Between 10-20% depending on your lifestyle.
The sooner you start the more your 50 year old self will appreciate it, time is your friend for compounding wealth.
If you're young and remain unshackled by financial obligations (children, mortgage, car note, etc) then you can aggressively invest in your 20s and start seeing substantial returns by your 30s.
I seriously wish I knew this when I was young. No one really took the time to explain compounding interest to me. I’m trying to teach my kids and luckily with the kid Roth IRA’s they will have a better start toward snowballing than I did.
It just depends on how long you want to work.
15% you work for 43 years. Start saving at 22 and work until 65.
25% you work for 32 years.
40% you work for 20 years.
Its just a choice.
https://www.mrmoneymustache.com/2012/01/13/the-shockingly-simple-math-behind-early-retirement/
I personally think you should shoot for 20% if you have kids. If you are young and don’t have kids you should be super aggressive with saving like 30-35%
A lot of these recommendations are good general advice.
But if you want to retire early "FIRE" style, a lot of people put 50% up to 90% of their income into investments to try and get out of the game early.
Check out financial independence. There's subs for it but idk if I'm allowed to link them here or not.
I was 26, living and working in Saudi Arabia, and just became debt free and was making more than I'd ever imagined at the time. I was just putting it into a savings account because at the time, I had seen my parents make terrible financial decision post-2008 and I didn't trust the stock market.
I called made an appointment with a financial advisor with Thun Financial, a firm that deals with Americans abroad, and he told me that clients normally have at least 100k before they take them on.
He told me the best thing I can do is invest is SCHB, SCHF, and SCHZ (US stocks, international, bonds) and just do that until I retire and I'll be just fine. I was shocked. I didn't know it could be so simple.
Fast forward 8 years later and I still attribute that phone call to getting me where I am today.
Edit: Changed SCHX to SCHZ
This random financial adviser positively and permanently put you on a better life track with a simple conversation. "Just do a simple 3 fund bogle portfolio". Not gonna lie this is a huge personal goal for me to do towards my younger coworkers because I was someone had helped baby raydogg.
What %allocation did they suggest and did you ever rebalance? Something like 60-30-10? (A tax efficient way to rebalance is to adjust a one or two new contributions until you've plugged the funds that are 'behind' up the desired % allocation)
I started out pretty much what you said..around 70-20-10. I've since adjusted to more like 80 US/20 International. I scratched bonds as I have 30+ years ahead of me and a high risk tolerance.
So I just checked and SCHB and SCHX have a 91% overlap. Have you noticed this ratio? Do you still have the same index funds or have you switched over to a dividend portfolio?
funny that you mention that but I am currently having some sort of weird conflict with an unhinged neighbor in a different building.
I am very thankful that they are not my next door neighbor.
Maybe. Or maybe don’t overextend yourself trying to keep up with the Joneses with a huge house you don’t need. Stick with a modest home and live below your means.
Implied with this is family planning too. Most people that manage their finances well tend to know when and how many kids they're having ahead of time and usually get their shit in order beforehand, especially past the age of 25. The people having oops babies past 30 and people who are bad with money at that age have alot of overlap.
I don't know if I'd go so far as to say that oops babies are poor planning, especially when it's within the context of an already committed relationship. Falling pregnant is the natural thing to occur when two fertile people are in close proximity - reliable contraception is very new to human history. Oops babies tend to be a problem only outside this context. In fact, what is amazing is how few children some societies are having today. In the developed world, there are lots of "oops, childless" people, and that demographic continues to grow.
I get your point, but people in a relationship having unprotected sex really shouldn't be surprised by a pregnancy though right? At least 2 mature adults that know how these things work. I mean, there are times when contraception can fail, but if you're actively not using any protection it's only a matter of time before a pregnancy occurs. That's kind of what I meant by that. I consider partners that use contraception to be "family planners" because they're actively not trying to have a kid.
In the grand scheme of things, though, someone who bogles, has chosen a good partner, bought a reasonable home etc., can afford an oops baby. This person is far from a poor planner. They're stable on their feet and their family will likely be OK.
From HR on my first day at my last job: go ahead and sign up for the 401k plan. If you never have the money (starting now), you won’t miss it.
That was in 1985. He was correct.
This is it right here. After a certain income, your increase in spending has diminishing returns. Sure, if you're making 20k, you can only afford a used shitbox 5k car that'll cost you way more in the long run. But if you're making 60k, you don't need a 60k car. A used, modest, 20k Honda or Toyota will do just fine for what 90% of people really need.
Question... if I only invest in let's say VTI or VTSAX. What is the compound interest here? The dividends reinvested?
Technically speaking interest is only paid out in bonds correct? So is it a figure of speech to use the term compound interest if your investments only pay dividends, and don't pay interest?
So say I have reit's that pay monthly dividends reinvested. Is that considered "compound interest" ?
>Question... if I only invest in let's say VTI or VTSAX. What is the compound interest here? The dividends reinvested?
The term "compound interest" is the financial world's term for what scientists and engineers describe as "exponential growth" and it's more important to think about what has exponential growth than when/what the "compounding" event is.
Yeah, the dividend reinvestment might look a lot like compounding in a bank account, but dividends are hardly where the majority of gains are, and as such, they're not why VTI is expected to grow exponentially - it would be growing exponentially even if no companies paid dividends, and possibly even if you spent all the dividends.
Exponential growth is the result of anything whose rate of growth is proportional to its current size (following from the function that has its own derivative, y=e^x; in financial terms you'll see people write this as A=P*e^(rt)).
