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 optimizing his advice for the least common denominator within a mass audience of financially troubled people. A small percentage of financially desperate people would hear great advice about credit cards (only use cards to buy stuff you have 100% of the cash for, and pay them back instantly to get some cash and rewards back) and not internalize that as something like (it's okay to keep using my card because I'm getting money back as long as I try and pay my bill every month). For a mass audience, the safest advice on credit cards that might make an impact is to just tell everybody with a financial problem to stop using them. On an individual level, a financial expert can probably give better advice that's more suitable.
If I had to give 1 bit of general financial advice though: develop your talent stack. It doesn't matter if it's learning a new programming language, wood-working, learning to fix cars or toilets, taking a foreign language class, learning how to paint, or growing a great garden. If you have multiple skills you have more opportunities to make money as well as combining those skills in unique ways to create new business ideas and concepts. And baring some health issue, nobody can ever take a skill away from you.
The goal of most personal finance experts is not to teach you to be mega rich, but rather to be average and while still being pretty average in terms of income, hours worked, and capability, remarkably comfortable to peers.
> Yet you almost never hear the financial experts recommending that you start a business.
Is the average business owner any better off? I know that there are plenty of successful business owners, but we tend to completely ignore the many that filed bankruptcy after taking cash advances on credit cards to live one more month.
> Nor do these guys tend to mention the importance of understanding how taxes work.
Only really matters if you make a lot of money. My Dad is a tax accountant. We optimize the heck out of our personal taxes. But at our 100Kish incomes, it doesn't make a big difference beyond what the personal finance people say.
Obviously anecdotal, but not really IMO. I've bounced back and forth between being in business for myself and working for the man.
Between healthcare, saving for retirement, etc. things are really optimized against someone "pulling themselves up by the bootstraps" in this way. I've listened to the politicians in the US scream how important small business only to vote against that very interest (tax cuts for rich + corporate tax breaks).
I can't get good healthcare unless it's tied to my employment here. The healthcare I get independently is of lower quality for much, much more money out of pocket... Lord help you if you do something stupid and show a profit on your books... etc etc... The first 2-3 rungs of the "small business owner" ladder are missing by design.
If I had a family I would likely never consider being a business owner again due to the health implications, financial risk, and time commitment.
Starting a business is complicated, requires discipline, and then requires a decent amount of luck to even keep it afloat...
It can be used as a good tax harvesting vehicle but again this requires so much knowledge and ultimately I think running a business (even at a strategic loss) requires more depth of knowledge than the average saving/investing tips.
Would definitely agree that starting a business is a path to becoming RICH, but definitely not a path to being financial stable/above average
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 that. I take Adderall because it makes me an effective engineer and I’ve really struggled for multi year periods where I’ve tried to stop it, but my life gets measurably worse. I cashed out my $5,000 at one point and blew it on I don’t even know what, but it was something stupid I’m sure.
I guess the real enemy is future me. I don’t feel like I can consistently trust myself to make good financial decisions so the me of right now acts as if future me will just blow all my savings irresponsibly anyway. It’s depressing just writing it out.
I wish I could put money into an account that would then only disburse small amounts of it over the year, and I couldn’t override that.
I’m really ashamed of it but end up paying the mortgage with one biweekly paycheck, paying all my bills with the next biweekly paycheck, and despite making a very good salary for where I live, I’m living paycheck to paycheck.
I don’t really know how to develop impulse control, I spend hours and hours scrolling Amazon and websites trying to think of things to buy.
I know the answer is “just act like an adult” but I guess spending has become a coping mechanism because I’ve got a disabled kid, I don’t really know how to enjoy things that aren’t going to Costco or buying a new 3D printer or a shiny new computer.
Is there anyone here who has gone from being extremely irresponsible with money to having savings? How do I get over the trauma of my grandparents losing millions of dollars in the 2008 financial collapse, which happened right as I came of age? How do I stop “shopscrolling” Amazon until 2 in the morning?
I know it’s pathetic, and I feel like this is a place I might get an answer that’s actionable.
You're trying to cure the symptom, not the disease. You need a therapist, not financial advice.
You know what you're doing is unhealthy but you can't stop. A good mental health professional can help you deal with the pain you're trying to cover up with buying junk.
