
A good resource for financial advice to share with people in their twenties? - dsr12
https://twitter.com/sama/status/934583956019798017
======
roenxi
There is a real problem with asking 'to be given financial advice'. Before any
meaningful talk can be had about setting common financial levers to get a
result, what people really need is someone to sit down with and have an in-
depth conversation about what life goals.

You can't really receive meaningful financial advice without taking position
on the following:

1) Are you comfortable committing to a lifetime of working?

2) Is there reasonable scope for a high risk high reward venture? Eg,
entrepreneurship, acting.

3) Do you determine your personal comfort in terms of how other people
perceive it (expensive & common option), or do you use your own metrics?

4) What is your personal understanding of retirement?

Without that orientation, there isn't really a generic position to take on
debt (it might be good or bad). There isn't a generic position on investments
(might be good or bad). If someone is really being taken to the cleaners maybe
there is a quick change to be made, but really "personal finance" is more
about expectations and habits than knowledge ad howto guides.

The fundamentals of personal finance intuitively easy to grasp, to the point
of absurdity - if you consistently spend more than you earn, you will run out
of money. End of the story. If you spend a lot less (10-20% of your earnings
go into savings), you will weather surprises easily. If you earn a stupid
amount less (40%+ pre-tax earnings saved) you will have a very easy later
life.

That all only scratches the surface of orienting a strategy, let alone the
details of how the myriad investment options and retirement mechanisms work.

~~~
hsitz
I don't think that's true at all. I think the main thing for young people to
learn is that being frugal, avoding luxuries, is probably more important to
financial well being than earning a lot of money. Also that as your income
rises you need to be aware of (and fight against) the natural urge to spend
(and often waste) more money. Need to fight against the urge to "spend what
you earn" and develop habit of saving money every paycheck.

Our society encourages outrageous consumption of unnecessary goods at
ridiculous prices. It's not hard to live much more cheaply if you can get over
(difficult) psychological hurdles of (1) disregarding marketing that we're
bombarded with every day, and (2) getting out of the competition for social
status. What's more, you will tend to lead a happier life if you can do this.
A good book that I don't think was mentioned in the linked page is "Why Smart
People Make Big Money Mistakes".

Also, my mind has been boggled by what people seem to take from even good
books on finances. For example, _The Millionaire Next Door_ is a good book.
But I have friends who have read it, claim to believe it and try to adopt some
of its advice, but the life they lead is ridiculously extravagant, not at all
consistent with the book. Self-awareness of bad psychological attitudes
towards money is not always easy.

~~~
matwood
> Also that as your income rises you need to be aware of (and fight against)
> the natural urge to spend (and often waste) more money.

This is probably the most important thing to remember. For many years every
time I received a raise, I just upped my savings/retirement by the same
amount. My take home never changed, so it was easy to stay at the lifestyle I
had become accustomed to.

Perspective is also important. I did not have much growing up, so while what I
have now is modest it is way more than I ever thought I would have. Another
trick is to listen to old rap ;) In the 90s it _was_ extravagant to have 50"
TVs and game systems.

~~~
nasredin
Plus now when you pager beeps people think you are a on-call doctor rather
than a drug dealer.

------
IanCal
The personal finance subreddit for the US is very good

[https://www.reddit.com/r/personalfinance/wiki/young_adult](https://www.reddit.com/r/personalfinance/wiki/young_adult)

[https://www.reddit.com/r/personalfinance/wiki/early_career](https://www.reddit.com/r/personalfinance/wiki/early_career)

And the rest of the links
[https://www.reddit.com/r/personalfinance/about](https://www.reddit.com/r/personalfinance/about)

Also the UK one
[https://www.reddit.com/r/ukpersonalfinance/wiki/lumpsuminves...](https://www.reddit.com/r/ukpersonalfinance/wiki/lumpsuminvestment)

~~~
throwaway0255
That subreddit (at least the US one) is pretty terrible. I think there's some
active shilling for credit card companies going on there. They also give a lot
of objectively terrible advice when it comes to transportation, mortgages, and
student loans.