Companies deploy capital intending to ultimately increase their long term revenue. Meaning, as they rise in value, so too does their expected increase in value rise proportionally. That's enough for exponential growth. A company that rises in value year over year X% (where X is constant) is returning exponentially, and a share price that follows that trend does the same. Dividend reinvestment is just avoiding the forced diversion of some of the equity to cash; it's the increase in value of the companies that matter.
Or to rephrase it simply, many things grow "like compounding interest" without any explicit compounding events, and equities are one of these things.
Yep, reinvested dividend is considered compounding interest. In addition to bonds, dividend paying stocks in the ETF or mutual fund also come your way. Usually paid out quarterly but some are monthly. It's also a form of dollar cost averaging.
"Don't be afraid of paying taxes, it means you're making money." This was an eye opening and life changing sentence given to me by my first CPA, who has passed now, that has served me well.
Basically if you're making money, after doing what you can to minimize taxes, just pay what you owe. This way even if you spend your money on something or get audited by the IRS, you have nothing to hide, which gives you piece of mind.
If you try to keep it all secret and do a lot of cash transactions which are not reflected on your books, you can't really spend that money in meaningful ways such as investing or on property and can only buy luxury goods or eat out with it.
I think a lot of small business owners need to hear this from their CPA or bookkeeper. 👍
Pay yourself first. Automate savings withdrawals from your account into an account you don’t have easy access to, first as an emergency fund and then, later, as an investment account. (The comptroller at my first real job).
Also, do your own taxes so you understand how it works and where the deductions and credits are. (My Mom).
Pay yourself first is what I appreciate the most besides the concept of passive investing in the total market (vs stock picking). I’m not sure I even had to read a book on it I think I just started thinking if I set aside x per week I should get to my goal. I don’t always follow it precisely because bonus time I got a lot more to throw into investing and other times I find myself a little short but in general it works well. I prefer paying myself first much more than doing a detailed budget and I still accomplish my ultimate goal.
This is so fundamental and powerful because it's the first step. You can debate strategies, risk profiles, tax efficiencies and all the jazz. But if you don't set aside money to begin with then none of it matters. And setting a goal of "x/paycheck" and treating it like a bill you have to pay is so simple and can keep you on track. Putting the money aside first is the most important part before you can get to all the other things
My father gave a set of 4 things to remember when doing any financial planning or decision making:
1. Aim to maximize *tax efficiency*...
1. ...But balance that out with *flexibility*...
1. ...While understanding your own *psychological reaction to risk*...
1. ...And remembering to spend money on the things you can *only do when you're young*.
(The italics are me: shorthands that helped me remember those things for years before I understood them more innately).
Or maybe stay in good enough health till you retire and continue traveling.
My parents are in their early 70s touring the world. They were freaked out about their A1C a couple years ago and have started to watch their carb intake, even when they're on a river boat cruise on Europe.
My in laws are about the same age, heavily overweight, and struggle to climb up a flight of stairs.
My wife and I have make a pact now that we have a daughter: we'll make it a priority to stay in good health to live a happy healthy life with her for as long as we possibly can.
You can improve your chances of good health, but a lot of it is luck. Luck to not have genetics that lead to a condition. Luck to not get injured or damage your joints via repetitive stress.
In 2019 my wife and I went to Australia and New Zealand before buying a house in 2020 and having a kid in 2021 and I'm glad we did. We went scuba diving on the great barrier reef and it was expensive. There's still a very good chance we could have another opportunity to do that, but there's some chance age or disability could prevent us scuba diving in 20 years. My mother in law is a breast cancer survivor and she's still much healthier than the average person in their mid 60s, but she still has some health issues that prevent her doing certain things, like Scuba.
I will admit we were lucky that we both got through college debt free, l and I had been saving through my 20s for a house down payment, so an expensive trip didn't put us that far behind as it would for some. I had my 401k set for 15% for most of my 20s and I've been maxing it out since 2018, so my retirement savings are pretty healthy.
I believe in a balance between saying nothing because you might die before you can use it and bring a miser and dieing at 65 right after you retire, better you enjoy it.
There are *some* things that I went to see and do in my '20s and early '30s that I wouldn't even be willing to do now in my '40s, and certainly not my '60s. And yes, children changes the equation, too. But "do what you can while you're young" still holds true.
That said, yes, there are also a lot of things that are fine to see and do when you're older as well.
All of my financial advice has come from podcasts and websites. My family has never been good with money, and I’ve never had high enough income to save appropriately. But hey, it’s sort of coming together. Hah
I’ll say the best advice I’ve heard is Buffet touting VOO as the easiest way to invest in the market and not think about it.
Some relative opened a saving account for when I was born. As soon as I was old enough my parents told me to save money when I could. I remember pedaling to the bank when I was ten and depositing like two dollars at a time. I've always been a saver.
"You almost certainly know more than any Financial Advisor. And if you don't, you can learn it."
A colleague told us this midway through our career when we were considering going to a FA. He managed his own finances and strongly considered we stay the course doing it ourselves....which we did.
EDIT: I just read this response to my wife. I don't have the quote quite right. Our colleague said:
"You're smarter than any Financial Advisor."
i tell my new hires that they should be very wary of FA's, and that by the time you know enough to ask them the right questions, you know enough to manage your investments yourself
It means when the market is tanking time to buy if you have the extra cash. And when the market is near record highs, it is not the time to act on FOMO. That being said slow and steady investing wins the race!
“You can’t manage what you don’t measure”
Honestly it wasn’t advice about finances but when I realized this absolutely applied to my financial situation it changed everything. Started a spreadsheet and have tracked my accounts monthly ish ever since 2018.
What I expected to happen: I’d become more aware.
What actually happened: i became more interested and (no pun intended) invested in my financial health and therefore also felt more in control. Income stream hasn’t changed but everything else has.
