So you've completed CS007. And graduated Stanford. You've even managed to save around $10K in cash from various summer jobs and gifts from relatives. The consensus advice investment management professionals would offer is to sock it away in a well-diversified set of Vanguard Funds. Which you keep adding to on a monthly basis allocated from your paycheck. As well as re-investing any dividends generated. Which will compound nicely over the next thirty years. Leaving you with a $1M nest egg that will provide stable yearly income during your golden years. As well as a decent inheritance left over for the next generation.
But I have a really hard time giving this advice to a 22 year old. I certainly didn't heed it myself. Instead I used the cash and spent 100% of it on my own professional and personal development. So, naturally, since this is Stanford and Silicon Valley. I'd include a section on Risk. Taking it. Managing it. What are the rewards. As well as the costs. But with the emphasis the post-graduation 5-10 year window may represent a unique opportunity in your life to take it. And that there are programs such as StartX and YC available to assist should you decide to go all in.
As university Devops engineer working with students, I have had a number of opportunities to advice the young in the ways of adulting. One thing that's painfully obvious is that the 'your 20s are your best time to take on risks' crowd is missing is like, women and fertility. Women in the US are generally more risk adverse, so they're more likely to heed the usual 'save now!' spiel. They're also facing a conflict with career risk vs family risk in ways men do not encounter at all. Worse, talking with friends and colleagues about it can threaten your career tracking if you are perceived as a short timer. I've seen too many managers, on HN no less, say they avoid hiring women who might become pregnant.
And as far as I can tell, health insurance is allocated two words in the lecture series: "health" and "insurance". That's it! I will grant you that the ACA is under incredible threats at the moment, but employer based health insurance isn't going anywhere, and at the very least, HDHP / HSA plans vs. PPOs vs HMOs is a thing. Considering how expensive pregnancy, birth, maternity leave, child care can be, health insurance and savings is a crucial topic not even mentioned in the 'couples finances' section.
The other thing I should mention is student loan debt. 92 percent of those surveyed in the Stanford course say they have no student loans. This seems high -- even the net price of Stanford is $17k / year. Most undergraduates are going to be paying like 4.45 percent interest, which is way better than the 6.8 they used to charge. Despite required financial counseling, most people with loans don't really know how repayment works, and haven't looked at how much their payments will be post graduation.
Now I'm about to turn 40, and now in the timeframe where I have the network to exploit and experience to get into customers, I'm sitting on a nice nest egg. If I decide to roll the dice, I get to keep more pie than an impoverished college grad.
My 22 year old self would have been failing fast into the heart of the dot-bomb implosion and probably stuck in some less than optimal grind for a few years.
The advice I give to people on here is generally upvoted, except when it comes to investing. If you're in the top 1% or 0.1% intellectually and you're active in the tech community as a software developer or other highly technical skill you are very well situated to beat the market.
Pick any decade where this wasn't true. In the 90s it was buying web domains or investing in personal computer companies. In the 2000s it was investing in platforms and social networks or even just building a company in the mobile space. In the 10s it was cryptocurrencies and AI.
All of these things were obvious and even if you didn't get in at the very ground floor (buying sex.com or 50 bitcoins for a dollar) you still make hyper, hyper gains.
100000% returns? Totally possible. Now go on and take all that knowledge you hard fought for at MIT, Stanford, Harvard, or Waterloo (or even on your own!) and use it too... Invest in low fee ETFs.
Agree. In your 20s, your main competitive advantage is your ability to take risks. Plus your skill set is incomplete, so you’re likely to see much better returns from investing in yourself than the market.
Honestly, I suspect the consensus would be to use there $10,000 to start a savings account where you keep 6 months of living expenses for those times when your opportunities blow up in your face. That's risk management, and I'd have no trouble tattoing it on a 22 year old's forehead in reverse.
Further, I'd have no problems telling someone with a 6-figure income to max out their 401k and then invest more in index funds. Take it from a 50 year old, it's easy to come out if that 10 year window with nothing but painful experiences.
Yes, exactly. I don't think a new grad should be taking their $10k savings and putting it into a vanguard. They're at a unique point in their lives where they can take a risk and start a company. It'll probably fail, but even if it does, there's lessons that usually come with that that's way more valuable than the $10k lost. Also, even if it's not a smash success, there's plenty of businesses you could start that might bring in a nice side income for many years while you go do other things such as get a real job. That's also much more valuable than 5% / year off of a vanguard.