Also, one short term hack I haven't seen explicitly mentioned yet. Try to enjoy a healthier kind of buying: buy your house piece by piece. In other words, pay off your mortgage early. If you can direct some of your impulse buying towards early mortgage repayment like that, that would be a win!
Try to experience the process of increasing your ownership as close to your senses as possible:
- Can you make the repayments cash transactions instead of online?
- Make these early repayments as frequent as possible. If the bank allows monthly, quarterly or annually only, arrange for a trusted friend to collect weekly or even daily.
- Visualise your progress:
- Make a drawing/real life 3d model/photo/lego model of your house.
- Colour the bits of the drawing you now own.
- Move the lego bits over from "the bank" to "mine/ours".
- Mark individual stones or pieces of siding as your own versus the bank's.
- ...
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 owner who knows a lot of other small business owners, there's a "dirty little secret" that this article doesn't mention: most of them never get paid a dime by their own business. They are spending their way through a business loan, or they have family money, or some other source. Yes, there are people who get rich from starting a business, but if popular finance experts told everyone to start their own business, that would be a lot worse advice than what they are saying.
> there's a "dirty little secret" that this article doesn't mention: most of them never get paid a dime by their own business. They are spending their way through a business loan, or they have family money, or some other source
Over fifty percent of generic small businesses survive for more than five years, so it's unlikely that a majority of them are completely subsisting on government loans, investors, or family money.
The most common outcome (for the small businesses that last) is to turn into something that creates just enough revenue to support the owner and a handful of employees. The owner takes a small salary and uses the rest of the cash flow for float or reinvests it into the business.
However, depending on the country, tax laws can be fairly advantageous for small business owners (e.g., higher limits on tax-deferred retirement accounts). There's also the benefit of building net worth in the business, which isn't something that employees benefit from. So, while the owner may not be getting paid all that much, they still benefit in a bunch of other ways.
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.
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.
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The plan for people at average, 50k/year combined income is closer to the go to college and get some skills that will launch your career.
What I do find amusing is our collective inability to talk about things that matter. Ex: the paycheck is the elephant in the room. And even though it is brought up in this post, the paycheck differences between families can lead to grossly different experiences.
The r/personalfinance and r/financialindependence subreddits are quite good and even cover more exotic details like the “mega back door roth” otherwise known as “after tax 401k contribution in plan conversions to roth” (which can let you add an additional 36k to a Roth IRA over the 6k limit each year in addition to the normal 19.5k for a traditional 401k).
They’re mostly bogleheads so are a little risk averse, but for most that’s probably the right move anyway.
Owning a small slice of a business where you're employed can also help make you rich if it grows a lot. In the tech world there are probably more financially independent employees than founders, because of the growth of some massive companies over the last few decades and high salaries. Probably a different story in the UHNW category though, very few employees can get to that level.
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.
Part of the discussion should be, can the 'masses' "Generate income not based on hours worked", "Minimize taxes", and "Leverage time and debt to become wealthy like the personal-finance gurus themselves did?"... in other words, is becoming wealthy possible?
It is worth being honest about the false hope these authors are peddling about "becoming wealthy", instead of what they are really advising which is, to become above average / not poor. It is ultimately good advice for most while the crux of the issue is pretending everyone in America is a millionaire waiting to happen.
I would add that much of the sensible advice provided by these types of authors is not taught in public schools as a basic necessity of general education.
Definitely not everyone, but most people in America can become millionaires (inflation adjusted) within their lifetimes.
Saving $100 per week should be possible for most households today. $100 per week over 40 years with an 8% return is $1.3m.
If you think the market will be slower in the future, or higher inflation, or whatever, use the absurdly conservative 6% and it’ll take 50 years instead of 40.
Add in the possibility of home ownership giving an additional asset to add to the net worth over the investing lifetime, giving an extra few hundred thousand… and in forty years from now, we’re well over $1m in assets, easy.
Getting $100/week might seem daunting, but that’s less than 10% of the median household income — totally within reach of a majority of people with some small changes.
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.