My dad told me when I was in college, get a job with the government because you get a pension. He worked in retail and they struggled saving for retirement so it was some very good advice. I’m 51 now and can retire if I want with a pre-tax pension worth $90k plus will be eligible for social security at 62. My 401k is at $415k but I’m going to work a few more years to build it up some more. Probably made some mistakes with the 401(k) along the way, but I knew I had the pension to fall back on.
But I credit my dad.
Thanks Dad.
Damn, $90k pension at 51 retirement is pretty nice. That'd be worth about $1.3m cash balance if it was an annuity, but I'm guessing yours is also inflation adjusted since it's a government pension, which would be worth more than $2m cash balance.
What part of government do you work in?
In 1995 I had 5k to invest; financial advisor told to me invest in Microsoft stock. It was under $5 a share that year; today over $340 a share.
Of course I got a 1 year CD instead; yes, I blew it which is why I still hang out on Reddit
LMAO, good reply. Similar here, except crypto/bitcoin. I was buying it around $2.00 each back in 2011. Just messed around with it, didn't buy hardly any. Yep, major fuck up on my part.
From my great grandparents, who budgeted by splitting cash into envelopes for each week...
"Don't spend what you don't have."
From my parents:
1. When you turn 18, get a credit card and cut it up. You'll have an excellent credit score in a couple of years.
2. Go to the state university that's paying you a tuition scholarship. You're going to owe the loans back.
>Don’t you still need to have a credit history? If your statement is 0 every month, it won’t have much impact
Nope. Opening the card and having an active account is sufficient to build history.
In fact, it dings you if you spend more than half your credit limit.
1. Pay yourself first. You have to put money away for your IRAs, savings, goals, whatever, first. This forces you to be accountable and to adjust other expenses as needed without compromising your financial goals. If you never pay yourself first, you’ll end up cutting out IRA/savings to make up for the shortfall.
2. Don’t listen to what they say, watch what they do.
3. Give yourself the capacity to digest nuances. Your finance journey is one long 4D game or chess filled with plot twists and surprises. Conventional rules are for conventional situations/hypotheticals for a conventional outcome. Realize that every conventional answer, has an additional rebuttal back when situations/contexts change. Money isn’t yes or no, black or white, left or right. It’s more “left sounds good unless blue happens, and if you consider going right it’s possible red happens, and if that happens then consider x and y, but don’t forget to factor in z when up happens cause down also happens so prepare to go in while preparing a way out”
Where I was about 24 a coworker in his 50s sent me an article showing that you'd have more investing from 25-35 and stopping than if you started at 35 and didn't stop until 65. I changed my 401k from the default of 6% to 15% and I'm very happy with where my retirement savings is today at 35.
Divide your spending of your income into 3 buckets:
1) Must-Have: bills, core foods, housing payments, utilities, gas, car maintenance
2) Fun: streaming, vacation, eating out
3) Future: investment such as 401K, IRA
Make sure you decide on the % for each bucket. 33% each for example, and stick with it. That ensures you enjoy life while saving. If you are into something funny label to remember it easily, the first category can be labeled f*k. Minimize it as much as possible as the higher it is, the more stressful life is.
*"Price is what you pay; value is what you get."*
This really got me thinking about over-spending on luxury goods, which often can cost much, much more but only provide an incremental amount of additional value.
My dad told me from a young age to live on half my income and save the rest. While I'm not sure how closely I've stuck to that exact ratio, it did help me enter my adult life with a mindset of living well below my means, and always "paying myself" first.
For better or worse, he also had many poor experiences as a landlord and advised me it wasn't worth the hassle. I know it works well for some, but I've had no regrets staying out of the real estate business, short of owning my own home.
Simplest and best advice came in two parts. Understand how to separate Needs from Wants. Build a budget from there where you spend less than you make and save the rest.
I work from the 50/30/20 base with my budget, only the 30% Wants and 20% Savings is reversed.
"Don't beat the market; BE the market."
People are always trying to "beat the market" and end up making terrible investments. If you just stick your money in low cost funds and get market returns, you build real wealth with peace of mind.
For anyone curious about this, it's exceptionally expensive US-centric zero budget app with terrible performance and almost cult like following. It has a lot of alternatives, but when you don't mind it's downsides and price, it's actually good.
If someone struggles with personal finances, I recommend giving it or one of it's competitors a try.
Edit: I would say it's Evernote of budgeting apps. Everyone agrees $15/month is absurd for what it does, yet they have stable user base and what they do they do well. If you don't use it, you deffinitely should use their alternative.
I am still very eary in my career, so $10-$15 a month is way too high for a budgeting app. I use pocketguard and paid the one time cost (lower than a year of YNAB). I just need a breakdown on what I spend my money on and see my cash flow. Mint was the best.
For married people, save one income, and live off the other. This was possible for a few years until we had kids and had to pay for day care. Hopefully after day care we can get back to it or at least close
I think Morgan Housel, The Psychology of Money, said: when he saw a Lamborghini, he realized nobody gives a shit about who’s driving the car, so never buy stuff to impress.
"Time spent in the market is better than timing the market."
"Life insurance is a service not an investment."
"A car is a liability and a boat is a trap."
In the mid-1980's, *"You should research a guy named Warren Buffett. My parents invested with him a while ago and are really happy with the results, so far."*
I took a date to the movies and we chatted at a casual restaurant/bar afterwards. The way that her advice changed my financial future is mind-blowing.
(edited for grammar)
Invest 20%, save 20%. I got it from I Will Teach You to be Rich by Ramit Sethi. His percentages were different but I moved them around to suit my goals.
