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Personal finance experts don’t get wealthy by following their own advice

larryludwig.com

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Re: Personal finance experts don’t get wealthy by following their own advice

#141

Post by jandrewrogers »

sokoloff wrote: post #96
jandrewrogers wrote: post #71

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'…

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.

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.

Re: Personal finance experts don’t get wealthy by following their own advice

#142

Post by zhdc1 »

logicalmonster wrote: post #55

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 optimi…

> 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 Even someone in a sedentary job in a field where their expertise won't necessarily become outdated will eventually have to hang up their cleats for one reason or another.

Re: Personal finance experts don’t get wealthy by following their own advice

#143

Post by foogazi »

ball_of_lint wrote: post #54

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 ea…

> 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

Re: Personal finance experts don’t get wealthy by following their own advice

#144

Post by foogazi »

astura wrote: post #100

>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 bibli…

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

Re: Personal finance experts don’t get wealthy by following their own advice

#145

Post by cma »

b112 wrote: post #33
giantg2 wrote: post #14

Earlier quoted context omitted.

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.

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.

But due to diminishing marginal utility of wealth, a more flat baseline like this scenario would still make everyone far more rich on average.

Re: Personal finance experts don’t get wealthy by following their own advice

#146

Post by leetcrew »

umvi wrote: post #19

> 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 kickback…

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.

Re: Personal finance experts don’t get wealthy by following their own advice

#147

Post by zhdc1 »

giantg2 wrote: post #7
dragontamer wrote: post #2

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, 50…

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.

> 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.

Re: Personal finance experts don’t get wealthy by following their own advice

#148

Post by anigbrowl »

wincy wrote: post #43

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 tha…

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.

Re: Personal finance experts don’t get wealthy by following their own advice

#149

Post by zhdc1 »

dheera wrote: post #39
dragontamer wrote: post #2

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, 50…

> 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?

Tax deferment and stability.

Re: Personal finance experts don’t get wealthy by following their own advice

#150

Post by edoceo »

jstummbillig wrote: post #137
rossdavidh wrote: post #129

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 owne…

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.

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.
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