While not everyone’s household has a practical probability to become a millionaire household, I think a quarter of them could without inordinate difficulty (around 10% already have and some of the 90% are well on their way, but are younger households and so have time and growth ahead of them)
If you give "start a business" advice to people, the majority will end up poorer than the advice he is complaining about. Sure, you may have more options to invest and pay less taxes, but that's only if your business is making money, which most don't.
I agree with the thrust of the article. Most personal finance experts are...a bit weird (I have no idea why Tony Robins is an expert...he knows literally nothing, isn't he a motivational speaker...only in America could this be a job).
But there is a reason why spend less is the best advice for most people: they can't start a business, they have limited scope to increase their earnings significantly, and you can actually become relatively rich if you just spend less.
Personal financial advice really isn't about attempting to become rich, it is about stopping people doing things that make no sense. We aren't talking about becoming Jeff Bezos...that isn't the goal for most people, the aim is to help people retire with dignity. Telling everyone to start their own business is terribly unhelpful because it won't improve anything as most people will fail (this is why personal finance experts exist...because most people think in these unreasonable ways i.e. the only way I can become rich is by taking huge risks...rather than just not buying stupid shit I don't need, ppl reason in very weird ways).
To say this another way, most people do not understand the long-term value of a $1 saved today. Obviously, exactly how you calculate this is a little complicated but if people realised that $1 now was worth $4 or $6 or $8 in 30 years then they would consider what they do today more carefully (and even then, some people are just weird...they will say: I am going to die before then, or I don't care...then they will get to retirement and everything is fucked).
Btw, I used to work in this industry, I have seen people who didn't consider any of this. We had a client who worked all his life in a decent paying job but had little savings, took to drink, wife divorced him, lost his job in his late 60s, got drunk one day, fell down the stairs when he was on his own in his rented house (he lost his house a few months before), died. This all happened within a few months. It will happen. You will get old. You can't control everything in life but something that is relatively easy to control is your spending. I try not to give people specific advice but the number one thing that everyone can do is: control your spending, think about what you need, you can't avoid some expenses but the peace of mind later down the road from small changes is huge.
This kind of thing is unfashionable as hell though because it does put that pressure back onto the individual. Lots of young people today have this attitude of: everything is rigged, telling me to change anything when X person is so wealthy makes you an oppressor, etc. Unsurprisingly, this attitude tends to be linked with taking decisions that are unwise, and abrogating all responsibility for the consequences.
I think most financial advisors target people with no impulse control, spending the bulk of their income each month, with a measurable part of it on non-essentials.
Those kinds of people can budget to some version of wealth (especially when you consider the median net worth of their peers is most likely only barely a positive number).
To get into "real" money (5+ million dollars in savings?), then you can't budget yourself to riches if you simply do not have the gross income, and time horizon for some amount of compounding interest. The financial advisors in this bracket are usually not telling you what to save vs. spend, but instead more commonly discussing investment diversification strategies, ways to (legally) avoid or defer taxes, etc.
> 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 kickbacks are free money... The card companies are glutting themselves on merchant fees and we are all paying the price in the form of costlier goods in exchange for a small kickback.
Some cities had an issue to even have to ban in person businesses from banning cash transactionss. Given the costs of cash handling taken for granted bizzarely it is possible that being charged a fee where there was none before will save merchants and consumers money net even while the credit card companies make money. Cash counting machines, time spent tracking physical money, safes, and armored car transports all cost money. The wire transfers of money and credit are a real service of real value.
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.
As the author of this article, this isn't true. some comes from the merchant fees, many comes from the fact people don't pay off their cards every month and that far more subsidizes those payouts.
Lastly have you tried paying with cash online? While Bitcoin is a neat idea we are far from yet mass acceptance of any digital currency yet.
> Investing that $2.50 you spend every day on a latte in the stock market instead can lead to a life of riches. How’s that for putting a damper on one of the little joys in life?
Budgeting will let you realize there are essentially infinite ways to spend your money. You have to decide the best way to do that. If you're trying to make money, buying yourself a latte is not the best way to do it. If you're trying to enjoy the money you earned, buying a latte may be the best way (but probably not).
Budgeting helps you better understand the balance between spending and earning. When you start considering the best investment for the dollar you have earned, it makes a difference.