I agree with the gist of your post but your consensus advice is a bit off:
>And graduated Stanford. You've even managed to save around $10K in cash from various summer jobs and gifts from relatives. The consensus advice investment management professionals would offer is to sock it away in a well-diversified set of Vanguard Funds.
Your first $10k is your emergency fund. From what I've read, the consensus is: don't invest it, instead keep it in an FDIC insured savings account + cash. If you need it, it'll probably be because you've been unemployed for a while. You are most likely to be unemployed during an economic downturn. The cash choice insulates against natural disasters.
If you do invest it, try a target date fund that's matures in the near future. For today, 2020 would be a good choice.
Edit: there's a correction on this in the child comments.
The math on this is misleading. $10k invested for 30 years to become $1M implies an interest rate of 16.6%. Even as a nominal interest rate in the US, that would be an extremely lucky result to consistently achieve. My advice to you would be to start a hedge fund immediately with whatever secret knowledge you have, and then all money concerns will become irrelevant. :-)
A good choice for a real ('real' meaning non-nominal) interest rate in these types of projections is 7%, which would make $10k equal to $76k in 30 years. Because you used a real interest rate, the $76k is $76k in today's dollars, not in 2047 dollars. The conclusion is that you will need to invest a bit more than $10k today to retire in 30 years.
I like to use this type of calculation to frame my short-term purchase decisions. Would I like to spend $20 on this thing I don't need? Yes. Would I like to spend today's equivalent of $300 on it 40 years from now? No thank you.
My take is different and I don’t think there is one way to live either.
I take my dad’s words: spend the money and time well, and enjoy your life.
So save enough every month and get a good meal either alone or treat your family to a good brunch/dinner. Plan a trip at least once a year. Go to movies or do something healthy you have never done before. Buy new clothes. Whatever
But have a budget. Spebd 100% is IMO a bad advice. When you need the money you have none.
I also do not recommend invest in stock market unless you are buying one of those low-price stocks that will go up crazy.
Instead I would save up enough money, buy a house. Owning a land or an apartment will do you far better in the long run. Buy some gold when you have spare. Also invest in your life insurance; Usually you pay about 20-30 years then you get money just like social security (and some you can cash all with a big bonus).
I have been through tough time. If it weren’t for the medical leave $$ my employer provides through insurance, I would be forced to sell my house at age 26 right now in NYC.
Think in the long term: professional developmebt is great but do not let career be the only thing be your long term prospect. Putting 100% without saving is a big risk you really want to avoid.
Sometimes I have the urge to tell people why I think they should stop coding after work. But hey, if that makes them happy (I get it might be a hobby) great. But please do not fall into “this is norm”. I went to a lot of conferences and hackathons; great but don’t really satisify me as much as enjoy an outdoor view. Going to a new city for a talk is good for as long as you really have the chance to experience that city. Otherwise I’d wait for video to come out (and I feel bad so nany conferences do not organize publish conference videos).
In the end, what is good for saving a million dollar when you are sick and tired all the time?
Might be good to have another section on 'Inflation.'
That $1M nest egg will need to be ~$3M in 38 years (when a 22yr old might be looking to retire at 60) in order to have the same purchasing power as $1M today (which isn't much in many markets).
Certainly not enough to provide a decent inheritance for the next generation.
I struggle with this week to week as I fight between strictly managing my finances and funding my YOLO 26 year old "holy shit I can't believe I'm making this much money" swagger.
I'm having a really hard time justifying saving above the bare minimum - despite my experience as a recruiter, I still can't convince myself that there will ever be a time I'm not hireable, unless all jobs have vanished (apocalypse, general AI), in which case my "nest egg" is useless anyway.
It's just a logical reach to justify my excessive spending I'm sure, but I've really got myself convinced here :P
Funnily enough (to me), I'm in a bit of a situation similar to this, financially anyway (I lack the Stanford side, but whatever).
If I were to put, say as you mentioned, $10K in cash into something like a set of Vanguard Funds, what percentage of my monthly income should be added?