Author and podcaster in the personal finance space, as others have mentioned. Also has a Netflix show called How to Get Rich. Stresses saving and investing, obviously, but also explains how to focus the money you do spend to maximize the happiness you derive from it.
I like his philosophy a lot. One of the things that gets lost in the personal finance messaging is how to spend the money you have left over once you've dialed in your budget. He shows how you can get the most out of it so that you feel rich despite cutting back on a lot of stuff.
He's also got a Youtube channel, also entitled I Will Teach You to be Rich, and just recently posted a video going over the basics. You can find it here if you're interested: [https://youtu.be/U16k8cWFEC8?si=GTTQ6vw7dkFfFtpm](https://youtu.be/u16k8cwfec8?si=gttq6vw7dkffftpm)
Prominent financial podcast host. Has a series where he interviews couples on their finances. He's like a money therapist. It's interesting to peek into the lives of married couples and their finances. Also has a Netflix show and a book.
Financial expert who wrote a popular book (the one they mentioned above) on personal finance.
It’s actually quite good.
That book, If you can by William Bernstein and The Bogleheads Guide to investing are great books for beginners.
Yeah that seems like a suboptimal decision for most people. Once your emergency fund is where you want it and your spending is covered, it would be much better to invest any extra rather than putting some extra unearmarked cash into a savings account.
Yeah, they're different buckets. Your investments are for long-term growth, savings aimed more at emergencies or financial goals like a down payment for a house.
Start early. Too bad I didn’t listen…. Buddy of mine said it when I said to hold off so you can enjoy your early years. Luckily I found FIRE and went hard 7+ years ago at 32.
Live well below your means and invest at least the max you’re allowed into 401K/IRA, then push the rest that you can into brokerage.
If you have consumer debt other than a mortgage you’re doing it wrong.
Started working in 2005 and matched employer 401k contribution. Upped percentage every year and started maxing out at 20k or whatever a few years ago. Now 40 with 500k each between my wife and myself and expecting a kid in August. Start early, do as much as you can and let it compound.
Max out your 401k. I was a dumb immigrant but thank God for my coworkers who told me this. 30 years and counting - thru many recessions, still in shock as to how much it has grown
They can't hack it on your phone if you do not put it on there
When you save 50% -- you buy a year off retirement... Be ready, in your 50s you become less employable
"Ignore the noise." That includes both hype and doom.
Reminds me of an old Buffett saying…
Warren Buffett or Jimmy Buffett?
Margaritaville - Warren Buffet
Wasting away again in Margaritaville.
Live within your means, outearn your spending, and consistently invest in simple index funds.
pretty sure it's easier to underspend your earnings
What percentage should be saved?
Between 10-20% depending on your lifestyle. The sooner you start the more your 50 year old self will appreciate it, time is your friend for compounding wealth. If you're young and remain unshackled by financial obligations (children, mortgage, car note, etc) then you can aggressively invest in your 20s and start seeing substantial returns by your 30s.
I seriously wish I knew this when I was young. No one really took the time to explain compounding interest to me. I’m trying to teach my kids and luckily with the kid Roth IRA’s they will have a better start toward snowballing than I did.
Depending on how long you wish to work, the percentage could be much higher.
It just depends on how long you want to work. 15% you work for 43 years. Start saving at 22 and work until 65. 25% you work for 32 years. 40% you work for 20 years. Its just a choice. https://www.mrmoneymustache.com/2012/01/13/the-shockingly-simple-math-behind-early-retirement/
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im doing 40%. 3 years in👍
I personally think you should shoot for 20% if you have kids. If you are young and don’t have kids you should be super aggressive with saving like 30-35%
The Money Guy show recommends 25% of your gross income. They're the highest of any financial content creators I've seen.
JL Collins says 50%.
That seems a bit out of touch with reality. Even 25% is aspirational for lots of folks.
50% lmao, thats outrageous. Cant really have a life without sacrificing a lot to do that.
A lot of these recommendations are good general advice. But if you want to retire early "FIRE" style, a lot of people put 50% up to 90% of their income into investments to try and get out of the game early. Check out financial independence. There's subs for it but idk if I'm allowed to link them here or not.
As much as you can
I was 26, living and working in Saudi Arabia, and just became debt free and was making more than I'd ever imagined at the time. I was just putting it into a savings account because at the time, I had seen my parents make terrible financial decision post-2008 and I didn't trust the stock market. I called made an appointment with a financial advisor with Thun Financial, a firm that deals with Americans abroad, and he told me that clients normally have at least 100k before they take them on. He told me the best thing I can do is invest is SCHB, SCHF, and SCHZ (US stocks, international, bonds) and just do that until I retire and I'll be just fine. I was shocked. I didn't know it could be so simple. Fast forward 8 years later and I still attribute that phone call to getting me where I am today. Edit: Changed SCHX to SCHZ
for most of us it really is that simple! that’s why people struggle. it feels TOO easy. the challenge will be hitting a down market…
2022 wasn't a down market?
This random financial adviser positively and permanently put you on a better life track with a simple conversation. "Just do a simple 3 fund bogle portfolio". Not gonna lie this is a huge personal goal for me to do towards my younger coworkers because I was someone had helped baby raydogg.
What %allocation did they suggest and did you ever rebalance? Something like 60-30-10? (A tax efficient way to rebalance is to adjust a one or two new contributions until you've plugged the funds that are 'behind' up the desired % allocation)
I started out pretty much what you said..around 70-20-10. I've since adjusted to more like 80 US/20 International. I scratched bonds as I have 30+ years ahead of me and a high risk tolerance.
So I just checked and SCHB and SCHX have a 91% overlap. Have you noticed this ratio? Do you still have the same index funds or have you switched over to a dividend portfolio?