The number of participants, and the source of those participants (reddit
main), pretty much guarantees that the advice there can't/won't be high-
quality, and will only get worse over time.

~~~
Veelox
Im curious, what objectively terrible advice have you seen? I want to make
sure I didn't pick some up without knowing it.

~~~
twblalock
I think the bottom line is that most of the contributors to that subreddit are
young and don't have much life experience, so they parrot the same one-size-
fits-all financial advice.

An example is telling everyone, no matter their circumstances, to always buy
used cars and learn how to fix them themselves. They give this advice to rich
doctors as well as poor single mothers.

It also seems that many of the contributors have had bad experiences with
debt, and now treat it as something to be avoided like a cancer. Debt is a
useful tool for people who understand money. I remember a thread characterized
by total incomprehension in most of the comments when someone said he would
rather take a low-interest loan to buy a car than sell some of his stock and
pay cash, because selling the stock would have triggered capital gains taxes
far greater than the interest he would have paid on the car loan.

It's also very common in that subreddit to recommend that people who are in
debt should basically live like monks for years, when living in a modest
amount of comfort would only prolong repayment by a few months. Giving up your
$14.99 monthly Netflix account is not going to make a big dent in your student
loans over time -- over a 10-year repayment, that savings will add up to less
than $2k. But the commenters there will pile on you if you point that out.

The thing that annoys me the most is the way people who have succeeded in
tackling their debts are criticized for having high incomes, as though having
a high income was something that just happened to them because of luck, rather
than being a result of hard work and skill development.

------
pdog
Here is the only advice a person in their twenties needs to follow:

1\. Never pay interest on your credit cards. Pay off your credit card balance
every month.

2\. Save at least 20 cents of every dollar you earn.

3\. Buy an S&P 500 index fund.

4\. Contribute as much as possible to your 401(k), if you have one, and at
least enough to get the full employer match.

~~~
rm999
This is good advice for someone with financial security and a good salary.
Which is sadly a fairly small % of people in their 20s. I'd add two higher
priorities for people who don't have financial security:

1\. Take stock of your finances. Track all your expenses and income for a
month or two. If you find your debt is growing make changes to bring your
costs down.

2\. Pay off high interest debts like credit cards. Once this is complete,
build up a rainy day fund of at least 3 months of expenses in a savings
account. Consider this money hands-off except in emergencies.

After all this is implemented the person's finances are "stable" and they have
a budget, and I think your advice is solid (but should be modified depending
on salary). I'd also blend in some safer investments with the s&p 500 -
perhaps using a robo advisor to manage the risk for you.

------
danblick
When I was younger I enjoyed reading about finance and investing. The
investment strategy I settled on was the three fund portfolio from:

[https://www.bogleheads.org/wiki/Three-
fund_portfolio](https://www.bogleheads.org/wiki/Three-fund_portfolio)

and I haven't seen any reason to change this in ~10 years.

I'd recommend poking around that site to learn about the philosophy of index
investing. (You might still want to actively invest after reading that, but
you should probably first understand some of the reasons not to.)

~~~
JBlue42
Just a note for OP or others reading that "Bogleheads" are those that follow a
certain value investing philosophy from Vanguard founder John Bogle.

For some basic investment literacy, it would not hurt to read "The Bogleheads'
Guide to Investing" ([https://www.amazon.com/Bogleheads-Guide-Investing-
Taylor-Lar...](https://www.amazon.com/Bogleheads-Guide-Investing-Taylor-
Larimore/dp/0470067365)). I've also heard good things about John Bogle's
"Little Book of Common Sense Investing" but haven't read it.

------
alexnewman
The financial industry is actually designed to fleece from those without much
financial knowledge. I should know, I used to be one of those shaving the
sheep. I’ve worked with many brokers at Morgan and Merrill and they are
generally ignorant sales people. Often they are actually deceitful.