I have money socked away right now from working internships, and from the past year as a full time engineer, but haven't invested it in much other than partially into my 401k. I'd love to do something with it and I know it's doing nothing sitting in the bank in a regular account.
> You've even managed to save around $10K in cash from various summer jobs and gifts from relatives. The consensus advice investment management professionals would offer is to sock it away in a well-diversified set of Vanguard Funds.
Put half of it in a Roth IRA with Vanguard. You can still do a lot of risk taking and self development on $5k, and the compounding from being in the Roth IRA that early really will make a big difference.
The thing about personal development - it's hard to confiscate or take away. It can't be seized, overtaxed, or barred from leaving the country. It can have value that isn't defined by just one nations' standards of governance. It's not liable to inflation (AFAIK people aren't getting smarter).
This makes it relatively less risky and more valuable.
I think this is really great but IMHO college is too late for this. Personal finance should be taught in middle and high schools just like health classes.
When I was 18 and a freshman in college I saw some crazy decisions including using student loans to put a down payment on a car or taking out private loans for spending money.
I was taught budgeting and basic finances in both middle and high school (I went to public school in NJ) and whatever I learned evaporated immediately because I had next to no use for it at the time. College (when people are getting more independence than they’ve had previously) is a much better time to teach people these skills.
In general, I chafe at the types of educational arguments that go “we should teach kids more useful skills, like how to file a tax return!”. I think such arguments would benefit from the knowledge that some students are already being taught this, and need to relearn it when they get out into the work force anyway.
Absolutely this. We were actually taught basic finances, cooking, cleaning etc when I was in elementary school. They called it "hemkunskap" which literally translated to "home knowledge". I used to think it was useless then, except maybe for the cooking classes – I enjoyed those – but I can trace back A LOT of my deeply rooted knowledge for personal finances and other home skills to those classes. For instance, I moved away from home at age 15 to attend high school in a different town, and all of a sudden I had to deal with a bunch of things I never had to care about before, like weekly budgets and what not. Right then it dawned on me just how useful those classes actually were, and they really did help me out a lot.
I wish this had been a staple class throughout my entire stay in school. A lot of the stuff will be repetitive, but that's what it means running a home and a life – a lot of chores that you keep doing over and over, some maybe you'll optimize like hiring a cleaner (after working out it fits your budget!) or investing in technology that just makes things easier.
As you grow older, the classes would obviously need to become more advanced, but I think this would go a long way to make kids much more capable to deal with real world problems, and there's a lot of cross over with other subjects as well. I don't know if schools still do this, but when I went to elementary school we had wood working and/or sewing class. I enjoyed those, but we had those for way longer than we had home skills class, and it seems to me these three could be successfully combined.
I agree that basic financial ideas should be taught in high school, but people aren't always ready for a deep dive until they've started to be more independent.
Seems to me personal finance should be something you start learning from a young age by watching and learning from your parents and other people you interact with. If schools need to teach this because of failing parents, starting in elementary school would not be too early.
> I think this is really great but IMHO college is too late for this. Personal finance should be taught in middle and high schools just like health classes.
That's all well and good, but it won't really help if the students have no real income to practice with. Sure you can warn them of going into debt, but on the other side of the coin "This is what you should do if you theoretically had a salary" is less effective than "So you have a salary. Here's what you can do with it"
This is a class full of engineers from Stanford, many of whom are going to be making $100k+ straight out of college. Yet 92% aren't going to be responsible for any student loans.
Wealthy parents? Incredible student aid from Stanford's endowment? Both? Either way, I have a feeling this is one of the biggest advantages they will have in achieving a secure financial future.
Behavior determines successful outcomes far more than circumstances.
Saving $5.5k in an IRA every year for 40 years earning 7% ARR is a retirement nest egg of $1.1M dollars.
Median family income is $60k, making this 9% of the budget. Even if you earned say... $25k/yr ($12 per hour) for your entire life, you can afford to save $5.5k per year.
There is zero excuse for most people not emerging a millionaire at retirement.
The most important thing in personal finance is the delta between how much you net, and, how much you spend. Period. Increase the former, or decrease the latter. Preferably both. You will 'earn' far more in savings by the money YOU contributed than the amount paid to you in interest; unless you have much money over a long enough period of time, and you likely won't.