You’ll never get rich unless you start a business. Oh by the way, lucky you, I happen to be selling tips for making millions off a blog (just click this sponsored link. I made $6M with mine, I swear).
Seriously, since when did HN decide to sponsor this kind of self-interested clickbait?
Exactly. This is a terrible article that's designed to prey on people's FOMO. The basic financial advice he derides is solid advice. Do that first. Starting a business is very hard and often fails.
I'd just like to point out the irony of the bolded, all caps statement in this article, "You’ll NEVER get rich by working for someone else", the recent HN frontpage article about how Tim Cook got a $750 million payout working for Apple, and that the title of this post is "All Personal Finance Experts Are Liars".
This is a mischaracterization of Ramit Sethi’s class. I’ve taken it and it’s the opposite of what the article claiming. It focuses on helping you build your business and income streams.
Came here to say this. The author lost all credibility with me when including Ramit in the list as if he's actually paid any attention at all to what IWT says he'd realize that Ramit could have written the article he just published (and they would have been similarly condescending tones)
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'll be much better served focusing on increasing your savings rate and income.
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.
This guy seems to be conflating “how to get rich/create wealth” with “how to not behave like a child financially”. Basically only four groups of people get richer 1) business owners, 2) people at the apex of a profession (professional sports/media/actors, partners at banks/law firms/consultancies, etc. 3) a subset of investors (this is where some FIRE types focus). 4) inherit/marry wealth
Most personal financial advice is not focused on getting rich, it’s how to improve your financial health.
I've read Ramit's book and Tony Robbins' book. Both mention entrepreneurship. The latter mention taxes. Don't really see the big lie here.
I'm most familiar with Ramit's work but he's also pretty clear that there's only so far you can go through savings but no upper bound on earnings.
It seems to me a bit like a strawman argument he's making when in fact some (or all) of the other gurus do talk about entrepreneurship and earning more.
1) Most of the personal finance experts he lists aren’t telling you how to get rich. They’re telling you how not to be poor.
2) Most people do need a coach or a mom or whatever to tell them they can’t afford something. Most people don’t even know how to balance a checkbook or calculate the real interest rate of a credit card.
3) Most people don’t know how compounding interest works.
4) There’s no definition of “rich”
5) I know plenty of people making mid-6 to low-7 figure incomes while “working for someone else” and some retired in their late-40s, early 50s
While I generally agree, I think for many people it's easier to cut 10% of their annual spending instead of getting better return rates or a salary raise.
It varies widely by person (some people are addicted to spending money), and by career (bumping salary up by a few percentage points is a lot harder in some industries than others), which is part of the problem
It is "easier" for people that are capable of becoming wealthy to do so by making money and leveraging their skills to accrue wealth not by hours worked.
It is unclear weather it is "easier" for everyone to do so, or possible. And if not, whether they are better off not trying, and instead saving and budgeting.
For a business owner this guy sure doesn’t understand much about market economics. Those gurus made their money by appealing to average people. In no way is it possible for a majority of that audience to all start successful businesses. So while a lot of what he says is technically true, and these gurus might be encouraging a lot of wishful thinking and fantasy, the authors message is likely to be a lot more misleading at scale if half the country all started businesses with the hope of getting rich.
[+] [-] logicalmonster|4 years ago|reply
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 optimizing his advice for the least common denominator within a mass audience of financially troubled people. A small percentage of financially desperate people would hear great advice about credit cards (only use cards to buy stuff you have 100% of the cash for, and pay them back instantly to get some cash and rewards back) and not internalize that as something like (it's okay to keep using my card because I'm getting money back as long as I try and pay my bill every month). For a mass audience, the safest advice on credit cards that might make an impact is to just tell everybody with a financial problem to stop using them. On an individual level, a financial expert can probably give better advice that's more suitable.
If I had to give 1 bit of general financial advice though: develop your talent stack. It doesn't matter if it's learning a new programming language, wood-working, learning to fix cars or toilets, taking a foreign language class, learning how to paint, or growing a great garden. If you have multiple skills you have more opportunities to make money as well as combining those skills in unique ways to create new business ideas and concepts. And baring some health issue, nobody can ever take a skill away from you.
[+] [-] MattGaiser|4 years ago|reply
> Yet you almost never hear the financial experts recommending that you start a business.
