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

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

#211

Post by BrandonMarc » Tue, Sep 17, 2013, 5:52 AM UTC

prawn wrote: post #184

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.

Hear hear. I can't repeat this point enough. You have to force yourself to save, first. If you spend on everything else first and figure you'll save "the rest", something will always come up. If you set it aside before other categories, it will ... be set aside!

As a corollary, just writing (and following) a basic budget does wonders. I've talked to a lot of people who said it was like getting a raise. You have regular expenses, so just plan out a basic month and then follow it. Something magic happens next: by being more conscious and deliberate about your spending, you spend less on un-necessary "wants" (if it's truly a need you'll spend it no matter what).

Plus, a written budget is like looking in the mirror: it's a reflection of your priorities, good bad or indifferent. If you see you're spending $300 / month on restaurants and $0 / month saving for retirement ... well, that shows what appears to be important to you. And, if you've got two brain cells to rub together, it shows an easy place to make some adjustments. Not that I have anything against restaurants ... even $200 and $100 would be far more reasonable.

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

#212

Post by BrandonMarc » Tue, Sep 17, 2013, 5:59 AM UTC

dionidium wrote: post #85

JoshTriplett wrote: post #38

Earlier quoted context omitted.

The idea that >20% savings rates are not "realistic" is a serious mindset problem. Almost anyone on Hacker News with a paying job (i.e. not an early-stage no-funding startup) should easily be able to save much more than that. Sure, saving two-thirds of your income might be out of reach, and even the 20% advice is better than most sites that often say 5-10%, but consider carefully whether you can increase it and retir…

The idea that your retirement years are a better time to live than your 20s and 30s is a serious mindset problem.

A good-sized retirement isn't just for fun. It's to work against inflation and maintain financial security / independence, it's to prepare for potential catastrophes, and it's also to prepare for your declining years.

Actuarial tables show if you make it to age 40 you have a very high likelihood of making it to 80 or 90. Statistics show that the last decade of your life - thanks to health care needs or assisted living necessities - is often more expensive than any other decade of your life.

That's absolutely important to plan for in your 20's and 30's when you have the time (and energy) to make a difference.

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

#213

Post by BrandonMarc » Tue, Sep 17, 2013, 6:07 AM UTC

throwaway1979 wrote: post #15

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…

"Save 20%" ... gross or net?

Fair question, but OTOH it kinda doesn't matter since nobody does either.

Seriously, everybody talks about saving money, and everybody intellectually agrees it's a good thing, but next to nobody actually does it.

Which means, even if you're aiming for 20% of the little number, you're behaving smarter than the vast majority of your peers.

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

#214

Post by BrandonMarc » Tue, Sep 17, 2013, 6:19 AM UTC

baddox wrote: post #20

ChuckMcM wrote: post #12

Earlier quoted context omitted.

So in the ideal world everyone around you is doing the same thing as the card. If that is true, then when something goes wrong there will be plenty of safeguards already in place. It takes a special kind of hubris to social welfare benefits believing you will never need them.

> So in the ideal world everyone around you is doing the same thing as the card. That still doesn't constitute financial advice, unless your choice to follow the card somehow influences others to follow the same card, which is unlikely at any measurable level.

Not true. Those who are wealthy and happy give to charity, and not for greedy reasons or boastful vanity. Many charities provide a very valuable social safety net, and by carefully choosing what charity you give to, you can pick the ones that are the most efficient, the most effective, and the least wasteful. And no, paying taxes don't count ... you don't have a choice, there, and you can't personally ensure the money is spent to maximum effect.

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

#215

Post by twelve40 » Tue, Sep 17, 2013, 6:20 AM UTC

sopooneo wrote: post #179

gremlinsinc wrote: post #166

this is nothing new... this is stuff straight out of the automatic millionaire by David Bach..wanna get rich? First step is pay yourself and get out of debt... then build up some solid investments.. real estate is a good way to build assets and wealth flipping or rentals..rentals for long term obviously. Or do what 80% of us reading hn plan on doing ...build something awesome and get bought out for 10 mill.