Another habit that rich people have over "poor" people is that they invest in assets and not liabilities, and their ability to categorise investments into these two buckets. An asset as in something that contributes to your net value vs a liability that deducts from your net value.
I've been using YNAB to solve my personal finance problems and it's been the best solution to my problem. Doing zero-based budgeting (you only budget money you have) is a superior approach to the traditional budgeting where you set it once. The only three things I need in YNAB to make sure my personal finance in check is:
- Giving every dollar a job
- Making sure my net value increases each month
- Making sure the money I spend is as "old" as possible
Tracking my assets and seeing what part of my mortgage goes out the window (the interest) and how some of my funds move from my bank account to my apartment each month changed how I understand the flow of money.
I know this might sound like a commercial, but I've come from a situation of having a hard time handling my money to being fairly financially literate in my personal life.
Person A saves $1000 from each paycheck. She invests it in index funds, and nets ~8% returns over a 30 year period.
Person B saves $2000 from each paycheck. She behaves like the average investor, and nets ~2.5% returns over a 30 year period.
Who do you think is going to wind up with more money? Person-A by a long shot.
The amount of money you save every month is undoubtedly important, but it's only half the story, and it's somewhat common knowledge. The way you invest your money is the other half of the story, and this is where most people seem to trip up. Personally, my parents saved a ton of money because it's common sense that it will lead to future prosperity. However, their investment strategy and track records are abysmal. They buy near the peak, sell during the recession, and sit out of the markets entirely during the recovery. They could have easily ended up with a retirement portfolio that's 2-4x larger than what they ended up with. I've tried telling them numerous times to approach investing differently, but they still refuse to listen. If there's anything people need to be educated on, it's on investment strategy.
Pretty much. I think people really want a silver bullet. Spend as little money as you're comfortable with. Invest the rest in an index fund. Wait. That's pretty much it.
EDIT: I also should add that the "spend as little money" part does not mean you should necessarily become homeless, or that you shouldn't experiment with things that might help you that cost money.
If you want to avoid sugar and corn syrup, you'll be paying 3x as much on food. You have to remember to cancel all of those superfluous monthly charges. If you get parking tickets, you're set back. If you don't check your physical mail for too long, you'll discover you accidentally ran a toll road and now they're billing you $150. Whenever you get a phone or internet plan, they never tell you what the final bill is, so you have to remember to add +50% to whatever price they're saying. If you live with someone, you have to get them interested in managing finances too, or else you'll discover you're hemorrhaging money. The list goes on and on.
If you live in the US, it costs ~$400/mo to have health insurance under the ACA. If you can't afford that and go to the ER for any reason, your credit is screwed.
Fantastic set of topics! As an engineering undergrad at UC Davis, I took a course in engineering law which was incredibly helpful. It's great to see a course in personal finance for engineers. As an entrepreneur building financial services for STEM professionals, I see a distinct opportunity to educate this demographic. While financial education for all demographics is desperately lacking in the US, the STEM crowd has the mathematical training to be presented with a more rigorous treatment of the topics. Moreover, STEM professionals quite often have compensation packages that include complex financial arrangements (e.g. deferred comp.) and/or derivatives (e.g. options) that are difficult to value and/or manage.
Is there any significant benefit of thinking tens of long-term/short-term goals and planning, and managing different funds for them (emergency, travel, house, card, kid's college education..). Why not just have a 1-2 funds to dump your savings in and be smart about withdrawing from it? One could consist of conservative investment vehicles, other could have more aggressive ones.
Because when you've got one big savings account it is a lot easier to look at it and say "Oh! I can afford a new car now!" and cash out your entire savings on one thing without taking the other things into account.
Having different accounts for different goals keeps a clean separation of concerns. When your car account has enough to buy a car then you can buy it and know you aren't taking away from what you have planned for your kid's college education. If you decide to take money from one account to pay for something else you have to actually think about what you are doing and are more aware of the trade offs.
Question for hackernews: where did everyone else learn about this stuff?
Going through the material, I found I already knew 50-75% of it, but from bits and pieces of information I learned over the years, not one consolidated place. Is it the same for others?