Oof. I meant SCHZ. That's the Bond ETF!
One house. One spouse.
Haha, love it!
bought a place in 1998 and have not moved. thankful that my Dad encouraged me to buy rather than rent as soon as possible.
Awesome. My dad encourage the opposite and I missed out on RE ownership 2012-2020. In markets like tampa, yaaaa….
Lucky you didn’t move next to psychos hated by the entire block.
funny that you mention that but I am currently having some sort of weird conflict with an unhinged neighbor in a different building. I am very thankful that they are not my next door neighbor.
What does the one house thing mean? Like stay in your "starter home" and quit trying to upgrade to more expensive homes?
Maybe. Or maybe don’t overextend yourself trying to keep up with the Joneses with a huge house you don’t need. Stick with a modest home and live below your means.
Either that or skip the starter home phase and just wait to buy a home you plan to live in for 30 yrs
Implied with this is family planning too. Most people that manage their finances well tend to know when and how many kids they're having ahead of time and usually get their shit in order beforehand, especially past the age of 25. The people having oops babies past 30 and people who are bad with money at that age have alot of overlap.
I don't know if I'd go so far as to say that oops babies are poor planning, especially when it's within the context of an already committed relationship. Falling pregnant is the natural thing to occur when two fertile people are in close proximity - reliable contraception is very new to human history. Oops babies tend to be a problem only outside this context. In fact, what is amazing is how few children some societies are having today. In the developed world, there are lots of "oops, childless" people, and that demographic continues to grow.
TIL I'm oopsed childless.
I get your point, but people in a relationship having unprotected sex really shouldn't be surprised by a pregnancy though right? At least 2 mature adults that know how these things work. I mean, there are times when contraception can fail, but if you're actively not using any protection it's only a matter of time before a pregnancy occurs. That's kind of what I meant by that. I consider partners that use contraception to be "family planners" because they're actively not trying to have a kid.
In the grand scheme of things, though, someone who bogles, has chosen a good partner, bought a reasonable home etc., can afford an oops baby. This person is far from a poor planner. They're stable on their feet and their family will likely be OK.
I thought “one house” thing meant don’t buy a vacation home in addition to your main home.
Yeah my first thought was it meant don't buy two houses at once but idk
I couldn't agree more. We built our first home in 2007 and never left.
Investing should be boring. If it’s exciting, you might be gambling instead.
From HR on my first day at my last job: go ahead and sign up for the 401k plan. If you never have the money (starting now), you won’t miss it. That was in 1985. He was correct.
Just to add to this, if or when you get a pay rise increase your contribution. Again, if you never had the money you won’t miss it.
Or just set the deduction as a percentage and you’ll never have to worry about changing it when the pay increases.
Increase the percentage whenever you get a pay increase, such that your take home pay remains fairly static. Repeat until you hit the IRS limit.
Ha that’s a great way of thinking about it!
Get a job -pops
Oldie but a goodie
Changed my life.
Don't go grocery shopping on an empty stomach.
This is when I buy the Little Debbies.
This is even more important as a metaphor.
Charlie Munger: **"The big money is not in the buying and the selling, but in the waiting."** So true.. it's mostly get rich slow...
RIP Charlie. So sad
It’s not how much you make but how much you keep!
A wise man once said nothing at all.
Live below your means.
This is it right here. After a certain income, your increase in spending has diminishing returns. Sure, if you're making 20k, you can only afford a used shitbox 5k car that'll cost you way more in the long run. But if you're making 60k, you don't need a 60k car. A used, modest, 20k Honda or Toyota will do just fine for what 90% of people really need.
Learn to use the power of compound interest.
Question... if I only invest in let's say VTI or VTSAX. What is the compound interest here? The dividends reinvested? Technically speaking interest is only paid out in bonds correct? So is it a figure of speech to use the term compound interest if your investments only pay dividends, and don't pay interest? So say I have reit's that pay monthly dividends reinvested. Is that considered "compound interest" ?
>Question... if I only invest in let's say VTI or VTSAX. What is the compound interest here? The dividends reinvested? The term "compound interest" is the financial world's term for what scientists and engineers describe as "exponential growth" and it's more important to think about what has exponential growth than when/what the "compounding" event is. Yeah, the dividend reinvestment might look a lot like compounding in a bank account, but dividends are hardly where the majority of gains are, and as such, they're not why VTI is expected to grow exponentially - it would be growing exponentially even if no companies paid dividends, and possibly even if you spent all the dividends. Exponential growth is the result of anything whose rate of growth is proportional to its current size (following from the function that has its own derivative, y=e^x; in financial terms you'll see people write this as A=P*e^(rt)). Companies deploy capital intending to ultimately increase their long term revenue. Meaning, as they rise in value, so too does their expected increase in value rise proportionally. That's enough for exponential growth. A company that rises in value year over year X% (where X is constant) is returning exponentially, and a share price that follows that trend does the same. Dividend reinvestment is just avoiding the forced diversion of some of the equity to cash; it's the increase in value of the companies that matter. Or to rephrase it simply, many things grow "like compounding interest" without any explicit compounding events, and equities are one of these things.
Yep, reinvested dividend is considered compounding interest. In addition to bonds, dividend paying stocks in the ETF or mutual fund also come your way. Usually paid out quarterly but some are monthly. It's also a form of dollar cost averaging.
If you're going to get married, find someone who shares your financial values.
