Hacker News new | comments | show | ask | jobs | submit login
Stanford CS007: Personal Finance For Engineers (cs007.blog)
1089 points by destraynor 83 days ago | hide | past | web | favorite | 343 comments

So you've completed CS007. And graduated Stanford. You've even managed to save around $10K in cash from various summer jobs and gifts from relatives. The consensus advice investment management professionals would offer is to sock it away in a well-diversified set of Vanguard Funds. Which you keep adding to on a monthly basis allocated from your paycheck. As well as re-investing any dividends generated. Which will compound nicely over the next thirty years. Leaving you with a $1M nest egg that will provide stable yearly income during your golden years. As well as a decent inheritance left over for the next generation.

But I have a really hard time giving this advice to a 22 year old. I certainly didn't heed it myself. Instead I used the cash and spent 100% of it on my own professional and personal development. So, naturally, since this is Stanford and Silicon Valley. I'd include a section on Risk. Taking it. Managing it. What are the rewards. As well as the costs. But with the emphasis the post-graduation 5-10 year window may represent a unique opportunity in your life to take it. And that there are programs such as StartX and YC available to assist should you decide to go all in.

As university Devops engineer working with students, I have had a number of opportunities to advice the young in the ways of adulting. One thing that's painfully obvious is that the 'your 20s are your best time to take on risks' crowd is missing is like, women and fertility. Women in the US are generally more risk adverse, so they're more likely to heed the usual 'save now!' spiel. They're also facing a conflict with career risk vs family risk in ways men do not encounter at all. Worse, talking with friends and colleagues about it can threaten your career tracking if you are perceived as a short timer. I've seen too many managers, on HN no less, say they avoid hiring women who might become pregnant.

And as far as I can tell, health insurance is allocated two words in the lecture series: "health" and "insurance". That's it! I will grant you that the ACA is under incredible threats at the moment, but employer based health insurance isn't going anywhere, and at the very least, HDHP / HSA plans vs. PPOs vs HMOs is a thing. Considering how expensive pregnancy, birth, maternity leave, child care can be, health insurance and savings is a crucial topic not even mentioned in the 'couples finances' section.

The other thing I should mention is student loan debt. 92 percent of those surveyed in the Stanford course say they have no student loans. This seems high -- even the net price of Stanford is $17k / year. Most undergraduates are going to be paying like 4.45 percent interest, which is way better than the 6.8 they used to charge. Despite required financial counseling, most people with loans don't really know how repayment works, and haven't looked at how much their payments will be post graduation.

Those are really good points. Plus if you are not a US citizen the whole equation completely changes

My girlfriend is from an immigrant family and left undergrad + grad school with almost half a million in debt without having worked full time in her life, and is completely overwhelmed and underequipped to deal with this. Given how many great engineers and entrepreneurs are immigrants / from immigrant families, financial education programs for undergrads should focus a lot more on these issues

I guess this should go without saying.

Never take a loan you can't afford to pay back? Immigrant or other wise.

it isn't a matter of being able to pay the loans back, it's a matter of opportunity cost (she is a doctor so will be able to pay the debt back, but if she had a better understanding of finance when she took the loans she would have done some things differently). If you really want to start a company for example, having a lot of debt rules that out. So maybe if you want to keep optionality to start a company, you go to a cheaper public college instead of taking a loan to go to a private one, or you decide to work instead of grad school, or you just save more. If you don't understand the opportunity costs of debt, it's hard to make those choices

I took the advice the class is recommending.

Now I'm about to turn 40, and now in the timeframe where I have the network to exploit and experience to get into customers, I'm sitting on a nice nest egg. If I decide to roll the dice, I get to keep more pie than an impoverished college grad.

My 22 year old self would have been failing fast into the heart of the dot-bomb implosion and probably stuck in some less than optimal grind for a few years.

I found your post a little hard to understand. Are you saying "save money because your older self can do more with it than your younger self"?

Save money now so you can afford to take career risks later.