I am neither a professional financial analyst nor a writer, but I wanted to share what I've learned about financial management over the last 25 years with my 18 and 20 year old kids, so I wrote a series of posts called Hacker Finances. I take a lot of liberties with the Hacker notion, but all of the advice is painfully learned and hopefully the kids will read it and profit, or at least avoid major mistakes, when they are ready.
This is really cool, albeit a bit high-level and leaves you with the question: ok, what does this actually mean for me?
I hate these startup plugs on random threads (genuinely), but here it actually might be helpful for people. At Finimize, we're basically taking all the stuff that Adam is talking about and we're putting it into an algorithm that will tell you what you should be doing – from savings to investments to debt.
Like I said, not trying to pitch anything here, but feel free to check it out www.finimize.com/mylife – or ping me an email to hello[at]finimize.com if you want to get a demo (we're still in closed beta).
This is really an excellent intro to personal finance. I came to it expecting to see the standard "save 10% of your salary" rule that's so pervasive. But this is really thorough. I wish my school had a course like this. Great work!
the key with money/investing is you want to stay alive long enough to get lucky.
if you sock away money every month, make sure you have 6 months of living expenses off to the side for emergencies, bet ~20% on crazy things with unlimited upside and the remaining 80% in a very traditional way, you stand a good chance over the very long term.
just make sure that when things get rocky you are one of the strong hands and only sell when you want to.
as for the dollar values etc ... totally tied to city-specific cost of living ... totally impossible to compare between individuals (e.g., family vs. single, country-specific tax codes, medium and long term financial goals).
Can't they use something better than SlideShare? I can't even display it fullscreen on mobile. Even a stupid old PDF would be far better than promoting this commercial crap.
This is great but I think a personal finance course should be mandatory for all high school students. It is much more important than the the other curriculum.
[+] [-] indescions_2017|8 years ago|reply
But I have a really hard time giving this advice to a 22 year old. I certainly didn't heed it myself. Instead I used the cash and spent 100% of it on my own professional and personal development. So, naturally, since this is Stanford and Silicon Valley. I'd include a section on Risk. Taking it. Managing it. What are the rewards. As well as the costs. But with the emphasis the post-graduation 5-10 year window may represent a unique opportunity in your life to take it. And that there are programs such as StartX and YC available to assist should you decide to go all in.
[+] [-] jldugger|8 years ago|reply
And as far as I can tell, health insurance is allocated two words in the lecture series: "health" and "insurance". That's it! I will grant you that the ACA is under incredible threats at the moment, but employer based health insurance isn't going anywhere, and at the very least, HDHP / HSA plans vs. PPOs vs HMOs is a thing. Considering how expensive pregnancy, birth, maternity leave, child care can be, health insurance and savings is a crucial topic not even mentioned in the 'couples finances' section.
The other thing I should mention is student loan debt. 92 percent of those surveyed in the Stanford course say they have no student loans. This seems high -- even the net price of Stanford is $17k / year. Most undergraduates are going to be paying like 4.45 percent interest, which is way better than the 6.8 they used to charge. Despite required financial counseling, most people with loans don't really know how repayment works, and haven't looked at how much their payments will be post graduation.
[+] [-] Spooky23|8 years ago|reply
Now I'm about to turn 40, and now in the timeframe where I have the network to exploit and experience to get into customers, I'm sitting on a nice nest egg. If I decide to roll the dice, I get to keep more pie than an impoverished college grad.
My 22 year old self would have been failing fast into the heart of the dot-bomb implosion and probably stuck in some less than optimal grind for a few years.
[+] [-] 3pt14159|8 years ago|reply
Pick any decade where this wasn't true. In the 90s it was buying web domains or investing in personal computer companies. In the 2000s it was investing in platforms and social networks or even just building a company in the mobile space. In the 10s it was cryptocurrencies and AI.
All of these things were obvious and even if you didn't get in at the very ground floor (buying sex.com or 50 bitcoins for a dollar) you still make hyper, hyper gains.
100000% returns? Totally possible. Now go on and take all that knowledge you hard fought for at MIT, Stanford, Harvard, or Waterloo (or even on your own!) and use it too... Invest in low fee ETFs.
Great plan guys.