Is the average business owner any better off? I know that there are plenty of successful business owners, but we tend to completely ignore the many that filed bankruptcy after taking cash advances on credit cards to live one more month.
> Nor do these guys tend to mention the importance of understanding how taxes work.
Only really matters if you make a lot of money. My Dad is a tax accountant. We optimize the heck out of our personal taxes. But at our 100Kish incomes, it doesn't make a big difference beyond what the personal finance people say.
[+] [-] folkhack|4 years ago|reply
Obviously anecdotal, but not really IMO. I've bounced back and forth between being in business for myself and working for the man.
Between healthcare, saving for retirement, etc. things are really optimized against someone "pulling themselves up by the bootstraps" in this way. I've listened to the politicians in the US scream how important small business only to vote against that very interest (tax cuts for rich + corporate tax breaks).
I can't get good healthcare unless it's tied to my employment here. The healthcare I get independently is of lower quality for much, much more money out of pocket... Lord help you if you do something stupid and show a profit on your books... etc etc... The first 2-3 rungs of the "small business owner" ladder are missing by design.
If I had a family I would likely never consider being a business owner again due to the health implications, financial risk, and time commitment.
100% the average working Joe is better off.
[+] [-] darkwizard42|4 years ago|reply
It can be used as a good tax harvesting vehicle but again this requires so much knowledge and ultimately I think running a business (even at a strategic loss) requires more depth of knowledge than the average saving/investing tips.
Would definitely agree that starting a business is a path to becoming RICH, but definitely not a path to being financial stable/above average
[+] [-] wincy|4 years ago|reply
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 that. I take Adderall because it makes me an effective engineer and I’ve really struggled for multi year periods where I’ve tried to stop it, but my life gets measurably worse. I cashed out my $5,000 at one point and blew it on I don’t even know what, but it was something stupid I’m sure.
I guess the real enemy is future me. I don’t feel like I can consistently trust myself to make good financial decisions so the me of right now acts as if future me will just blow all my savings irresponsibly anyway. It’s depressing just writing it out.
I wish I could put money into an account that would then only disburse small amounts of it over the year, and I couldn’t override that.
I’m really ashamed of it but end up paying the mortgage with one biweekly paycheck, paying all my bills with the next biweekly paycheck, and despite making a very good salary for where I live, I’m living paycheck to paycheck.
I don’t really know how to develop impulse control, I spend hours and hours scrolling Amazon and websites trying to think of things to buy.
I know the answer is “just act like an adult” but I guess spending has become a coping mechanism because I’ve got a disabled kid, I don’t really know how to enjoy things that aren’t going to Costco or buying a new 3D printer or a shiny new computer.
Is there anyone here who has gone from being extremely irresponsible with money to having savings? How do I get over the trauma of my grandparents losing millions of dollars in the 2008 financial collapse, which happened right as I came of age? How do I stop “shopscrolling” Amazon until 2 in the morning?
I know it’s pathetic, and I feel like this is a place I might get an answer that’s actionable.
[+] [-] crunchyfrog|4 years ago|reply
You know what you're doing is unhealthy but you can't stop. A good mental health professional can help you deal with the pain you're trying to cover up with buying junk.
[+] [-] fartingflamingo|4 years ago|reply
Also, one short term hack I haven't seen explicitly mentioned yet. Try to enjoy a healthier kind of buying: buy your house piece by piece. In other words, pay off your mortgage early. If you can direct some of your impulse buying towards early mortgage repayment like that, that would be a win!
Try to experience the process of increasing your ownership as close to your senses as possible:
- Can you make the repayments cash transactions instead of online?
- Make these early repayments as frequent as possible. If the bank allows monthly, quarterly or annually only, arrange for a trusted friend to collect weekly or even daily.
- Visualise your progress:
Just don't forget about finding a good therapist![+] [-] rossdavidh|4 years ago|reply
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 owner who knows a lot of other small business owners, there's a "dirty little secret" that this article doesn't mention: most of them never get paid a dime by their own business. They are spending their way through a business loan, or they have family money, or some other source. Yes, there are people who get rich from starting a business, but if popular finance experts told everyone to start their own business, that would be a lot worse advice than what they are saying.
