
The Five Biggest Myths About Saving Money, According to a Millennial - lujim
http://www.bloomberg.com/news/articles/2015-11-11/the-five-biggest-myths-about-saving-money-according-to-a-millennial
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seibelj
Puff piece by a guy trying to get people to use his startup. I think it's
actually way worse to use his technology to automatically move money around
your accounts. I like to be on top of where my money is.

And "emergencies" happen several times a year. In a few month span I had to
replace a water heater, then a dishwasher, then tires on my car. Several
thousand bucks of expenses in a couple months. Having to withdraw from a 401k
for life's unexpected issues is insanity.

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mberning
If you followed his advice and not bought a house you would have had 2 less
emergencies. Also, renting in the city you would have had no need for a car
and thus 0 emergencies.

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lawpoop
"The City" being Manhattan or perhaps Chicago, the only place sin America
where we have usable public transportation.

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eropple
Boston/Cambridge/Brookline, Atlanta, Seattle...

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gnaritas
Portland.

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roymurdock
Here are the 5 "myths" and his advice to save you a click through:

1\. It's important to get a job and start saving for retirement the minute
you're out of college. >It's more important to spend time thinking about what
you want to do (surfing in South America?) than to start working and paying
off students loans immediately.

2\. Getting a credit card right out of school is dangerous. >Get a credit card
with a small limit ($500) and set it on autopay.

3\. The American dream involves buying a house. >Rent rather than buy and
don't get attached to anything while you're young.

4\. Once you graduate, immediately try to build up a cash emergency fund. >Use
401k as an emergency fund, even if you have to take the tax hit. Long-term
benefits outweigh short term risks of doing this when you're young.

5\. Investing is difficult, and stocks are sexy. >Avoid managers/fees and just
put money into an index fund.

Nothing too radical.

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Someone1234
Rent Vs. buy is the most "radical."

I think it really boils down to what the relative costs are. There are many
renters who pay as much or more as someone with a mortgage, and the person
with the mortgage is obviously building up capital within that property (value
Vs. current mortgage).

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ghaff
Most sage advice about buying vs. renting boils down to "run the numbers but
there are a lot of tradeoffs, many of them non-financial." The "Don't buy"
sentence is deliberately provocative I think. The rest of what he says boils
down to don't buy a house because you think you're supposed to. Which sounds
like very sensible advice to me.

I certainly held off buying for a fairly long time because I didn't want to be
locked down in that way. In retrospect I might have done things differently
but hindsight is 20-20 and all that.

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byoung2
_I certainly held off buying for a fairly long time because I didn 't want to
be locked down in that way. In retrospect I might have done things differently
but hindsight is 20-20 and all that._

In my case foresight was 20-20 since I bought in 2012 and I knew that when
interest rates on a 30 year fixed were the lowest they had been in 30 years
that this was the time to lock in a mortgage. At the same time, housing prices
in my city were the lowest they had been in 15 years so it made sense to buy.
I knew if we didn't make a move then that we'd regret it once interest rates
and prices started to rise.

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chris_va
+1 to index funds for saving, but you are already into a better off market
when you look at optimizing savings.

Debt is where most people fall down, and most folks in the US don't manage
debt well. For example, there is a phenomena where people will take additional
expensive debt (e.g. credit card) to keep their savings/401k contributions
high. Irrational from an ROI standpoint, but very common.

I like all of these startups that try to optimize your spending/savings (e.g.
Even, Acorn, Betterment), but I haven't seen anyone doing this well on the
debt side.

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tedivm
It's not completely irrational to take on additional debt to maintain 401k
contributions, especially if you're in lower income brackets. You can't lose
your 401k to bankruptcy, which in some ways makes it a more stable investment
than not taking on the emergency debt. There are tax benefits as well.

There's also the budgeting and discipline aspect- if you make yourself work
inside of a budget (one that's comprised of your money after your retirement
savings) you're much more likely to stick with it in the long term. Once you
start allowing emergencies to alter your retirement plans you may end up doing
it again in the future. It's much better in that case to take on the
additional debt and take paying that down out of another part of your budget.

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humbleMouse
This guy's advice applies to people who have a higher risk tolerance. The
advice is given in an off-the-cuff manner that really only applies to a small
sub-set of the population.

TLDR; "You don't need to save money, just fund your 401k. If crap hits the
fan, just pull money out of 401k. Just wait until your start-up is successful,
then you will have cash and an emergency fund!"

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ghaff
Yeah. One can debate the specifics of how big an emergency fund a given person
should have but he seems awfully cavalier about tapping the 401k for
unexpected expenses. I suspect, given that he doesn't offer dollar amounts,
that he assumes that having $5K or so around to cover an emergency car repair
doesn't rise to the level of emergency fund.

The bit at the beginning about the latte is also pretty silly. Sure if you can
afford it and get great pleasure out of your Starbucks, go for it. But this is
exactly the sort of money leak that causes a lot of people to wonder where
their money all went at the end of the month.

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polartx
This kind of generic financial advice is dangerous, and pretty irresponsible
for someone in his position (and supposed expertise).

I bought my first house while I was still in college. I patiently waded
through the 8 month process of buying a short-sale property. I invested maybe
$5k over 2 years (and a lot of elbow grease) in making improvements and netted
$40k when I sold it.

Home ownership carries risk and responsibility, but leasing is restrictive and
will never provide any kind of returns. In my case I was basically paid to
live in my house, vs the $28k in rent it would have cost me

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smrtinsert
The housing piece is so much more complicated than his bumper sticker finance
approach. Forgetting you heard his name is probably a good first step into
smarter personal finance.

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sp332
Did he say you can pay off college loans in three years?

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zwerdlds
No, he said that you shouldn't worry about paying them for the first three
years - presumably because this is the period of time for which all student
loans can be deferred due to unemployment in the United States.

[https://studentaid.ed.gov/sa/repay-loans/deferment-
forbearan...](https://studentaid.ed.gov/sa/repay-loans/deferment-forbearance)

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crpatino
What kind of interest do you pay in the US for student loans, anyways?

Completely forgetting about your credit card debt, or even your mortgage, for
any extended period of time sounds like an amazingly stupid decision. Ignore
compound interest at your own peril.

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zwerdlds
Typical rates are between 4 and 7 percent.

Agreed about the issue of compound interest, but everyone's case is different.
I think that's all he's saying: "Take the time to be unemployed and figure out
what you want to do. Three years of CI is less important than knowing what you
want to spend your life making money at."

Now one might argue that this decision should be made prior to going to
university in the first place...