[+] [-] edraferi|8 years ago|reply
[+] [-] mcguire|8 years ago|reply
Further, I'd have no problems telling someone with a 6-figure income to max out their 401k and then invest more in index funds. Take it from a 50 year old, it's easy to come out if that 10 year window with nothing but painful experiences.
[+] [-] jliptzin|8 years ago|reply
[+] [-] kharms|8 years ago|reply
>And graduated Stanford. You've even managed to save around $10K in cash from various summer jobs and gifts from relatives. The consensus advice investment management professionals would offer is to sock it away in a well-diversified set of Vanguard Funds.
Your first $10k is your emergency fund. From what I've read, the consensus is: don't invest it, instead keep it in an FDIC insured savings account + cash. If you need it, it'll probably be because you've been unemployed for a while. You are most likely to be unemployed during an economic downturn. The cash choice insulates against natural disasters.
If you do invest it, try a target date fund that's matures in the near future. For today, 2020 would be a good choice.
[+] [-] rnprince|8 years ago|reply
The math on this is misleading. $10k invested for 30 years to become $1M implies an interest rate of 16.6%. Even as a nominal interest rate in the US, that would be an extremely lucky result to consistently achieve. My advice to you would be to start a hedge fund immediately with whatever secret knowledge you have, and then all money concerns will become irrelevant. :-)
A good choice for a real ('real' meaning non-nominal) interest rate in these types of projections is 7%, which would make $10k equal to $76k in 30 years. Because you used a real interest rate, the $76k is $76k in today's dollars, not in 2047 dollars. The conclusion is that you will need to invest a bit more than $10k today to retire in 30 years.
I like to use this type of calculation to frame my short-term purchase decisions. Would I like to spend $20 on this thing I don't need? Yes. Would I like to spend today's equivalent of $300 on it 40 years from now? No thank you.
[+] [-] yeukhon|8 years ago|reply
I take my dad’s words: spend the money and time well, and enjoy your life.
So save enough every month and get a good meal either alone or treat your family to a good brunch/dinner. Plan a trip at least once a year. Go to movies or do something healthy you have never done before. Buy new clothes. Whatever
But have a budget. Spebd 100% is IMO a bad advice. When you need the money you have none.
I also do not recommend invest in stock market unless you are buying one of those low-price stocks that will go up crazy.
Instead I would save up enough money, buy a house. Owning a land or an apartment will do you far better in the long run. Buy some gold when you have spare. Also invest in your life insurance; Usually you pay about 20-30 years then you get money just like social security (and some you can cash all with a big bonus).
I have been through tough time. If it weren’t for the medical leave $$ my employer provides through insurance, I would be forced to sell my house at age 26 right now in NYC.
Think in the long term: professional developmebt is great but do not let career be the only thing be your long term prospect. Putting 100% without saving is a big risk you really want to avoid.
Sometimes I have the urge to tell people why I think they should stop coding after work. But hey, if that makes them happy (I get it might be a hobby) great. But please do not fall into “this is norm”. I went to a lot of conferences and hackathons; great but don’t really satisify me as much as enjoy an outdoor view. Going to a new city for a talk is good for as long as you really have the chance to experience that city. Otherwise I’d wait for video to come out (and I feel bad so nany conferences do not organize publish conference videos).
In the end, what is good for saving a million dollar when you are sick and tired all the time?
[+] [-] shostack|8 years ago|reply
That $1M nest egg will need to be ~$3M in 38 years (when a 22yr old might be looking to retire at 60) in order to have the same purchasing power as $1M today (which isn't much in many markets).
Certainly not enough to provide a decent inheritance for the next generation.
[+] [-] unknown|8 years ago|reply
[deleted]
[+] [-] komali2|8 years ago|reply
I'm having a really hard time justifying saving above the bare minimum - despite my experience as a recruiter, I still can't convince myself that there will ever be a time I'm not hireable, unless all jobs have vanished (apocalypse, general AI), in which case my "nest egg" is useless anyway.
It's just a logical reach to justify my excessive spending I'm sure, but I've really got myself convinced here :P
[+] [-] heedlessly3|8 years ago|reply
http://danluu.com/startup-tradeoffs/
[+] [-] spike021|8 years ago|reply
If I were to put, say as you mentioned, $10K in cash into something like a set of Vanguard Funds, what percentage of my monthly income should be added?