How do you take risks when you’re married with kids?

Settle down and have kids early, play the long game instead. Seriously. Have kids when you're ~25 (closer to the optimal age for having kids), then by the time you're ~45 they'll have moved out and you'll have the time and the financial freedom to take risks, do what you want, sail around the world etc.

We've done this. And let me tell you, working 40 hours a week when your 8-month baby lets you sleep on average 2 hours per night is a lot fucking harder than the 70-hour tech-scene work week. So given the choice, I'll take the former when I'm young and fit for it, and the latter when I'm older and wiser.

Advising people to get married young is also a great way to boost the divorce rate.

Most people in their mid-20s are still growing up.

How do you pick a wife and get married and have kids by 25? That’s simply impossible for people that don’t marry their high school sweetheart and stay together through college

You go on lots of dates.

Of course, that's no guarantee - I belong to a religion where dating is a thing, and we believe marriage can be eternal, so there is a big emphasis on dating. And during my college years I was in an apartment of 6 and it seemed like every semester I'd have an engaged roommate - and I went on lots a dates, but didn't get married until I graduated.

So, yeah, go on lots of dates, and you might get married early. If not, don't sweat it. Just make sure you marry somebody who will work to have a good marriage.

note: I (and my culture) are definitely outliers - we tend to go through the courtship process relatively fast - I married my wife about 9 months after first meeting her.

What religion?

The Church of Jesus Christ of Latter Day Saints (LDS for short, but more widely known as 'Mormons')

In regards to dating, I was living in Provo, UT at the time, which over emphasized the dating aspect - I'm not sure how emphasized the dating aspect is outside of the U.S. / Angelo Saxon culture areas.

What I find rather interesting though is that despite placing more importance and weight on marriage, we tend to go through the courtship process faster (under a year is not uncommon).

That makes sense. Once a couple finds that their world view, values, and personalities are compatible, there is little else to evaluate.

I think "impossible" is maybe going a little far; I met my wife in college and was engaged at 23 and married a year later. There are other problems though -- most people don't have the kind of financial security you'd want to raise a kid at that age and they probably don't want the lifestyle that comes with it yet (despite getting married early I don't have kids five years later).

Definitely not impossible. I got married at 21, and it's one of the best decisions I ever made. We just celebrated our 8th anniversary, and we've got two kids to enjoy it with. No, it wasn't to my high school sweetheart either. I was blessed to meet someone that fit me, and we made a commitment to each other. I know others who did the same and have thriving marriages.

I think it's really dependent on personal maturity. My wife-to-be and I both knew what we wanted families, so we looked at our financial situation, and decided we could responsibly get married while I was still in college. A couple generations ago, that was pretty normal. Not so much now, but that doesn't make it impossible.

Date agressively and widely for 6 months-year. Double down on someoone who seems promising and date that person for a year or two. Marry that person with a short-ish engagement. Begin having kids. That can be done in 2-4 years.

And they say romance is dead.

You forgot the part about getting divorced and going broke. Sometimes, it's worth waiting a bit.

It's not really germane.

Statistically, your divorce probability drops dramatically when you get married at 25, and doesn't change much afterward.

Once you're married at 25, the primary risk factors are: substance abuse (obvious), prior cohabitation (many people feel they "slide" into marriage when they do this), and unemployment.

If you make the wrong decision, you're looking at potentially losing half of your assets in a divorce. Plus, if you're unlucky enough to have a kid, there's another 18 years of child support. If you survive that without going broke, you'll also probably feel compelled to pay for college. There goes another half million.

Of course, maybe it's not quite that bad. Maybe you're just really miserable all the time. Things aren't quite terrible enough to leave your marriage, especially considering the consequences, so you suffer for a couple of decades. Instead of giving up half your money, you give up half your life and most of your freedom.

I have friends in this very situation. They tell me they wished they stayed single.

Yeah, I'd say finding the right partner is pretty germane.

Our concepts of relationships, parenthood and (crucially) romance are so far apart you’d need a space shuttle to go between them.

