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This 4×6 index card has all the financial advice you’ll ever need

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Re: This 4×6 index card has all the financial advice you’ll ever need

#181

Post by cdcarter »

azelfrath wrote: post #173
staccatomeasure wrote: post #156

Earlier quoted context omitted.

No. Poor people cut out non-essentials, be more efficient, and save money. A lack of nice things now will help later. Buy cheaper clothes, stop smoking, stop drinking, eat out less, don't have a fancy car...etc. Don't live beyond your means and consider your means what allows you to save 20%. Exactly what I'd have to do if I wanted to save more money. Stop pretending like poor people are all dizzy starving idiots tha…

I could not agree with you more had I said those words myself. A year ago I had a great job as a sysadmin, then I got laid off. Shit happens. I got a job doing landscaping for $10 an hour til I could find something better, and when winter came I worked in a restaurant serving people in the city. What did I do? I stopped eating out and put my cooking skills to use saving money by eating in. I cut out cable, lowered my…

That's not being poor.

Try earning federal minimum wage and providing for 2-3 people. You cut the crap out early. But your car that you need to get to work still breaks down. Your SNAP (don't know what they are? you've never been poor) benefits still run out too soon. And you and your kids still get sick.

Re: This 4×6 index card has all the financial advice you’ll ever need

#182

Post by WildUtah »

mrb wrote: post #58
zedpm wrote: post #37

Seems like good advice, though a great many Americans are at a disadvantage because their employer doesn't offer a 401k. Even with no employer match, a 401k allows an individual to save much more money in a tax-advantaged account ($17,500 for a 401k vs. $5500 for an IRA). If you're a W-2 employee but your employer doesn't offer a 401k then you're pretty much stuck paying higher tax rates on any savings beyond $5500/y…

With no employer match, a 401k has ZERO tax advantages. Because it merely delays when your income is taxed: after withdrawing it from the 401k. Mathematically you end up with the same capital whether your pay income taxes today and invest post-tax money, or whether you invest in a pre-tax 401k and pay taxes later.

Mathematically you end up with the same capital whether your pay income taxes today and invest post-tax money

No.

    ___
Put $100 in an IRA.

    [$100]
Quadruple your money by keeping it in an index fund for a couple decades.

    [$400]
Pay 25% income tax on the money.

    [$300]
Spend $300 in retirement.

    ---
Or,

    ___
Earn $100.

    [$100]
Pay 25% income tax on the money today.

    [$75]
Quadruple your money by keeping it in an index fund for a couple decades.

    [$300]
Pay 15% capital gains tax on the $225 gain.

    [$266.25]
Spend $266.25 in retirement.

    ---
But you could also tell this story:

    ___
Put $100 in an IRA.

    [$100]
Double your money in some garbage high-fee actively managed fund your boss's boss picked out based on the quality of strippers the investment advisor hired when he sold your company the plan. Your awful 401k offered limited investment options and the rest were even worse.

    [$200]
Pay 25% income tax on the money.

    [$150]
Spend $150 in retirement.

    ---
But lobbying your boss to get low-fee index funds into the 401k plan doesn't fit on a card. It's still the kind of thing a wise planner needs to do sometimes.

Re: This 4×6 index card has all the financial advice you’ll ever need

#183

Post by reginaldjcooper »

kondro wrote: post #158
kintamanimatt wrote: post #42

Earlier quoted context omitted.

I doubt anybody could construe a general opinion that's not tailored for a specific individual's situation as financial advice, if that's what you're getting at. Maybe it's different in Oz.

You'd be surprised. Our law assumes quite a large amount of potential uneducation and general stupidity when it comes to an unsophisticated investor interpreting financial advice.

You can't even post a, "this is not advice but here's what I am doing..."? That seems overly strict.

Re: This 4×6 index card has all the financial advice you’ll ever need

#184

Post by prawn »

jellicle wrote: post #80

There are a couple of good parts about this post. The first is the HN comments, which are an unintentional fountain of hilarity. But the second is the assumptions. 50% of the US population can't afford to put even a dollar into any sort of investment security. Of the 50% of the public that does own some sort of security, most of them are in the three-figures range. This index card, without realizing it at all, has ta…

Budget to save before you outlay your discretionary income. You might have to redefine discretionary to include car (if public transport suffices for your job), cable, etc.

Don't lay out your budget and set aside $x for entertainment (eating out, etc). Savings will always suffer. Set aside desired savings first and then work with what's left.

Re: This 4×6 index card has all the financial advice you’ll ever need

#185

Post by alok-g »

JoshTriplett wrote: post #9

Almost all of this is excellent advice, except for one point: "save 20% of your money". That's a bare minimum, which will let you retire after about 37 years of working. Bump it to 35% and you'll retire after 25 years. Bump it to 50% and retire in 17. Bump it to two-thirds and retire in 10 years. That's one of the most important factors in your personal finances: not how much you make off your investments, not whethe…

>> ... Bump it to 35% and you'll retire after 25 years. Bump it to 50% and retire in 17. Bump it to two-thirds and retire in 10 years.

Can you/someone please point to the maths behind this? It sounds to me there are some assumptions about returns on investments and inflation rates.

Re: This 4×6 index card has all the financial advice you’ll ever need

#186

Post by kamaal »

As some one who takes great meticulous care in planning and investing regularly, both for the long term and super long term(retirement savings), I can pitch in and offer some advice here.