I have money socked away right now from working internships, and from the past year as a full time engineer, but haven't invested it in much other than partially into my 401k. I'd love to do something with it and I know it's doing nothing sitting in the bank in a regular account.
[+] [-] npsimons|8 years ago|reply
Put half of it in a Roth IRA with Vanguard. You can still do a lot of risk taking and self development on $5k, and the compounding from being in the Roth IRA that early really will make a big difference.
[+] [-] Chris2048|8 years ago|reply
This makes it relatively less risky and more valuable.
[+] [-] wil421|8 years ago|reply
When I was 18 and a freshman in college I saw some crazy decisions including using student loans to put a down payment on a car or taking out private loans for spending money.
[+] [-] Uehreka|8 years ago|reply
In general, I chafe at the types of educational arguments that go “we should teach kids more useful skills, like how to file a tax return!”. I think such arguments would benefit from the knowledge that some students are already being taught this, and need to relearn it when they get out into the work force anyway.
[+] [-] mstade|8 years ago|reply
I wish this had been a staple class throughout my entire stay in school. A lot of the stuff will be repetitive, but that's what it means running a home and a life – a lot of chores that you keep doing over and over, some maybe you'll optimize like hiring a cleaner (after working out it fits your budget!) or investing in technology that just makes things easier.
As you grow older, the classes would obviously need to become more advanced, but I think this would go a long way to make kids much more capable to deal with real world problems, and there's a lot of cross over with other subjects as well. I don't know if schools still do this, but when I went to elementary school we had wood working and/or sewing class. I enjoyed those, but we had those for way longer than we had home skills class, and it seems to me these three could be successfully combined.
[+] [-] d3ad1ysp0rk|8 years ago|reply
[+] [-] kamaal|8 years ago|reply
Most adults despite seeing their parents struggle through their retirements, cannot get themselves to make right decisions.
Courses and subjects only help those who wish to help themselves.
[+] [-] njarboe|8 years ago|reply
[+] [-] ythn|8 years ago|reply
That's all well and good, but it won't really help if the students have no real income to practice with. Sure you can warn them of going into debt, but on the other side of the coin "This is what you should do if you theoretically had a salary" is less effective than "So you have a salary. Here's what you can do with it"
[+] [-] sbuccini|8 years ago|reply
Wealthy parents? Incredible student aid from Stanford's endowment? Both? Either way, I have a feeling this is one of the biggest advantages they will have in achieving a secure financial future.
[+] [-] heedlessly2|8 years ago|reply
[+] [-] leifaffles|8 years ago|reply
Saving $5.5k in an IRA every year for 40 years earning 7% ARR is a retirement nest egg of $1.1M dollars.
Median family income is $60k, making this 9% of the budget. Even if you earned say... $25k/yr ($12 per hour) for your entire life, you can afford to save $5.5k per year.
There is zero excuse for most people not emerging a millionaire at retirement.
[+] [-] bungie4|8 years ago|reply
The most important thing in personal finance is the delta between how much you net, and, how much you spend. Period. Increase the former, or decrease the latter. Preferably both. You will 'earn' far more in savings by the money YOU contributed than the amount paid to you in interest; unless you have much money over a long enough period of time, and you likely won't.
[+] [-] theodorton|8 years ago|reply
I've been using YNAB to solve my personal finance problems and it's been the best solution to my problem. Doing zero-based budgeting (you only budget money you have) is a superior approach to the traditional budgeting where you set it once. The only three things I need in YNAB to make sure my personal finance in check is:
- Giving every dollar a job
- Making sure my net value increases each month
- Making sure the money I spend is as "old" as possible
Tracking my assets and seeing what part of my mortgage goes out the window (the interest) and how some of my funds move from my bank account to my apartment each month changed how I understand the flow of money.
I know this might sound like a commercial, but I've come from a situation of having a hard time handling my money to being fairly financially literate in my personal life.
Edit: formatting
[+] [-] whack|8 years ago|reply
Person B saves $2000 from each paycheck. She behaves like the average investor, and nets ~2.5% returns over a 30 year period.
Who do you think is going to wind up with more money? Person-A by a long shot.