Basically everything taught about finance and economics is a half lie and the
half that isn’t true is very difficult to understand. In economics ,Consider
that private debt has no role in economics but is critical for understanding
bank flows. So why do we teach that private debt has no effect under islm? Or
consider in finance traditional options strategies of selling covered calls,
on etfs. In the past few days you’d notice you lost a ton of money due to the
way tracking error is manipulated vs options on the etfs. I was just talking
to a billionaire who actually understood black scholes and didn’t understand
why he lost so much money on a hedge. Or consider how much growth has gone
solely into a few tech stocks while people are still advising you to buy s&p.
Realistically smart exposure to the underlying is Generally so much better.
Finally on tax advice, especially on crypto, which I believe should be
somewhere between 2-5 % of any young persons portfolio, no one suggested a
charitable remainder trust and it ended up saving me huge amounts of cash and
avoiding long term capital gains while allowing me to do well.

The financial industry is a business dominated by sales people. The people you
will talk to with less then a half million In savings hardly know shit about
Shit. It’s like anything else, if you took the time to understand these
financial products you’d realize they are powerful cool abstractions worth
learning about

~~~
uiri
I'm not sure why you're getting down voted. Your point about finance
professionals being sales people looking to fleece their customers is spot on.

Maybe because you're suggesting that people"invest" in the crypto bubble but
the overall advice ("take time to learn about your investments") is sound.
Plenty of young people on HN understand the underlying mechanisms of crypto-
tokens.

------
stevenj
When it comes to financial advice, I tell people the following:

1\. Live within your means. Spend less than you earn. But it's okay to take a
vacation and splurge a little, too. Or if you need to buy something like a
suit that stretches you a bit think of it as an investment for your career.

2\. Use credit cards responsibly. They can be great for their rewards
programs, but you can easily get into trouble with them. Be very careful.

3\. From a financial perspective, it's never too early to think about
retirement. Take advantange of your employer's 401k program if it's offered.
Additionally, setup and contribute to a Roth IRA retirement fund through
Vanguard or Fidelity.

4\. Buying a house makes sense as a long-term investment. Location will
primarily determine how good of an investment it will be (which sometimes is
hard to predict into the future).

5\. In terms of what to invest in, buy a low-cost index fund from Vanguard or
Fidelity (e.g. S&P 500) and make monthly or quarterly contributions to it. And
don't touch it (i.e. sell), especially in a downturn.

------
krat0sprakhar
I'm surprised that no one has mentioned this:
[http://www.mrmoneymustache.com/2013/02/22/getting-rich-
from-...](http://www.mrmoneymustache.com/2013/02/22/getting-rich-from-zero-to-
hero-in-one-blog-post/)

~~~
mattmanser
Cause he's a very divisive figure who claims to be retired but in fact is a
handyman and blogger?

~~~
dejv
He did achieved financial independence years before he was blogging. This what
I think is important and his advice note worthy.

I don't really care what he did after this point. The fact that he multiplied
his net worth many times thanks to blogging doesn't mean he is financial
independent thanks to it.

~~~
tryingagainbro
_> >He did achieved financial independence years before he was blogging._

He is selling shovels and jeans to gold rush miners. "Financial independence"
when supplemented by the $$ he makes while telling people how he got rich
surely makes a huge difference.

~~~
throwaway0255
That isn't an argument for why his advice is bad or why he's a bad person,
though. That's just an explanation of why people are jealous of him and an
argument that people can't reliably repeat the success he's had with financial
blogging.

He's not saying people can, though. He's giving financial advice based on
something he achieved following a plan when he was making $67k/year, years
before he ever even had the blog.

Also, shovels and jeans to gold rush miners?? Pretty sure people can still
make $67k/year. Pretty sure people can also still make simple investments,
live frugally, pay off their mortgage and retire early. It's simple math.
Comparing that to taking advantage of gold rush miners is quite a stretch.

~~~
tryingagainbro
"I'm retired" while you're blogging /making a lot of money by saying you're
retired, is profitable but fishy. Like getting rich by writing a book about
how you got rich.

