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Hard-won lessons about money and investing

mattcutts.com

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Re: Hard-won lessons about money and investing

#121

Post by CompelTechnic »

usaar333 wrote: post #74
j_lev wrote: post #3

> If you’re an employee working for salary, it’s going to be hard to reach that level of independence. ... You can try to radically lower your financial burn rate, but few Americans have taken that step. So many people are quick to dismiss living well within one's means as a way to financial independence. Here's the link to the facts again: http://www.mrmoneymustache.com/2012/01/13/the-shockingly-sim... TL;DR: Live o…

Well, except for how difficult that is. Living on only 35% of after tax income requires you either A) live extremely cheaply or B) make tons of cash. Roughly speaking, in California, this requires living off of 20% of pre-tax income. As an example, to live off $35k/year in SF as a single person (which would be considered modest in tech circles), you'd need to earn $175k/year. With a family, this gets more unrealistic…

To be fair, you picked one of the world's highest cost of living locations to live in, let alone retire in.

I'm on track to retire in my thirties, or earlier, here in North Carolina. Not hard at all on a mechanical engineer salary.

Re: Hard-won lessons about money and investing

#122

Post by mfringel »

JoshTriplett wrote: post #34
adamio wrote: post #26

Earlier quoted context omitted.

What about rent or mortgage? In most major cities low rent could be easily 35% of after tax income already

Depends on how much home you go for; most people buy or rent far more home than they need or can afford. Sure, if you're in the middle of Mountain View or NYC, even the tiniest apartment can be exorbitantly expensive, both in absolute terms and as a fraction of salary (which does not scale to the same degree). Those locales are fundamentally expensive to live in unless you get very creative. On the other hand, in mos…

Indeed, "dumping raises into savings" was one of the smartest things I ever did, financially. When I moved from working from a university to working at a mid-sized corporation, I got roughly a 25% pay bump. Every single dollar of that went into savings (fully funding the 401(k) and Employee Stock Purchase Plan, etc.).

This did a couple of things... it kept a lid on living expenses because there was no additional cash, but it also provided an easy way for me to raise my savings every year without having to make too many conscious choices, just by moving every pay raise into savings.

Re: Hard-won lessons about money and investing

#123

Post by lars »

usaar333 wrote: post #74
j_lev wrote: post #3

> If you’re an employee working for salary, it’s going to be hard to reach that level of independence. ... You can try to radically lower your financial burn rate, but few Americans have taken that step. So many people are quick to dismiss living well within one's means as a way to financial independence. Here's the link to the facts again: http://www.mrmoneymustache.com/2012/01/13/the-shockingly-sim... TL;DR: Live o…

Well, except for how difficult that is. Living on only 35% of after tax income requires you either A) live extremely cheaply or B) make tons of cash. Roughly speaking, in California, this requires living off of 20% of pre-tax income. As an example, to live off $35k/year in SF as a single person (which would be considered modest in tech circles), you'd need to earn $175k/year. With a family, this gets more unrealistic…

Living on a low percentage of income seems like a great strategy if you're optimizing for dying with the maximum amount of money in the bank.

I think many people in this thread need to consider if that really is the game they want to be playing. I'd think people would be better off maximizing their total happiness. There's research showing that having good memories from the past positively affects momentary happiness in the present [1]. With that in mind, it seems like spending money on great experiences now is a good idea, while excessive saving could be counter productive.

[1]: http://www.wjh.harvard.edu/~dtg/DUNN%20GILBERT%20&%20WILSON%...

Re: Hard-won lessons about money and investing

#124

Post by tacos »

The tone is far too authoritative given the narrow experience of the author. Reading an Googler's quickie blogpost investment guide isn't the path to financial independence. It's barely the bot-filled advice of /r/personalfinance with a better PageRank.

Microsoft pushed giving and 30 years later there are still people blindly pumping money into United Way. (Maybe not the best charity!) Google seems to have pushed their smart people into another half-baked set of assumptions.

I'm forcing myself NOT to get involved on this one (the solution to one person's narrow experience isn't another guy with different narrow experience ranting in the comments) but I will point out that Schwab Charitable (their DAF) has lower minimums and fees than Vanguard.

A lot of nerds spend more time researching a graphics card than a stock pick or charity. Like anything else, put the time in and you'll be rewarded over the long term.

Re: Hard-won lessons about money and investing

#125

Post by randomdata »

yen223 wrote: post #81
Ecio78 wrote: post #41

Earlier quoted context omitted.

Mr. Money Mustache will probably tell you to move to a different place[1], saving time and money by reducing the commuting time[2] etc.. NB I neither agree nor disagree with his ideas (still have to decide.. :)) [1] http://www.mrmoneymustache.com/2011/09/28/get-rich-with-movi... [2] http://www.mrmoneymustache.com/2011/10/06/the-true-cost-of-c...