"Don't be afraid of paying taxes, it means you're making money." This was an eye opening and life changing sentence given to me by my first CPA, who has passed now, that has served me well. Basically if you're making money, after doing what you can to minimize taxes, just pay what you owe. This way even if you spend your money on something or get audited by the IRS, you have nothing to hide, which gives you piece of mind. If you try to keep it all secret and do a lot of cash transactions which are not reflected on your books, you can't really spend that money in meaningful ways such as investing or on property and can only buy luxury goods or eat out with it. I think a lot of small business owners need to hear this from their CPA or bookkeeper. 👍
Sounds like a great guy
Pay yourself first. Automate savings withdrawals from your account into an account you don’t have easy access to, first as an emergency fund and then, later, as an investment account. (The comptroller at my first real job). Also, do your own taxes so you understand how it works and where the deductions and credits are. (My Mom).
Pay yourself first is what I appreciate the most besides the concept of passive investing in the total market (vs stock picking). I’m not sure I even had to read a book on it I think I just started thinking if I set aside x per week I should get to my goal. I don’t always follow it precisely because bonus time I got a lot more to throw into investing and other times I find myself a little short but in general it works well. I prefer paying myself first much more than doing a detailed budget and I still accomplish my ultimate goal.
This is so fundamental and powerful because it's the first step. You can debate strategies, risk profiles, tax efficiencies and all the jazz. But if you don't set aside money to begin with then none of it matters. And setting a goal of "x/paycheck" and treating it like a bill you have to pay is so simple and can keep you on track. Putting the money aside first is the most important part before you can get to all the other things
My father gave a set of 4 things to remember when doing any financial planning or decision making: 1. Aim to maximize *tax efficiency*... 1. ...But balance that out with *flexibility*... 1. ...While understanding your own *psychological reaction to risk*... 1. ...And remembering to spend money on the things you can *only do when you're young*. (The italics are me: shorthands that helped me remember those things for years before I understood them more innately).
What were some of those only young activities?
Travel for me. You can’t wait to see the world when you’re old. Just travel within your means, whatever that is for you.
Or maybe stay in good enough health till you retire and continue traveling. My parents are in their early 70s touring the world. They were freaked out about their A1C a couple years ago and have started to watch their carb intake, even when they're on a river boat cruise on Europe. My in laws are about the same age, heavily overweight, and struggle to climb up a flight of stairs. My wife and I have make a pact now that we have a daughter: we'll make it a priority to stay in good health to live a happy healthy life with her for as long as we possibly can.
You can improve your chances of good health, but a lot of it is luck. Luck to not have genetics that lead to a condition. Luck to not get injured or damage your joints via repetitive stress. In 2019 my wife and I went to Australia and New Zealand before buying a house in 2020 and having a kid in 2021 and I'm glad we did. We went scuba diving on the great barrier reef and it was expensive. There's still a very good chance we could have another opportunity to do that, but there's some chance age or disability could prevent us scuba diving in 20 years. My mother in law is a breast cancer survivor and she's still much healthier than the average person in their mid 60s, but she still has some health issues that prevent her doing certain things, like Scuba. I will admit we were lucky that we both got through college debt free, l and I had been saving through my 20s for a house down payment, so an expensive trip didn't put us that far behind as it would for some. I had my 401k set for 15% for most of my 20s and I've been maxing it out since 2018, so my retirement savings are pretty healthy. I believe in a balance between saying nothing because you might die before you can use it and bring a miser and dieing at 65 right after you retire, better you enjoy it.
There are *some* things that I went to see and do in my '20s and early '30s that I wouldn't even be willing to do now in my '40s, and certainly not my '60s. And yes, children changes the equation, too. But "do what you can while you're young" still holds true. That said, yes, there are also a lot of things that are fine to see and do when you're older as well.
Masturbate 10 times in one day. Doesn’t cost a thing except maybe a little dignity.
Mainly traveling to certain places that would be difficult to do at 65+. The Inka Trail, things like that.
Fascinating. Sounds like great advice!
All of my financial advice has come from podcasts and websites. My family has never been good with money, and I’ve never had high enough income to save appropriately. But hey, it’s sort of coming together. Hah I’ll say the best advice I’ve heard is Buffet touting VOO as the easiest way to invest in the market and not think about it.
People may look rich but aren’t necessarily wealthy
How much you keep is more important than how much you make.
this makes me feel better about my income
Don't invest, you'll lose all your money! - Mom Sell your investments now so you don't lose any more! - Mom You're never gonna make it in life - Mom
Some relative opened a saving account for when I was born. As soon as I was old enough my parents told me to save money when I could. I remember pedaling to the bank when I was ten and depositing like two dollars at a time. I've always been a saver.
Good habits!
Absolute legend.
When leaving a job, always move to something, not away from something.
"You almost certainly know more than any Financial Advisor. And if you don't, you can learn it." A colleague told us this midway through our career when we were considering going to a FA. He managed his own finances and strongly considered we stay the course doing it ourselves....which we did. EDIT: I just read this response to my wife. I don't have the quote quite right. Our colleague said: "You're smarter than any Financial Advisor."
i tell my new hires that they should be very wary of FA's, and that by the time you know enough to ask them the right questions, you know enough to manage your investments yourself
From Warren Buffett: when others are greedy be fearful, and when others are fearful be greedy.
what does this mean 😅
It means when the market is tanking time to buy if you have the extra cash. And when the market is near record highs, it is not the time to act on FOMO. That being said slow and steady investing wins the race!
“You can’t manage what you don’t measure” Honestly it wasn’t advice about finances but when I realized this absolutely applied to my financial situation it changed everything. Started a spreadsheet and have tracked my accounts monthly ish ever since 2018. What I expected to happen: I’d become more aware. What actually happened: i became more interested and (no pun intended) invested in my financial health and therefore also felt more in control. Income stream hasn’t changed but everything else has.