I never understood why real estate would be such a good investment. If one house is good, why not 100 as part of an REIT?

It's different than REIT, not necessarily universally "good". One obvious difference is with a house you get a collateral for a huge low-cost leverage, that in some cases might be easier to settle if things go South (e.g. shortsale). Another one is rent you save/collect from someone else.

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

#216

Post by BrandonMarc » Tue, Sep 17, 2013, 6:22 AM UTC

peterjancelis wrote: post #120

Doing a startup is inconsistent with the advice give here.

Debt for consumer needs != debt (investment) to build a business

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

#217

Post by eatmyshorts » Tue, Sep 17, 2013, 7:54 AM UTC

a8da6b0c91d wrote: post #60

nostromo wrote: post #18

Am I alone in wondering if the advice about broad index funds is no longer good? We're still below the s&p inflation adjusted high from ~2000 -- almost 14 years later. When will the gains finally arrive? I worry that there is some systemic problem in our economy that has leaders playing whack-a-crisis every five or ten years that erases years of gains. I've read John Bogle and I want to believe . But a few years ago…

I also question the advice to max out 401K and IRA contributions. Recent events in Cyprus, Argentina, and some other places have made it quite clear that such money is far from safe. If there's a fiscal crisis and the political class is backed into a corner, they will seize your money. They'll do some sleight of hand to claim you're getting an equal value retirement annuity, but that will be a lie. More generally it…

Did either Cyprus or Argentina seize any defined contribution pension funds? I was under the understanding that only defined benefit pension funds have been raided. I can't think of a single exception.

401K and IRA are defined contribution pensions. Repricing financial instruments can affect those greatly, but I would argue that those are accurate reflections of the value of the investments.

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

#218

Post by eatmyshorts » Tue, Sep 17, 2013, 7:57 AM UTC

tunesmith wrote: post #198

tosseraccount wrote: post #106

Earlier quoted context omitted.

A 4% rate of return from an index fund is long-term average behavior. Average return for S&P 500 from 1928 to 2012 is 11.3% [ source : http://pages.stern.nyu.edu/~adamodar/New_Home_Page/datafile/... ] Inflation rate averages about 3.2% [ source : http://inflationdata.com/Inflation/Inflation_Rate/Long_Term_... ] 11.26 - 3.2 = 8.1 % real return. Long term investment in a diversified set of equities is a very good inves…

I started retirement investing in 1993. I did an APY analysis where I pretended I invested every one of my retirement contributions into the S&P-500, on the day that I invested it. From then until today, that APY would have been 6.77% . That's a far cry from 11.26% .

Did you include dividends when calculating that percentage? I have not done the math, but my intuition tells me that 6.77% is a little low. 11.26% is also high for that time period--I think that figure includes the post-WWII figure (and also includes dividends).

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

#219

Post by [deleted] » Tue, Sep 17, 2013, 8:04 AM UTC

ww520 wrote: post #150

I don't know how good the advise is to max out 401K and other retirement account. Some of the 401K accounts have very limited choice of investment. For example, you can't do real estate investment. If you know what you are doing, you might want to retain the money outside and do the investment yourself on investment that are not available in a typical 401K account.

[deleted]

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

#220

Post by eatmyshorts » Tue, Sep 17, 2013, 8:08 AM UTC

ww520 wrote: post #150

I don't know how good the advise is to max out 401K and other retirement account. Some of the 401K accounts have very limited choice of investment. For example, you can't do real estate investment. If you know what you are doing, you might want to retain the money outside and do the investment yourself on investment that are not available in a typical 401K account.

Look at the costs associated with each of your 401K investment options. Usually, most plans include at least one that is not actively managed, and their management costs tend to be significantly lower. Additionally, but avoiding actively managed funds, you also avoid the "chasing the tail" syndrome that leads to almost all active managers under-performing index funds over time. Layer in the tax benefits of 401K accounts, and I think the advice to max out 401K and other tax-shielded investments, and to look for "inexpensive, well-diversified funds" is very good advice. If followed correctly (few do, from the sounds of the replies to this article), I think you'll find that the advice is sound.