Yeah, a Google /FB /x employee can sacrifice for 10 years and then retire, at
least outside USA. Live like immigrants that send all their money back to
their home country, do.

~~~
pixelperfect
He does a breakdown of his household spending each year and it's around
$30,000. His house had been paid for in full and he had ~$800,000 invested at
the time of retirement. The math works out without income from blogging and
handiwork.

------
hiram112
The one advantage folks in their 20s have is time.

I actually don't think software engineering is the best career (in financial /
lifestyle terms) for someone who might also excel in business, finance, law,
or medicine. But there is one _hack_ to our industry:

You can make a good salary starting in your early to mid 20s, with only a
bachelor's degree or less, while most of your peers will still be in school
for years, then paying off loans, and finally beginning at the bottom of the
corporate ladder.

Now unfortunately, by 35 or so, most of your smart friends will have caught up
- paid off their loans, and now be earning similar high incomes. And software
engineers tend to hit a glass ceiling, run into ageism, etc.

But having lived frugally while making over six figures for over a decade, you
can have accumulated $500K - $1M, and if you forget about that money, can
coast into early retirement by 50 or earlier, or take career risks that others
can't afford. A million in net worth at 40 opens up a lot options.

------
aaronbrethorst
Spend less than you make. Max out your 401k and IRA. Invest in index funds.

~~~
charlesdm
What will be interesting to see is whether this actually stays good advice.
Massive amounts of money (trillions) has been flowing into these passive ETFs
and index funds -- I would assume this creates some distortions in the
financial system.

~~~
throwaway0255
Definitely interesting to think about.

My current take is that even if the tiniest minority of activity exists
outside of low-turnover ETFs, continued advancements in automated algorithmic
trading (whether it's ML or regression or something that hasn't been invented
yet) will get us closer to the perfectly efficient market and the only impact
to low-turnover ETFs will be reduced volatility.

Another possibility is that so much money gets parked in passive ETFs that the
valuation of the indexed stocks becomes more tied to the influx of money than
to the underlying enterprise value, then once the influx of money slows down
the stocks revert to enterprise value and start to consistently depreciate,
triggering a massive sell-off. If that happened it'd probably be bigger than
the subprime mortgage crisis, right?

What's your take?

------
f_allwein
‪"The Automatic Millionaire" by David Bach,
[https://m.barnesandnoble.com/w/automatic-millionaire-
david-b...](https://m.barnesandnoble.com/w/automatic-millionaire-david-
bach/1100304420‬)

Recommends automatically paying a share of your income each month into index
funds, and gives recommendations on how to distribute this across risk
categories according to your life situation.

~~~
kingkool68
This book really opened my eyes to the importance of savings. Really glad I
picked it up when I was 18.

------
supercanuck
/r/personalfinance's Prime Directive:

[https://i.imgur.com/lSoUQr2.png](https://i.imgur.com/lSoUQr2.png)

------
NicoJuicy
Saving or investing is the only way to get rich.

I do both, since I'm a develop, investing is also trying out projects. I don't
want to calculate my ROI om that part just yet. But the rest is fine, 16% on
stocks last halve year, 200% on crypto currency ( wouldn't recommend though)
and my own online shop which is a nice monthly extra on top of my full time
wage.

PS. I never had to spend anything of my full time wage :)

~~~
NicoJuicy
I would like to add that I only invest 10% of my assets now. 2 weeks ago it
was only 3%, then I realized the halve year test of investing was succeeded.

------
tomohawk
Learning about finances in your twenties is a bit late, but better late than
never.

What's worked for me and others I know is to get out of debt and stay out of
debt. This guy has a reasonable program to do that:
[https://www.daveramsey.com/get-started/debt](https://www.daveramsey.com/get-
started/debt)

~~~
PoachedSausage
I agree, staying out of debt should be a priority, but how do you reconcile
that with buying a house, which around here cost on average around £226k?