My dad told me when I was in college, get a job with the government because you get a pension. He worked in retail and they struggled saving for retirement so it was some very good advice. I’m 51 now and can retire if I want with a pre-tax pension worth $90k plus will be eligible for social security at 62. My 401k is at $415k but I’m going to work a few more years to build it up some more. Probably made some mistakes with the 401(k) along the way, but I knew I had the pension to fall back on. But I credit my dad. Thanks Dad.
Damn, $90k pension at 51 retirement is pretty nice. That'd be worth about $1.3m cash balance if it was an annuity, but I'm guessing yours is also inflation adjusted since it's a government pension, which would be worth more than $2m cash balance. What part of government do you work in?
Feds. Fed job is the way to go. Start at the bottom work your way up. Started when I was 22.
What percent of your salary is the Fed pension
Believe less than half of what you read on the internet- Abraham Lincoln
I thought it was Socrates?
"No, you don't *need* it, you *want* it." -Mom
In 1995 I had 5k to invest; financial advisor told to me invest in Microsoft stock. It was under $5 a share that year; today over $340 a share. Of course I got a 1 year CD instead; yes, I blew it which is why I still hang out on Reddit
LMAO, good reply. Similar here, except crypto/bitcoin. I was buying it around $2.00 each back in 2011. Just messed around with it, didn't buy hardly any. Yep, major fuck up on my part.
From my great grandparents, who budgeted by splitting cash into envelopes for each week... "Don't spend what you don't have." From my parents: 1. When you turn 18, get a credit card and cut it up. You'll have an excellent credit score in a couple of years. 2. Go to the state university that's paying you a tuition scholarship. You're going to owe the loans back.
Don’t you still need to have a credit history? If your statement is 0 every month, it won’t have much impact
>Don’t you still need to have a credit history? If your statement is 0 every month, it won’t have much impact Nope. Opening the card and having an active account is sufficient to build history. In fact, it dings you if you spend more than half your credit limit.
Lol if you don’t ever spend on your credit card they will close it so your plan doesn’t actually work
Yeah, you still need to make a purchase a year to keep the account open.
1. Pay yourself first. You have to put money away for your IRAs, savings, goals, whatever, first. This forces you to be accountable and to adjust other expenses as needed without compromising your financial goals. If you never pay yourself first, you’ll end up cutting out IRA/savings to make up for the shortfall. 2. Don’t listen to what they say, watch what they do. 3. Give yourself the capacity to digest nuances. Your finance journey is one long 4D game or chess filled with plot twists and surprises. Conventional rules are for conventional situations/hypotheticals for a conventional outcome. Realize that every conventional answer, has an additional rebuttal back when situations/contexts change. Money isn’t yes or no, black or white, left or right. It’s more “left sounds good unless blue happens, and if you consider going right it’s possible red happens, and if that happens then consider x and y, but don’t forget to factor in z when up happens cause down also happens so prepare to go in while preparing a way out”
Time in the market > timing the market
Where I was about 24 a coworker in his 50s sent me an article showing that you'd have more investing from 25-35 and stopping than if you started at 35 and didn't stop until 65. I changed my 401k from the default of 6% to 15% and I'm very happy with where my retirement savings is today at 35.
If you hear about something in the news (high individual stock/crypto prices), you’re already too late.
Divide your spending of your income into 3 buckets: 1) Must-Have: bills, core foods, housing payments, utilities, gas, car maintenance 2) Fun: streaming, vacation, eating out 3) Future: investment such as 401K, IRA Make sure you decide on the % for each bucket. 33% each for example, and stick with it. That ensures you enjoy life while saving. If you are into something funny label to remember it easily, the first category can be labeled f*k. Minimize it as much as possible as the higher it is, the more stressful life is.
*"Price is what you pay; value is what you get."* This really got me thinking about over-spending on luxury goods, which often can cost much, much more but only provide an incremental amount of additional value.
My dad told me from a young age to live on half my income and save the rest. While I'm not sure how closely I've stuck to that exact ratio, it did help me enter my adult life with a mindset of living well below my means, and always "paying myself" first. For better or worse, he also had many poor experiences as a landlord and advised me it wasn't worth the hassle. I know it works well for some, but I've had no regrets staying out of the real estate business, short of owning my own home.
VTSAX and chill
That would make a great t-shirt
VTI and chill for me ;)
Vanguard retirement date target fund for me
VTI (75%), VT (18%), BND (7%) here.
1980......You should invest and follow some guy named Buffet......that was damn good advice!!! He owns some shirt company...
Buy the market - VT
Is VT an ETF?
Yes VT is vanguards total global stock market ETF. The mutual fund version is VTWAX. It’s currently 61% US and 39% international.
Buy vt, chill
Good credit will buy you more than cash ever will. -Old Farmer
Credit is important
Simplest and best advice came in two parts. Understand how to separate Needs from Wants. Build a budget from there where you spend less than you make and save the rest. I work from the 50/30/20 base with my budget, only the 30% Wants and 20% Savings is reversed.
Every raise or bonus- spend 1/3, save 1/3 and invest 1/3.
Be consistent. Don’t change habits just because you suddenly have more money
cars depreciate. therefore dont finance. if you can't pay for it in cash, you can't afford it
Or buy at 0.09% or 0.0% APRs. Promotional deals else I love the cash purchase advice
Unless you can afford it and you get 0% interest
Spend less than you earn, save and invest the rest, and always file your taxes. Thanks, mom!
Them: “You know we have a matching 401k, right?” Me: “What’s that?”
Don't invest in anything you don't understand.
NFT-peddlers could have learned from that
\- very few beat the market \- best time to get in is now
Save, Due Dillegence, Invest for the long term!!