This is... not exactly actionable advice for everyone ?

What is your concept of romance?

I think the parent's posting is more applicable than you might think - putting in the effort to go on dates and really get to know a person does a lot to cultivate romance.

Nothing kills romance like hanging-out, but my perception might be different than yours - my ideal romance leads to a life-long relationship, which takes the same kind of effort that the parent's suggestion called for (deliberate effort focus on a romantic relationship).

That was average age of getting married 25 years ago. Honestly, it’s not that complicated.

Agreed. I'm completely open to marriage but haven't found the right person yet.

By having a nest egg that can keep you and your family going for a few years.

It's increasingly common for financially well-off people to marry other financially well-off people, perhaps contributing to income inequality. So, if you both share parenting duties (1-3 hours a day of individual work plus daytime child care, and being flexible with night time duties), it's doable if one of you has a high-paying steady job and the other is taking on more risk. In fact, with marginal tax rates in CA and NY approaching 50% it might actually be more efficient for one spouse to receive compensation through building equity.

Alternatively saving a lot of money before you have kids and living frugally by working in a lower cost metro area or renting outside of SF/Palo Alto can work. It's obviously a risk so you and your family has to be on board.

Living in the SF Bay Area is like the anti-pattern for gathering wealth. You make lots of money, but it's a bad cash flow story.

That's not necessarily true, especially if you work in tech.

It depends on how willing you are to live below your means, and below what your peers in other regions have. The programmers I know outside the Bay Area (or NYC) own houses with yards that have plenty of room for kids. Even relatively young ones. To buy the median single family home in San Francisco or San Mateo country, the minimum salary is circa $290,000. [1]

[1] http://www.mercurynews.com/2017/08/11/bay-area-real-estate-t...

OTOH if you live below your means, the outsized salaries make wealth accumulation far easier than anywhere else.

I put 20% of my salary away from 22-30. 12% after that, but I bought a house that appreciated 50%.

Now I could literally walk out the door and make at least what I’m making in my own in 3-5 phone calls. Not because of any magical talent, but because I’ve been around and have a decent network.

And having a home of your own makes a lot of difference.

A huge chunk of your monthly expenditure is now taken care of.

Yes, after settling in a country with public sponsored health care and affordable housing, I can say that it takes very little to live comfortably. Also, not having Amazon saves a lot of money.

It did implode but there was google, eBay, yahoo, amazon that emerged.

The advice I give to people on here is generally upvoted, except when it comes to investing. If you're in the top 1% or 0.1% intellectually and you're active in the tech community as a software developer or other highly technical skill you are very well situated to beat the market.

Pick any decade where this wasn't true. In the 90s it was buying web domains or investing in personal computer companies. In the 2000s it was investing in platforms and social networks or even just building a company in the mobile space. In the 10s it was cryptocurrencies and AI.

All of these things were obvious and even if you didn't get in at the very ground floor (buying sex.com or 50 bitcoins for a dollar) you still make hyper, hyper gains.

100000% returns? Totally possible. Now go on and take all that knowledge you hard fought for at MIT, Stanford, Harvard, or Waterloo (or even on your own!) and use it too... Invest in low fee ETFs.

Great plan guys.

Don't take it to heart -- people are intimidated by finance. Engineers like a scope-defined problem set and finance doesn't work with them.

IMO, do the boglehead thing for 80-90% and play with 10-20%. If you spend some time on it and educate yourself, that play portfolio will often beat the Vanguard strategy. If you lose, you're not dead.

> Now go on and take all that knowledge you hard fought for at MIT, Stanford, Harvard, or Waterloo (or even on your own!) and use it too... Invest in low fee ETFs.

I disagree with your mocking of this. Your emergency fund or retirement savings are not buckets where you throw every last dollar you have. They only cover your emergency fund (typically 3 - 6 months of expenses) and your retirement (10% - 20% of your annual income per year).