I would love to not need a mortgage and have to work more to pay the interest
but what other choice is there?

~~~
tomohawk
Econ 101 says never borrow money on a depreciating investment. A house may
appreciate, so it may make sense to buy one.

A house can be a blessing or a curse. You should first decide if you want to
own one, regardless of the economic pros/cons. Owning a house means you always
have a job to do. If that doesn't appeal to you, maybe get a condo?

In the US, the best approach is usually to get what's called a conventional
mortgage. That means putting 20% down. There are some good reasons for going
this route. First, it makes you prove to yourself you have the discipline to
put money aside for a house, without actually having the responsibility of a
house hanging over you. Secondly, its better financially as you can usually
get a better rate and don't have to pay private mortgage insurance.

In addition to the 20%, you really need 6 months of money set aside in case
something happens. The last thing you want is to default on a loan because
something unexpected happened and you have no income for a few months.

One of the worst things that happens is someone goes and gets a house with 0%
down and without the real financial wherewithal to weather a financial storm.
The house quickly becomes a curse when the unexpected happens.

------
lambdadmitry
IMO most "personal finance advisors" miss the career progression thing.

\- on one hand, it's ridiculous to seriously recommend young professionals (in
their 20s) to long-term save 20+% pretax income if they don't have substantial
assets (e.g. their parents' house) or if they are not in the top 5% of their
age group (think finance in London). I bet most millennials don't have the
kind of income that allows that _and_ having a life quality comparable to
their peers. In London and I suspect in SF it's very common to have 30% of
your pre-tax income to go to rent; taxes will eat another 30%, groceries and
eating out is another 10-20%. What's left is measly 20-30% of income that must
be divided between shopping (clothing, hobbies, car, gadgets, whatever) and
long-term saving. If we throw in absolute income numbers and property prices,
it all comes to "question any expense, live in misery and MAYBE you'll be able
to afford a downpayment in a decade".

\- on the other hand, a lot of people can expect to double, triple or
quadruple their income in a decade of their career. If not, on the scale of a
decade it's possible to change the career.

So maybe there is a point where one should focus on earning more instead of
saving. Maybe it's more important to have that expensive hobby that reduces
your stress levels and allows to work harder.

Maybe the only right kind of advice is "raise your income and don't get into
debt".

------
fullshark
This:

[http://www.mymoneyblog.com/dilberts-one-page-guide-to-
everyt...](http://www.mymoneyblog.com/dilberts-one-page-guide-to-everything-
financial.html)

------
Fargren
I've seen the "invest in index funds" repeated over and over, but almost
always coming from people in the US. I don't understand enough about investing
to understand when the advice is useful globally, or only locally. I also
don't really know where to get that knowledge, because most explanations don't
say whether they apply outside of the US. What are some good source for
someone based in Europe (Spain specifically, if it make any difference)?

~~~
ISL
"invest in index funds" is a heuristic for "own a tiny share of everything, at
market price".

The mantra is "try to be average, at very low management fees", that way, your
performance will always be average, and never _worse_ than average.

~~~
danblick
If you get average gains/losses with below average costs your performance
would be above average.

------
ksec
Saving and Investing. Doing really good with both _should_ bring you to a very
decent standard of living. Going being that to become wealthy? You need Luck.

Both million times easier said then done.

Learn about survivors bias. Basically all the things these successful people
told you are only guide lines, not rules.

This is sounding rather a lot like Zen's thinking.

------
defen
Anecdotal, but some of the 20-somethings I work with exhibit a kind of
helplessness or fatalism about finances. These are smart, well-educated people
who still haven't signed up for the company's 401k program, and don't invest
in the stock market because they "don't know how to buy stocks", even though I
tell them they should be doing this at least once a month. These aren't people
who are living paycheck to paycheck or spending profligately as far as I can
tell.

------
turingbook
Searching "financial advice" on HN itself, you will get this item: This 4×6
index card has all the financial advice you’ll ever need (washingtonpost.com)
155 points by bcn 1532 days ago| 249 comments
[https://news.ycombinator.com/item?id=6396352](https://news.ycombinator.com/item?id=6396352)

------
hkmurakami
"The Richest Man in Babylon", which was recommended by a HNer (amongst other
more advanced books) several years ago.

~~~
WA
God please no. This book must be the most overrated piece of junk in the
financial advice genre. There are literally only two things in the book that
get repeated 50 times over 100 pages:

\- invest 10% of your income

\- invest only in things you understand or when you happen to know someone who
understands them

There is zero more insightful content in this book. And even these two
insights are totally lacking, because they won’t tell you what investment
makes sense these days.

~~~
espitia
Although the key lessons can be written in a few bullet points, the story
helps the reader internalize the teachings.

I think we misunderstimate the impact a few fundamental lessons on finance can
do to a person’s life. Especially when the person is oblivious to it.

I’ve seen it first hand multiple times now. I give away this book all the time
and and have seen nothing but good come from it.