[+] [-] zhdc1|4 years ago|reply
Over fifty percent of generic small businesses survive for more than five years, so it's unlikely that a majority of them are completely subsisting on government loans, investors, or family money.
The most common outcome (for the small businesses that last) is to turn into something that creates just enough revenue to support the owner and a handful of employees. The owner takes a small salary and uses the rest of the cash flow for float or reinvests it into the business.
However, depending on the country, tax laws can be fairly advantageous for small business owners (e.g., higher limits on tax-deferred retirement accounts). There's also the benefit of building net worth in the business, which isn't something that employees benefit from. So, while the owner may not be getting paid all that much, they still benefit in a bunch of other ways.
[+] [-] jstummbillig|4 years ago|reply
[+] [-] dragontamer|4 years ago|reply
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.
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The plan for people at average, 50k/year combined income is closer to the go to college and get some skills that will launch your career.
What I do find amusing is our collective inability to talk about things that matter. Ex: the paycheck is the elephant in the room. And even though it is brought up in this post, the paycheck differences between families can lead to grossly different experiences.
[+] [-] gonehome|4 years ago|reply
They’re mostly bogleheads so are a little risk averse, but for most that’s probably the right move anyway.
[+] [-] pushrax|4 years ago|reply
[+] [-] giantg2|4 years ago|reply
[+] [-] dheera|4 years ago|reply
What are the advantages of 401k instead of say dumping it into half-VOO half-crypto and making millions one way or another?
[+] [-] PKop|4 years ago|reply
It is worth being honest about the false hope these authors are peddling about "becoming wealthy", instead of what they are really advising which is, to become above average / not poor. It is ultimately good advice for most while the crux of the issue is pretending everyone in America is a millionaire waiting to happen.
I would add that much of the sensible advice provided by these types of authors is not taught in public schools as a basic necessity of general education.
[+] [-] californical|4 years ago|reply
Saving $100 per week should be possible for most households today. $100 per week over 40 years with an 8% return is $1.3m.
If you think the market will be slower in the future, or higher inflation, or whatever, use the absurdly conservative 6% and it’ll take 50 years instead of 40.
Add in the possibility of home ownership giving an additional asset to add to the net worth over the investing lifetime, giving an extra few hundred thousand… and in forty years from now, we’re well over $1m in assets, easy.
Getting $100/week might seem daunting, but that’s less than 10% of the median household income — totally within reach of a majority of people with some small changes.
[+] [-] giantg2|4 years ago|reply
[+] [-] sokoloff|4 years ago|reply
[+] [-] BeetleB|4 years ago|reply
[+] [-] hogFeast|4 years ago|reply
But there is a reason why spend less is the best advice for most people: they can't start a business, they have limited scope to increase their earnings significantly, and you can actually become relatively rich if you just spend less.
Personal financial advice really isn't about attempting to become rich, it is about stopping people doing things that make no sense. We aren't talking about becoming Jeff Bezos...that isn't the goal for most people, the aim is to help people retire with dignity. Telling everyone to start their own business is terribly unhelpful because it won't improve anything as most people will fail (this is why personal finance experts exist...because most people think in these unreasonable ways i.e. the only way I can become rich is by taking huge risks...rather than just not buying stupid shit I don't need, ppl reason in very weird ways).
To say this another way, most people do not understand the long-term value of a $1 saved today. Obviously, exactly how you calculate this is a little complicated but if people realised that $1 now was worth $4 or $6 or $8 in 30 years then they would consider what they do today more carefully (and even then, some people are just weird...they will say: I am going to die before then, or I don't care...then they will get to retirement and everything is fucked).
Btw, I used to work in this industry, I have seen people who didn't consider any of this. We had a client who worked all his life in a decent paying job but had little savings, took to drink, wife divorced him, lost his job in his late 60s, got drunk one day, fell down the stairs when he was on his own in his rented house (he lost his house a few months before), died. This all happened within a few months. It will happen. You will get old. You can't control everything in life but something that is relatively easy to control is your spending. I try not to give people specific advice but the number one thing that everyone can do is: control your spending, think about what you need, you can't avoid some expenses but the peace of mind later down the road from small changes is huge.