For people working a full-time tech job before starting their own venture, I think eschewing those to "invest in yourself" is probably a stupid idea. Not having an emergency fund is a stupid thing to do if you have the financial situation to fund it.

It's a little different for college dropout or straight-out-of-college entrepreneurship. But in that case, pushing off retirement savings until you have a stable job is reasonable, and try your hardest to build up your emergency fund.

Cover your bases. If you're in a high-risk high-reward lifestyle (like tech entrepreneurship), investing 10% - 20% of your income in standard low-fee ETF's is a GREAT point of diversification.

Look I don't think you are wrong in the sense that your advice would be bad for the people taking it, I just think you are wrong in terms of the actual numbers you suggest.

15% of your money in something technically promising but risky isn't really worth the time you'd have to put into the research for it. Put in 50% at the very least. You'll make money if you are right and if you're bad at investing it will be safe enough for you to survive retirement.

Sorry, maybe I'm just tired, but I'm confused by your post.

> 15% of your money in something technically promising but risky isn't really worth the time you'd have to put into the research for it. Put in 50% at the very least. You'll make money if you are right and if you're bad at investing it will be safe enough for you to survive retirement.

Are you talking about investing in one's own venture (where you're looking for high return), or investing for retirement (in a diversified portfolio w/ low-fee ETF's, where an 8%-per-year return is great)?

You have great advice with the benefit of hindsight.

So what's your suggestion for the "obvious" investment today?

I've been commenting on here for almost 10 years. I've been wrong sometimes, but I've called a lot right (from Tesla, Apple, Facebook, Bitcoin, AI).

Next decade is going to be cyber security and a word that I doesn't exist yet that I think of as "personification" of the internet. Combination of webs of trust and machine learning to both shape tastes and politics and harden networks from their shaping. Also, I think there is a pretty good chance that biology takes off, starting with GATACA or something like it for dogs. People want old scratch to live forever and not get hip dysplasia, and once old doggo is doing fine with Gene Drive then we're not going to be far off. Also, people are much more comfortable thinking with graphs of data. Think about tying together graphs that we can use to make predictions and watch companies like meta.com (bought by Zuck, that guy is a genius) and researchgate.net.

Also get ready for mass protests and "eat the rich" politics. Especially in America where the poor are poorly educated and the political system is corrupt enough to be evil enough to not support the poor, but not corrupt enough to collapse the private sector.

--> Combination of webs of trust and machine learning to both shape tastes and politics and harden networks from their shaping.

Can you elaborate on this with an example of a future scenario? Thinking about this is throwing me for a loop. Are you talking about some deeper level of web curation not yet achieved? People ever more entrenched in their own AI curated "bubbles"? "Harden networks from their shaping" Qwut?

Imagine social networks where you couldn't just make 100 bots. Through some low friction mechanism the people that you trusted most would be identified to you as such and by extension the people they most trusted would be visually indicated to you. Settings would allow you to completely filter out people that aren't within a certain degree of trust.

Right now adversaries attempt to warp what people believe by pushing them to make connections to more extreme elements, this would be less possible if the social network were built in such a way that would expose fake or low trust profiles.

The web of trust would resemble Page Rank, more than modern day Facebook. For example, Bill Kristol may be trusted by people like Ezra Klein to such a high degree as to not just bring him within your bubble, but to be part of a social network feed that would provide a blend of opinions.

I'm not saying this is easy to get right, but it's necessary if we want to have open platforms like Twitter to survive gamification by nation-states and brand marketers.

I've had thoughts in that vein for a while, do you know of anyone/any company exploring them?

None that are out of stealth mode. Also, nothing that I could personally recommend at this point.

I think cyber security is going to be huge too, but not sure how to make a play on it, don't see any obvious winners in the security space. What approach do you take?

If you're not in the position to angel invest I don't have anything top of mind to share. I think most of the stock market is overpriced, but Facebook is still probably a reasonable bet.