The amount of money you save every month is undoubtedly important, but it's only half the story, and it's somewhat common knowledge. The way you invest your money is the other half of the story, and this is where most people seem to trip up. Personally, my parents saved a ton of money because it's common sense that it will lead to future prosperity. However, their investment strategy and track records are abysmal. They buy near the peak, sell during the recession, and sit out of the markets entirely during the recovery. They could have easily ended up with a retirement portfolio that's 2-4x larger than what they ended up with. I've tried telling them numerous times to approach investing differently, but they still refuse to listen. If there's anything people need to be educated on, it's on investment strategy.
https://www.forbes.com/sites/advisor/2014/04/24/why-the-aver...
https://www.investopedia.com/ask/answers/042415/what-average...
http://www.bankrate.com/calculators/retirement/investment-go...
[+] [-] _m8fo|8 years ago|reply
EDIT: I also should add that the "spend as little money" part does not mean you should necessarily become homeless, or that you shouldn't experiment with things that might help you that cost money.
[+] [-] sillysaurus3|8 years ago|reply
If you want to avoid sugar and corn syrup, you'll be paying 3x as much on food. You have to remember to cancel all of those superfluous monthly charges. If you get parking tickets, you're set back. If you don't check your physical mail for too long, you'll discover you accidentally ran a toll road and now they're billing you $150. Whenever you get a phone or internet plan, they never tell you what the final bill is, so you have to remember to add +50% to whatever price they're saying. If you live with someone, you have to get them interested in managing finances too, or else you'll discover you're hemorrhaging money. The list goes on and on.
If you live in the US, it costs ~$400/mo to have health insurance under the ACA. If you can't afford that and go to the ER for any reason, your credit is screwed.
[+] [-] corporateslave3|8 years ago|reply
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[+] [-] amsb|8 years ago|reply
[+] [-] shubhamjain|8 years ago|reply
[+] [-] sumeno|8 years ago|reply
Having different accounts for different goals keeps a clean separation of concerns. When your car account has enough to buy a car then you can buy it and know you aren't taking away from what you have planned for your kid's college education. If you decide to take money from one account to pay for something else you have to actually think about what you are doing and are more aware of the trade offs.
[+] [-] asafira|8 years ago|reply
Going through the material, I found I already knew 50-75% of it, but from bits and pieces of information I learned over the years, not one consolidated place. Is it the same for others?
[+] [-] amelius|8 years ago|reply
https://challenges.openideo.com/challenge/financial-empowerm...
[+] [-] JustPassinThru|8 years ago|reply
https://hackernoon.com/https-medium-com-davisjames-hacker-fi...
[+] [-] maxro|8 years ago|reply
I hate these startup plugs on random threads (genuinely), but here it actually might be helpful for people. At Finimize, we're basically taking all the stuff that Adam is talking about and we're putting it into an algorithm that will tell you what you should be doing – from savings to investments to debt.
Like I said, not trying to pitch anything here, but feel free to check it out www.finimize.com/mylife – or ping me an email to hello[at]finimize.com if you want to get a demo (we're still in closed beta).
Peace!
[+] [-] unknown|8 years ago|reply
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[+] [-] the_gastropod|8 years ago|reply
[+] [-] josephdviviano|8 years ago|reply
if you sock away money every month, make sure you have 6 months of living expenses off to the side for emergencies, bet ~20% on crazy things with unlimited upside and the remaining 80% in a very traditional way, you stand a good chance over the very long term.
just make sure that when things get rocky you are one of the strong hands and only sell when you want to.
as for the dollar values etc ... totally tied to city-specific cost of living ... totally impossible to compare between individuals (e.g., family vs. single, country-specific tax codes, medium and long term financial goals).
[+] [-] hslayer|8 years ago|reply
[+] [-] juanuys|8 years ago|reply
This uses IndexedDB, and is pre-alpha and very buggy and feature-less still:
https://github.com/opyate/fin
Just putting it out there if anyone's interested in Clojurescript/Hoplon and personal finance.
[+] [-] i_cant_speel|8 years ago|reply
[+] [-] voiper1|8 years ago|reply
[+] [-] k3a|8 years ago|reply
[+] [-] golemotron|8 years ago|reply
[+] [-] manu-chroma|8 years ago|reply