First advice I would give is, totally avoid using credit cards. It might sound impractical, but I've found some workarounds for it. Which is to use my debit card as a credit card. Go frugal for a few days and save some money in the savings account, then use that money as credit to yourself. The worst thing about any kind of debt/loan is the interest part. Lesser interest you pay the better, except in situation where you are making an investment with the loan(like buying a property of a home) and the value of the investment is growing faster, when the at the same time inflation is decreasing your loan's net value.

Second advice I can give you is to buy your own home and avoid paying rent. If you look at the whole thing having your own home is vastly more profitable than renting some one else's home on a long term.

Then there are a few assorted advices I would like to give, especially to people in India(My country), But I believe it applies equally to else where to. Buy gold in small quantities regularly. Gold is protected from inflation, and is the near standard of economic growth around the world. And value of growth(over long term) always grows. Once you have sufficient gold- sell it and, learn to buy real estate in city outskirts. You will see in any growing city, sooner or later outskirts merge into main city areas and then real estate prices shoot up. Take loans to do this, if and only if the loan is small and as I said before, inflation affects your loan faster than, the rate at which its value grows.

Make the mandatory 1 lac per year(if you can't make as much as you can), tax savings investments on things like endowment insurances which serve as both life insurance and long term investments.

Its good if you could rotate money by building a home which you could rent out. It will serve as a steady source of income later and after retirement.

Lastly at the risk of attracting downvotes, please don't invest in stocks and show pointless heroics if you don't understand that business. Far more people have burnt their hard savings hoping for magical miracles to happen and make them millionaire while dealing in stocks. In short if you know how to do it, do it. Else keep out for your own good.

Re: This 4×6 index card has all the financial advice you’ll ever need

#187

Post by pinaceae »

MacsHeadroom wrote: post #169
ajuc wrote: post #157

Earlier quoted context omitted.

You have food stamps, cheap oil and electricity, unemployement smaller than 10%, and if you are homeless you can move to a state that doesn't have winters capable of killing you. People in Eastern Europe save money and 50% of Americans can't?

41% of working age Americans are jobless. The official unemployment calculation is a joke.

there would be civil war if this were remotely true. ever think about those "facts" for a second?

Re: This 4×6 index card has all the financial advice you’ll ever need

#188

Post by jamesaguilar »

cdcarter wrote: post #181
azelfrath wrote: post #173

Earlier quoted context omitted.

I could not agree with you more had I said those words myself. A year ago I had a great job as a sysadmin, then I got laid off. Shit happens. I got a job doing landscaping for $10 an hour til I could find something better, and when winter came I worked in a restaurant serving people in the city. What did I do? I stopped eating out and put my cooking skills to use saving money by eating in. I cut out cable, lowered my…

That's not being poor. Try earning federal minimum wage and providing for 2-3 people. You cut the crap out early. But your car that you need to get to work still breaks down. Your SNAP (don't know what they are? you've never been poor) benefits still run out too soon. And you and your kids still get sick.

That notwithstanding, what advice would you naysayers like to see on this card for poor people? Is there anything that simply knowing is going to help them?

This card contains all the major points of advice a poor person can use about finance. Whether that is enough to save them is a completely different question. Raising it is not a valid criticism of this card.

Re: This 4×6 index card has all the financial advice you’ll ever need

#189

Post by stephenbez »

alok-g wrote: post #185
JoshTriplett wrote: post #9

Almost all of this is excellent advice, except for one point: "save 20% of your money". That's a bare minimum, which will let you retire after about 37 years of working. Bump it to 35% and you'll retire after 25 years. Bump it to 50% and retire in 17. Bump it to two-thirds and retire in 10 years. That's one of the most important factors in your personal finances: not how much you make off your investments, not whethe…

>> ... Bump it to 35% and you'll retire after 25 years. Bump it to 50% and retire in 17. Bump it to two-thirds and retire in 10 years. Can you/someone please point to the maths behind this? It sounds to me there are some assumptions about returns on investments and inflation rates.

The math is covered here: http://earlyretirementextreme.com/

Basically the thought is that 20-25 years of living expenses will generate enough income for you to early retire on.

If you make 100k (post tax) with a 20% savings rate, you save 20k, and have living expenses of 80k. Ignoring future compound growth, for each year you work, you save 1/4 a year of living expenses.

If you go the other extreme, and have 66% savings rate, you save 66k, and have living expenses of 33k. With 33k living expenses you need 660k to retire. Each year of working you end up with 2 years of living expenses. Even ignoring the effect of investment growth before you retire, that is only 10 years of working.

Of course 20 years of savings maybe be too optimistic. The book is good and has more details.

Re: This 4×6 index card has all the financial advice you’ll ever need

#190

Post by toomuchtodo »

humanrebar wrote: post #16

I consider it to be a huge oversight that they left off building an emergency fund. Before buying a house, buying individual securities, or maxing any retirement contributions, you need enough liquidity in your investments to get you through an illness or layoff that leaves you without income for a year. It amazes me how otherwise intelligent peers of mine will be paying extra on mortgages, student loans, and retirem…

You can get your contributions out of a Roth IRA at anytime. That gives me tens of thousands of dollars I can get to in 24-48 hours. It also helps that retirement accounts are shielded from creditors, and hence make better vehicles as emergency funds when you've done sometime like walk away from your underwater home.
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