If I knew the next Bitcoin I'd definitely have typed it out. Sometimes the answer is to just wait and see and let your thoughts kinda work through things. What I know for sure is that there are a lot of powerful people that found out how important cyber security is in the past couple years. Snowden, Clinton, Paradise Papers. The market will do its best to try to meet this need.

And if I were in a position to angel invest?

My email is in my profile.

From a work perspective, I recall reading that in the next 10 years, 6 of 10 people on a development team will be security related. [Looked for the source, can't find it, due your own diligence]. 1.8 Million security jobs vacant by 2022. https://venturebeat.com/2017/06/07/global-cybersecurity-work...

The need for very seasoned professionals who have BOTH security and heavy development/business/architecture backgrounds will be a scarce thing.

So... Which investments specifically?

Look at sectors that benefit from the political environment.

Things like pharmaceuticals with ok pipelines, good companies in shitty sectors (say a company like Costco in retail), health insurers and companies like McDonald's that do well when the rest of the world does not. Think about smaller players who benefit from net neutrality going away.

You should have a running list of good companies and invest as you see corrections or downturns.

This is not at all like what the parent post implied. You're basically saying to pick sectors/companies that will net a slightly better than market rate of return on average. Which is great. However, this is very far from a 10000x return on true outliers, long shots, and market bubbles.

I think he was taking some license.

Knowing your shit and having liquid cash is key to those opportunities. My play portfolio made a 10x return after the financial crisis because of knowing key sectors and having cash.

Likewise, I had a nice bitcoin hit that could have been a 1000x play, but to be honest I got out to buy a car, which in retrospect was a very dumb decision!

Reminds me of the HN guy who sold his sun stock to by a car..

By the time I had Sun stock, I would have had to pay someone to take it. Still loved working there.

I cashed out a bunch of bitcoin for what I thought was going to be a near peak price at the time, $800. Fortunately, I never agree with myself completely, so I saved a few for the long run. Thinking back, I can't really say I would do anything differently with the information I had at the time.

Not that it matters, but 100000% is 1000x.

This isn't investment advice. I think the idea is that you'll have some investments that yield 1000x and some that yield 0x so you'll average out to something that's better than the market, but not 1000x.

I agree. However, the original question was more like, "if it's easy to see what will yield a huge return, what should I invest in today to get that return?" To me, it's pretty clear that investments yielding huge returns are only obvious in hindsight, and even an astute tech-savvy investor will, on average, only do slightly better than a normal diversified portfolio.

Those two statements don’t jive. It’s not impossible to trade hours for a return significantly better than a normal diversified portfolio, but less than being an early bitcoin miner.

It's important to realize the global macro environment is pushing up prices of everything: houses, stocks, just, all of it.

I'll admit I'm surprised by Bitcoin, I actively avoided it thinking it would crash long before now. But I wouldn't treat the past five years as anything remotely "normal". We're in one of the longest bull markets the US has ever seen and there are a lot of macro forces that will eventually end it, e.g. boomer retirement, student loan debt overhang, pension obligations. I was just reading some of Dalio's daily observations on some of this, they're quite good.

No, but it is unlikely. Hence the "average" part. Also, if we're talking about trading hours we're effectively talking about working rather than investing. Of course you can make more than a market return if you spend your free time consulting on the side, for example, but that's not really comparable to spending 5 minutes buying bitcoin or Tesla stock in 2011.

Your instincts about pharma may be badly wrong. Many hackers are shocked that pharma stocks generally go up when they downsize in research -- it seems wrong to our builder instinct but it makes sense in terms of short-term opportunity.

Invest in self driving startups. Oh wait you can't, thanks SEC.

I'm a smart guy with a good degree. I still wouldn't represent myself in a court, or diagnose my own medical ailments, or file my own accounts. Why would I think I could pick stocks better than a professional?

Because if you can pick an index fund with low fees, you are already beating most professional stock pickers. Yes, you may find the one or a few active investors who are amazing, but unlike law or medicine, there is a fallback option that is consistently successful in both short and long term compared to most stock picking, even professional. Note that you may all lose if the market goes against you, even active stock folks with lots of "hedges against the downside" and whatnot.

