one quick trick" to help.
| Your troubles seem multifaceted and not completely about money.
| Have you considered talking to a therapist?
| wincy wrote:
| Maybe I haven't found the right one yet. The last
| psychologist wanted to chat about the weather or something. I
| know I can set goals independently and execute on them. I
| lost 40 pounds during the pandemic after setting a weight
| loss goal. But you're right it is multifaceted. It feels like
| a game of whacka mole where I put intentionality and care
| into one part of my life (career, or health) and the other
| parts languish.
| mdp2021 wrote:
| > _it's pathetic_
|
| No it isn't. But that is revealing the issue: you tend toward
| the irrational. In fact,
|
| > _How do I stop_
|
| By realizing that there is no need for that, rationally. You
| want to buy new X, but you do not need them: _see the fact_ -
| they are per se useless and replaceable for their improper
| purpose of emotional release: to have X is just petty if you
| want to fix your finance. You can replace the feeling of that X
| with something free. _If there is one stroke of luck of living
| in these times, is that access to stimula has probably never
| been so rich in options and free in cost_.
|
| > _trying to think of things to buy_
|
| _Think instead of things to enjoy_. They are really, mostly
| free nowadays (even our presence here at Dan 's is). Be faster
| than the other habitual pattern and replace it - if you think
| of something to buy, realize you are doing it and think of
| something to enjoy. Replace the thought. You are used to
| collect items: _collect experiences instead_. Realize that you
| can replace items with experiences. For that, one laptop is
| enough, a basic car etc.
|
| That thought habit is a mental pattern to replace, to replace
| with something that makes sense - the other does not, as you
| have to realize and in fact realize.
|
| (And about Amzn, if other people were unable to read this, I
| would add: Bzos is bald. And you do not seem to have stopped to
| consider that. If you want to buy from him - who am I to
| convince you otherwise. But he is bald (you should see that -
| it should be a thought stopper, a doubt inducer). _And possibly
| the last person in the world who needs your money_. With your
| money you vote: is that what you want to promote? The very fact
| that you shop there raises the question: how long have you
| thought about your actions? The single ones, the generic ones.
| Some people think you are supposed to evaluate your actions
| before doing them. You take a step back, look at what you do,
| and what you have done and what you would do, and judge them as
| good ideas or bad ideas, for what they are. I am sure you know
| mathematics sufficiently. If I shop from somebody with those
| traits, I have deliberately deliberated it, it is a conscious
| choice. Read these paragraph carefully, and understand them. If
| you want clarifications, we are here.)
| kook_throwaway wrote:
| >With your money you vote: is that what you want to promote?
|
| I was ordering from amazon 3-5x a week and when they locked
| us down in mid 2020 I was so disgusted by amazon getting
| filthy rich while my friends and neighbors were locked at
| home that I haven't ordered from them since.
| hn_throwaway_99 wrote:
| I'd just like to point out the irony of the bolded, all caps
| statement in this article, "You'll NEVER get rich by working for
| someone else", the recent HN frontpage article about how Tim Cook
| got a $750 million payout working for Apple, and that the title
| of this post is "All Personal Finance Experts Are Liars".
| [deleted]
| MattGaiser wrote:
| One of the problems is that "rich" is relative. I was talking
| to a guy at an alumni event who said that managing partners are
| prone to fraud as they feel poor compared to their similarly
| ranked CEO friends.
| paulpauper wrote:
| Being the ceo is sorta an exception to this.
| thefounder wrote:
| Not any CEO either.
| moltenguardian wrote:
| Considering the majority of CEO pay is in company equity, they
| are working for themselves.
| carnitine wrote:
| That's a fair point, what about traders then? There are
| people working for eg. RenTec who have earned tens of
| millions despite being regular employees who don't even
| manage anyone. And this is not given as equity, bonuses are
| cash.
| zffr wrote:
| Yes and several members of professional sports leagues like the
| NBA/NFL are also very rich too. While it is possible to become
| very rich working for someone else, I think the author's point
| is that it is extremely unlikely.
| hn_throwaway_99 wrote:
| As others have pointed out, though, while I used an extreme
| example, you can take your average, middle-of-the-road yet
| high-quality software engineer, and if they make the right
| decisions (select jobs that pay well, live well below their
| means, invest with a standard diversified portfolio), they
| could easily retire in their 40s. I'm not saying this route
| is available to everyone, but certainly available to plenty
| of folks to not be considered a rare outlier.
| ghaff wrote:
| >easily retire in their 40s
|
| That's a stretch. An average of $150K/year before taxes
| throughout 20s and 30s is a pretty good job in the US. Say
| they save $50K/year--which is a lot on that salary--that's
| $1million saved overall which, depending on your
| assumptions, will give you about median US household income
| annually. So possible in a sense if retiring as soon as
| possible is your goal but certainly not to everyone's
| tastes.