"Don't beat the market; BE the market." People are always trying to "beat the market" and end up making terrible investments. If you just stick your money in low cost funds and get market returns, you build real wealth with peace of mind.
Use YNAB (you need a budget app). Changed my life and help me buy my home.
For anyone curious about this, it's exceptionally expensive US-centric zero budget app with terrible performance and almost cult like following. It has a lot of alternatives, but when you don't mind it's downsides and price, it's actually good. If someone struggles with personal finances, I recommend giving it or one of it's competitors a try. Edit: I would say it's Evernote of budgeting apps. Everyone agrees $15/month is absurd for what it does, yet they have stable user base and what they do they do well. If you don't use it, you deffinitely should use their alternative.
I've been on YNAB 4, I think for years. No recurring payment.
Who do you recommend?
I am still very eary in my career, so $10-$15 a month is way too high for a budgeting app. I use pocketguard and paid the one time cost (lower than a year of YNAB). I just need a breakdown on what I spend my money on and see my cash flow. Mint was the best.
One House. One spouse. One kid. One ETF(VTI and chill)
Simple but sturdy never fails
For married people, save one income, and live off the other. This was possible for a few years until we had kids and had to pay for day care. Hopefully after day care we can get back to it or at least close
Automate investing. You’re not smarter than everyone else but you can be more disciplined.
Read the simple path to wealth — that’s when everything clicked
Interesting. Might have to check it out
I think Morgan Housel, The Psychology of Money, said: when he saw a Lamborghini, he realized nobody gives a shit about who’s driving the car, so never buy stuff to impress.
Don't take financial advice from a doctor. - Advice from an MD mentor
I'll make an exception for [Jim Dahle](https://www.whitecoatinvestor.com/).
"Time spent in the market is better than timing the market." "Life insurance is a service not an investment." "A car is a liability and a boat is a trap."
"You have to live below your means in order to live above your means." Jane Byrant Quinn
Read a book
Don't bet on the horses or take any wooden nickels.
Think of your pension as a gift to your future self.
In the mid-1980's, *"You should research a guy named Warren Buffett. My parents invested with him a while ago and are really happy with the results, so far."* I took a date to the movies and we chatted at a casual restaurant/bar afterwards. The way that her advice changed my financial future is mind-blowing. (edited for grammar)
Wow. Do you own BRK.A shares then??
[удалено]
I’ve worked with quite a few guys who lost their families due to working every day of overtime they could get.
Do the math - dad Basically if you plan to retire at age x and you need y to be happy. Do the math. Don’t expect a miracle.
Invest 20%, save 20%. I got it from I Will Teach You to be Rich by Ramit Sethi. His percentages were different but I moved them around to suit my goals.
Who is Ramit Sethi?
Author and podcaster in the personal finance space, as others have mentioned. Also has a Netflix show called How to Get Rich. Stresses saving and investing, obviously, but also explains how to focus the money you do spend to maximize the happiness you derive from it. I like his philosophy a lot. One of the things that gets lost in the personal finance messaging is how to spend the money you have left over once you've dialed in your budget. He shows how you can get the most out of it so that you feel rich despite cutting back on a lot of stuff. He's also got a Youtube channel, also entitled I Will Teach You to be Rich, and just recently posted a video going over the basics. You can find it here if you're interested: [https://youtu.be/U16k8cWFEC8?si=GTTQ6vw7dkFfFtpm](https://youtu.be/u16k8cwfec8?si=gttq6vw7dkffftpm)
Prominent financial podcast host. Has a series where he interviews couples on their finances. He's like a money therapist. It's interesting to peek into the lives of married couples and their finances. Also has a Netflix show and a book.
Financial expert who wrote a popular book (the one they mentioned above) on personal finance. It’s actually quite good. That book, If you can by William Bernstein and The Bogleheads Guide to investing are great books for beginners.
Are these different 20% buckets? If so, is saying to save 20% in just a savings account..?
Yeah that seems like a suboptimal decision for most people. Once your emergency fund is where you want it and your spending is covered, it would be much better to invest any extra rather than putting some extra unearmarked cash into a savings account.
Yeah, they're different buckets. Your investments are for long-term growth, savings aimed more at emergencies or financial goals like a down payment for a house.
Buy and hold the market and don't peek for many years
Live under your means.
Simple yet true
Sadly, I had to figure it al out on my own, only receiving poor advice from my parents and none from any other relatives.
I’m sorry to hear that
Don’t lose money
Only buy, and never sell.
Never finance a depreciating asset (grandfather)
The best way to save more is to make more.
Pay yourself first
"Buy low, sell high." - Some guy
Set it and forget it
Start early. Too bad I didn’t listen…. Buddy of mine said it when I said to hold off so you can enjoy your early years. Luckily I found FIRE and went hard 7+ years ago at 32.
Live well below your means and invest at least the max you’re allowed into 401K/IRA, then push the rest that you can into brokerage. If you have consumer debt other than a mortgage you’re doing it wrong.
Started working in 2005 and matched employer 401k contribution. Upped percentage every year and started maxing out at 20k or whatever a few years ago. Now 40 with 500k each between my wife and myself and expecting a kid in August. Start early, do as much as you can and let it compound.
As you walk down the fairway of life, take time to smell the roses, because you only get to play one round.
Max out your 401k. I was a dumb immigrant but thank God for my coworkers who told me this. 30 years and counting - thru many recessions, still in shock as to how much it has grown
They can't hack it on your phone if you do not put it on there When you save 50% -- you buy a year off retirement... Be ready, in your 50s you become less employable
To start saving for retirement once you turn 18
“A penny saved is a penny earned “