I don't think index funds are what the parent meant by "picking stocks". Going with a fund, even an index fund, is still a form of delegating the low-level work to financial professionals.

Isn't that the point? Professionals can't do it but for engineers it's supposed to be a cakewalk?

Because professional is a somewhat nebulous term when it comes to finance.

I do think that there are some firms, who cater to mostly very wealthy clients, who can consistently beat the market, or at least have a good chance of finding some niche or anomaly every few years for a huge jackpot such that their overall average is higher than the indexes.

The problem is that most of us won't have access to these people.

Instead, our professional is going to be the typical financial planner who has far less of an understanding of math than even the typical CS / engineer grad, and is basically a commissioned sales person who will take 5% off the top, plus another 2% a year - all for basically investing it in the same index funds you can now buy yourself with a Schwab or Vanguard account.

Find a financial planner that charges a flat fee, not a commission. He's not going to be selling you some stupid investment vehicle because he's not getting paid to sell that, he's getting paid to help you. He also is going to devote equal time to you, whether you have just a bit of money or a lot, you are equally entitled to his time as his wealthier customers. The only downside is that his financial incentive is to gain more customers. So he probably isn't going to sell you expensive bonds but he might not be able to devote as much time to your specific needs.

What will stop him from doing both charging you a flat fee and recommending less than optimal products to get an undertable commission. He can take you for a ride before you realize the game.

I think this can work only if we as customer also learn to cross examine his reasoning and ask hard pointed questions.

Ensure that one of the first questions asked is whether or not he has a fiduciary duty to you. If he says yes, then ensure that this is part of your written agreement of services.

Once an advisor is acting as your fiduciary, it's not lawful for them to advise you to do anything but what is in your best interest. Further, they may not have any conflicts of interest. This was supposed to be the case for all US retirement accounts, but the Financial Services Industry fought tooth and nail to defeat the Obama era rule.

How will you prove they deceived you? Moreover they might not be as competent as they sound. By the time you realize the deception, you might have gone bankrupt. Only by learning the basics we can hope to protect ourselves against bad advise.

The fiduciary duty of care solves the problem of advisors having mixed or divided loyalties and motives for clients wondering about why this or that product is being recommended. The simple answer is that the advisor is legally required to act on your behalf — period. If they do not, there's full recourse in the courts.

Competence is a qualitatively different problem and has different solutions. Usually, one would look for past experience, performance, and educational credentials to gauge competence in those they hire.

I do agree that the more educated client, the better. But, personally, I can only have domain expertise in so many areas, and I only have so much time. Outsourcing is a logical strategy.

I'd be willing to give it a try once just to see if they have ideas with which I'm unfamiliar.

How much are these flat fees for an hour or two of their time?

You'll also get help with tax planning. This matters a lot when you have a complex estate.

This comment astounds me. I'm an engineer as well, and while I get the logic that you're presenting here, I can't help but squirm at the thought of someone else managing my money.

In fact, it's something I just do not understand at all. The idea of giving my money to a complete stranger and entrusting them with years of my hard work is nuts to me. If people just read a bit about finance and managed their own money (in ETFs, your pick of Mutual Funds, REITs, Bonds etc) it would avoid so many headaches for people.

My wife and I call this the "faith in experts" argument. We named it because we often find ourselves on opposite sides of it. She believes in experts, I'm more skeptical.

The main thing I've realized is that returns to pure capital just aren't that high. For a typically-sized retirement account (few hundred K), you're much better off going hard on your career if you're in a field where that's rewarded (law, finance, tech, med, etc.)

The one saving grace of your idea is that you'll have made all the mistakes by the time you have real money to manage, so you won't make silly dumb beginner mistakes like buying high and selling low. That's my post hoc justification, anyway ;)

The problem is that most finance "professionals" you and I encounter are salesmen. The only thing they care about is their commission on that high fee mutual fund they just sold you.