By my calculations, it's generally much better to live in a high-cost area while earning a high wage, than to live in a low-cost area while earning a low wage. This is because a lot of products out there have a fixed cost which isn't based on geography (think iPhones). A higher wage makes it easier to purchase those items.

My calculations differ, though they are probably based on different locations than you used, which changes the numbers.

Median incomes are 75% higher in the high cost area, but housing costs are 200-400% higher, which, being a major expense for just about everyone, quickly erodes any gains you might make on the income side. Services, like internet connections, were also more expensive in the high cost area. Goods like iPhones are the same in both places, you are right, but is actually a larger portion of your disposable income because of the higher living costs.

The one place you might be able to make gains in the high cost area is if you struggle through paying those 400% higher housing costs with the intent of selling your home and moving to a low cost area later in life. Then you can ride that significant equity you have built, assuming the property maintains or increases in value.

That said, my preferred method is to live in a low cost area and work in a high cost area (telecommute).

Re: Hard-won lessons about money and investing

#126

Post by gbog »

lars wrote: post #123
usaar333 wrote: post #74

Earlier quoted context omitted.

Well, except for how difficult that is. Living on only 35% of after tax income requires you either A) live extremely cheaply or B) make tons of cash. Roughly speaking, in California, this requires living off of 20% of pre-tax income. As an example, to live off $35k/year in SF as a single person (which would be considered modest in tech circles), you'd need to earn $175k/year. With a family, this gets more unrealistic…

Living on a low percentage of income seems like a great strategy if you're optimizing for dying with the maximum amount of money in the bank. I think many people in this thread need to consider if that really is the game they want to be playing. I'd think people would be better off maximizing their total happiness. There's research showing that having good memories from the past positively affects momentary happiness…

But money don't buy good memories. I have much better memories of camping with friends for near zero euros, than expensive hotels.

Re: Hard-won lessons about money and investing

#127

Post by orblivion »

ballstothewalls wrote: post #27

Lesson number 1 is unequivocally wrong and contradictory with the start of the article. He says you shouldn't invest your money in single stocks, but then advocates for you to invest your money (by way of forgoing salary in favor of equity) into a start up company with (by definition) no track record of success or guaranteed future. Not to mention that when the start-up tanks (which it will do statistically) you will…

I noticed the same thing. One difference I came up with is that you get to buy low, long before any of the professional traders get a chance.

Re: Hard-won lessons about money and investing

#128

Post by tacos »

prostoalex wrote: post #55
arkem wrote: post #10

I've been considering moving from holding Vanguard ETFs (one of their Total Retirement funds) over to Betterment or Wealthfront to take advantage of their automated tax loss harvesting. Does anyone have any thoughts about whether automated tax loss harvesting is worth the 0.15-0.25% fees that the robo-advisers charge?

Wait till the price drops to 0% https://intelligent.schwab.com/

Schwab is also aggressively pricing their ETFs vs Vanguard, beating them in many cases. Not worth switching, but "Vanguard is Best" isn't the rule either.

Re: Hard-won lessons about money and investing

#129

Post by Retric »

usaar333 wrote: post #74
j_lev wrote: post #3

> If you’re an employee working for salary, it’s going to be hard to reach that level of independence. ... You can try to radically lower your financial burn rate, but few Americans have taken that step. So many people are quick to dismiss living well within one's means as a way to financial independence. Here's the link to the facts again: http://www.mrmoneymustache.com/2012/01/13/the-shockingly-sim... TL;DR: Live o…

Well, except for how difficult that is. Living on only 35% of after tax income requires you either A) live extremely cheaply or B) make tons of cash. Roughly speaking, in California, this requires living off of 20% of pre-tax income. As an example, to live off $35k/year in SF as a single person (which would be considered modest in tech circles), you'd need to earn $175k/year. With a family, this gets more unrealistic…

Living really cheaply in SF is really just a question of cheap rent and never eating out. If your willing to have roommates you can get below 1k/month rent making 25k/year living expenses doable.

Granted, Heath issues, dependents, or debt can make this a non starter. But, just because most people you work with spend most of what they make every month means you need to do the same.

Re: Hard-won lessons about money and investing

#130

Post by tacos »

netcan wrote: post #85

I'm surprised he doesn't mention real estate or investing in friend/family businesses as an option. This isn't as safe as index funds, but it is an option where you can increase your success rate by being competent. It probably has a risk profile similar to working for equity at a startup, an option only available to people who work in or around startups.

He also didn't mention putting your money in TSP if you're an eligible federal employee, or talk about individual 401ks tied to an LLC to increase retirement saving limits, or why wandering the halls of Google makes you predisposed to think Cisco would be a no-way-to-lose investment. The article represents a smart but narrow dude's perspective on a very, very big world.

That said, Real Estate during the "banks won't loan anyone money and interest rates are headed up storm" and "loan money to friends/family in the Shark Tank era" don't make my "top wealth-building picks" list for 2015...

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