| jmstriegel wrote:
| I think this doesn't account for investment returns. If
| you assume this money is invested for the duration of
| your 20s and 30s, you "only" need to invest $50k/yr for
| the first 10 years. At an average 7% growth, you can let
| it ride for a decade and still have just under 1.3mm by
| age 40.
|
| In your example, a high salary individual contributing
| $50k/yr for 20 years at 7% ends up with over $2mm by age
| 40. That's $80k/yr at a %4 withdrawal rate for the rest
| of your life.
|
| More reasonably, a $25k/yr contribution for 20 years at
| %7, would pass $1mm by 40. If you let that sit for the
| next decade and retire just before you turn 50, that will
| roughly double over the decade to $2mm.
|
| I agree that this isn't attainable for everyone, but
| contributing the $19.5k/yr max to a 401k pre-tax, and
| $5.5k/yr into a Roth IRA over your 20s and 30s, will
| likely make you a millionaire by 40 and a 2-millionaire
| by 50.
| [deleted]
| fossuser wrote:
| It's totally false even ignoring extreme outliers like Tim
| Cook. The reason there are so many angel investors in the Bay
| Area is because of the feedback loop of ipos giving regular
| employees 1-5M pretty often (and 5-50M+ less often). It's also
| part of the reason a pretty unremarkable and small home on the
| peninsula costs $3M.
| divbzero wrote:
| If you get rich from incentive stock options you have
| technically been working for yourself.
|
| The underlying gist of "You'll NEVER get rich by working for
| someone else" is that you should look for opportunities to
| build wealth that's not tied to hour-by-hour labor. You can
| do this by owning your own business, or by looking for ways
| to own equity in valuable assets beyond your regular job.
| hn_throwaway_99 wrote:
| I agree with your main point that you want a job where your
| compensation is not directly correlated to hours worked.
| I'd still argue that that's a very different argument than
| "you can't work for someone else and get rich" or that
| getting paid in stock options, as an employee with a boss,
| is really "working for yourself".
|
| I mean, enterprise software sales folks can get rich being
| paid on commission, "influencers" can get rich being paid
| by affiliate links, and none of them have any ownership in
| the business.
| ryandrake wrote:
| I wouldn't call a top engineer at a top company a "regular
| employee". Anyone with $1M+/yr in stock from their company is
| also a fringe outlier. Top talent at medium-sized companies
| are not making that, and regular rank-and-file at FAANG is
| not making that. I think the "NEVER" in the article is really
| a "statistically never". Yes, you can be pedantic (welcome to
| HN) and point out a few outliers, but it's still "never," in
| the sense of I'll Never hit the lottery.
| anigbrowl wrote:
| Is he really 'working for Apple', when he's the CEO? It'd be
| fairer to say he has Apple working for him.
|
| Of course you can get rich (or at least well off) in A Job. but
| realistically, that almost invariably means becoming a
| workplace strategist and doing office politics to make sure you
| outpace your peers, not just performing a job you like and then
| checking out to focus on your domestic life.
|
| If you are just a diligent and unselfish team member who never
| tries to elbow your way in front of others, you are very
| unlikely to become rich just from your job. Wealth tends to
| flow towards people who are competitive rather than
| cooperative.
| gruez wrote:
| > Is he really 'working for Apple', when he's the CEO? It'd
| be fairer to say he has Apple working for him.
|
| Apple's employees are _managed_ by him, but both him and the
| other employees are working for the apple 's shareholders.
| daveguy wrote:
| > Investing that $2.50 you spend every day on a latte in the
| stock market instead can lead to a life of riches. How's that for
| putting a damper on one of the little joys in life?
|
| Budgeting will let you realize there are essentially infinite
| ways to spend your money. You have to decide the best way to do
| that. If you're trying to make money, buying yourself a latte is
| _not_ the best way to do it. If you 're trying to _enjoy_ the
| money you earned, buying a latte may be the best way (but
| probably not).
|
| Budgeting helps you better understand the balance between
| spending and earning. When you start considering the best
| investment for the dollar you have earned, it makes a difference.
| edoceo wrote:
| Where can I get these cheap lattes? Seattle prices are >$5
| ghaff wrote:
| If they're that important to you, you can buy a relatively
| inexpensive expresso machine/milk frother and make them at
| home.
|
| People can spend their money and time however they want of
| course, but I'm always astounded by the lines at Starbucks
| whether people standing in line or the drive-through.
|
| I certainly use such places when traveling (though I try to
| go to local shops) but I've never especially understood the
| 8am stand in line for 20 minutes ritual.
| civilized wrote:
| TLDR: "don't skimp and save on your meager salary, instead become
| a small business owner and aggressively exploit tax deductions
| like Donald Trump"
|
| I feel like some options are being ignored here? You can also
| acquire more skills and get a higher paying job?
|
| There's no easy way to have more money. If there was, everyone
| would do it and the value of the money would be inflated away.
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