This kind of thing is unfashionable as hell though because it does put that pressure back onto the individual. Lots of young people today have this attitude of: everything is rigged, telling me to change anything when X person is so wealthy makes you an oppressor, etc. Unsurprisingly, this attitude tends to be linked with taking decisions that are unwise, and abrogating all responsibility for the consequences.
[+] [-] brk|4 years ago|reply
Those kinds of people can budget to some version of wealth (especially when you consider the median net worth of their peers is most likely only barely a positive number).
To get into "real" money (5+ million dollars in savings?), then you can't budget yourself to riches if you simply do not have the gross income, and time horizon for some amount of compounding interest. The financial advisors in this bracket are usually not telling you what to save vs. spend, but instead more commonly discussing investment diversification strategies, ways to (legally) avoid or defer taxes, etc.
[+] [-] umvi|4 years ago|reply
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 kickbacks are free money... The card companies are glutting themselves on merchant fees and we are all paying the price in the form of costlier goods in exchange for a small kickback.
[+] [-] MattGaiser|4 years ago|reply
[+] [-] Nasrudith|4 years ago|reply
[+] [-] leetcrew|4 years ago|reply
[+] [-] larryludwig|4 years ago|reply
Lastly have you tried paying with cash online? While Bitcoin is a neat idea we are far from yet mass acceptance of any digital currency yet.
[+] [-] daveguy|4 years ago|reply
Budgeting will let you realize there are essentially infinite ways to spend your money. You have to decide the best way to do that. If you're trying to make money, buying yourself a latte is not the best way to do it. If you're trying to enjoy the money you earned, buying a latte may be the best way (but probably not).
Budgeting helps you better understand the balance between spending and earning. When you start considering the best investment for the dollar you have earned, it makes a difference.
[+] [-] edoceo|4 years ago|reply
[+] [-] oakfr|4 years ago|reply
Seriously, since when did HN decide to sponsor this kind of self-interested clickbait?
[+] [-] jdlshore|4 years ago|reply
[+] [-] rchaud|4 years ago|reply
[+] [-] hn_throwaway_99|4 years ago|reply
[+] [-] dtjohnnymonkey|4 years ago|reply
[+] [-] amarghose|4 years ago|reply
[+] [-] FabHK|4 years ago|reply
[+] [-] foogazi|4 years ago|reply
[+] [-] jandrewrogers|4 years ago|reply
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'll be much better served focusing on increasing your savings rate and income.
[+] [-] sokoloff|4 years ago|reply
[+] [-] cascom|4 years ago|reply
Most personal financial advice is not focused on getting rich, it’s how to improve your financial health.
[+] [-] magnuspaaske|4 years ago|reply
I'm most familiar with Ramit's work but he's also pretty clear that there's only so far you can go through savings but no upper bound on earnings.
It seems to me a bit like a strawman argument he's making when in fact some (or all) of the other gurus do talk about entrepreneurship and earning more.
[+] [-] codyswann|4 years ago|reply
1) Most of the personal finance experts he lists aren’t telling you how to get rich. They’re telling you how not to be poor.
2) Most people do need a coach or a mom or whatever to tell them they can’t afford something. Most people don’t even know how to balance a checkbook or calculate the real interest rate of a credit card.
3) Most people don’t know how compounding interest works.
4) There’s no definition of “rich”
5) I know plenty of people making mid-6 to low-7 figure incomes while “working for someone else” and some retired in their late-40s, early 50s
6) Most businesses fail
[+] [-] jstummbillig|4 years ago|reply
Plenty to satisfy what? Why would you bring anecdotes to a gun fight?
[+] [-] WalterBright|4 years ago|reply
1. stay in school
2. don't do drugs
3. don't commit crimes
4. learn a skilled trade or go to college. remember to google starting salaries for your major before committing.
[+] [-] bdcravens|4 years ago|reply
[+] [-] cardosof|4 years ago|reply
[+] [-] brundolf|4 years ago|reply
[+] [-] PKop|4 years ago|reply
It is unclear weather it is "easier" for everyone to do so, or possible. And if not, whether they are better off not trying, and instead saving and budgeting.
[+] [-] Denvercoder9|4 years ago|reply
[+] [-] dasil003|4 years ago|reply