~~~
mtpn
It’s rare to see the word misunderestimate in the wild. Mind if I ask was this
a mistake, or intentional irony, or is this word has just made its way into
the general vocabulary now?

And to be less irrelevant, I do agree with you that a simple rubric that can
be internalized by compelling stories can be very powerful in a person’s life.

------
amelius
Just write a simple financial simulation in e.g. Python.

You can view saving as zero-risk investment, and then find the optimal
distribution of income over a number of investments with different
risks/returns.

~~~
speeq
> You can view saving as zero-risk investment

I wish I had bought index funds instead of keeping most of my savings in GBP
before the Brexit referendum...

------
elwaz
Can I add, for AU, the Barefoot Investor:
[https://barefootinvestor.com](https://barefootinvestor.com)

------
sn9
Ramit Sethi's _I Will Teach You to be Rich_ is literally this book.

------
IkmoIkmo
There's one realisation I came to myself in my early twenties, which I think
most people will when they're introduced to the time value of money, compound
interest and savings over time. And you'll find a whole bunch of people
talking about it in one form or another, e.g. buffett.

And it's quite silly, because the examples take things to the extreme, but
there's also a lot of truth to it. It goes a little bit like this:

If you do a bit of toothpaste research, you'll find the active ingredients
(i.e., the stuff that matters to your teeth) in a tube of $1 toothpaste and $6
toothpaste are pretty much similar. In fact, you can find toothpaste at $0.2
per oz and $2 per oz. Given you brush twice a day using 0.2 oz, that's an
annual expenditure of $30 to $300, depending on the type you use. Let's be
conservative and say you can save $200 if you buy cheap toothpaste in a little
bit of bulk, instead of expensive toothpaste.

Average life expectancy is about 80 right now. If you're 20, that means you'll
potentially save $200 for 60 years. That's 12 thousand dollars in toothpaste
saved, simply by making a conscious decision at age 20 to spend 15 minutes
looking up whether cheap toothpaste is effective, and which one to buy.

Related to this is the time value of money. i.e., if you look at the past 60
years of S&P500's return, include dividends (reinvested), and adjust for
inflation, you'll find 6.5% returns. Let's be conservative and low-ball that
at 4%, assuming taxes, other crap and potentially lower future returns. $1
invested today at 4% for 60 years would compound to 1.04^60 = $10.50. As
that's inflation adjusted, it ought to mean your purchasing power has
tenfolded.

If you combine the savings of toothpaste with long-term investments, you'll
find your toothpaste purchasing behavior can easily be worth tens of thousands
of dollars.

Now note, I chose toothpaste because there's no effort or quality-of-life
choice to be made there. Buffett enjoys using coffee as an example as saving a
$3 morning and evening cup is much more profound than saving 10 cents on
toothpaste each day. But it does require you to skip coffee, or make it
yourself. However trivial that may be to some, that requires respectively
discipline and mental effort to others. But things like toothpaste should be a
no-brainer.

It's up to anyone in their twenties to consider what actually matters to them,
there's tons of such decisions to be made. The brand of toothpaste? Likely
not. Brewing your own coffee? Probably not a big deal either. Skipping lunch
with friends because it saves money? Probably not a great idea. But even
there, being cognisant of the cost of such eating-out behaviour may spark you
to invite a friend over for a self-made lunch. The point isn't to save as much
money, the point is to allocate your money to where it's actually valuable.
That's not toothpaste. It may be working less and spending more time on a
hobby, with friends or family.

------
hkon
bitcoins!!

~~~
NicoJuicy
Although the ROI is great now, I wouldn't ever suggest it to others. I had a
ROI OF 16% in stocks. I still believe it's safer than BTC

------
gcheong
Fool.com , [https://www.fool.com/retirement/2016/12/19/the-perfect-
retir...](https://www.fool.com/retirement/2016/12/19/the-perfect-retirement-
strategy-for-20-somethings.aspx)