It all depends on the size of your problem. For some cases, there is no need of a professional advice other than just holding hands... I bet you could represent yourself in a small court claim, diagnose yourself with some OTC medication (or hitting the pub?) and file your tax with turbotax depending on your tax year.

This is only "obvious" in hindsight. To make those gains, you need to time things very well.

I do both. I put the majority of my funds into low fee ETFs. I keep another 20% for higher risk investments.

What do you do if a high-risk investment suddenly balloons to become much more than 20% of your total investments? When do you choose to jump off the potential 10000x return and rebalance, if this has ever happened to you? (And the next time you make a 20% bet, is it 20% of the new total, or 20% of your traditional portfolio?)

I've had this happen with Bitcoin. It is a tough decision to make.

I have decided that I don't want any single high risk investment to consist of more than 10% of my networth, so I sell some to compensate.

Is that the right number? I don't know...

If it was me, I would sell enough to have received a gain of 2-3x my cost basis even if the rest becomes worthless, and then just leave the rest alone unless there is a compelling reason to sell. If you aren't open to _receiving_ the truly outrageous returns that black swan-type events might cause, there is no sense in making bets for black swans. You do need to be a good sleeper to do this though.

The other criterion I'd use is that if one of my risky bets has returned enough money that I could likely retire from it (i.e. >25x annual expenses), I would sell enough to be capable of doing that. That's such a monumental quality of living change that it's not worth it to keep the same level of risk.

This. That's pretty much exactly what I did, although it was more like 800x because bitcoin. It gave me quite a bit of peace of mind to know that even if I was wrong, I was wrong in a very reasonable way and not completely out of the game.

What I do is I do the percentage split on money I direct towards investments. So I have X dollars to invest in a month, 25% will go to high-risk, 65% medium, 10% low-risk. Any profits coming from a certain risk section will be reinvested into that same section. If some section really balloons out of control I can perform some rebalancing, but in practice I haven't had to worry about that yet.

All of the examples that you cite are speculative in nature and to be a successful speculator you need to know when to exit. For example, personal computer companies were a great bet in the mid 90s but a terrible bet in the 2000s.

So my question to you is how will you know when it's time to sell cryptocurrencies? Is there a particular methodology that you're using?

Well the answer is that I underperform what could have been optimal. That means I sold most of my bitcoins between $200 and $1000 USD. Sure it hurts, but I still have some.

I got out of the stock market in 2006 because I thought it was overpriced too. I'm the type of person that looks at fundamentals / physics and I get in and out early. Bitcoin might be going to $50k a coin, but I bought at $3 USD and I still have a small amount. I still think the governments are going to ban it, but having a bit of exposure is averaging the risk.

I believe your assessment of "government ban" is a good bet. People forget that governments always want to control the money; I believe they'll let bitcoin go for a while to gain national acceptance - and then outlaw it in favor of a self created currency. Then, since having all money be digital and tracked is useful to a govt, they'll introduce a country wide one.

Why do you think it’ll make it as far as governments banning it? I suppose it depends on whether it’s a reaction to laundering or tax losses, with the former meriting attention a lot sooner than the latter.

Getting out of the stock market in 2006 is not bad as far as market timing goes.

True, but staying out as the market continued to rise into 2007 was probably really hard.

> If you're in the top 1% or 0.1% intellectually

How are you measuring this? Are you equating being at an elite institution or have a (currently) rare and valuable skillset with intellect?

And/or are you reducing 'intellect' in this post to only mean logical/mathematical prowess?

A relatively high proportion of students at elite schools will be in the top 1% of the IQ distribution (and the same is probably true of HN contributors), but I don't think you have to interpret this literally for GP's post to be clear. Intellect, like driving skill, can be measured along enough axes that more than 1% can be in the top 1%.

> The advice I give to people on here is generally upvoted, except when it comes to investing

Maybe it is because your advice only goes to 0.0X% of all people, as you state yourself?

Many of the people studying Stanford are the 1 % of people.

Agree. In your 20s, your main competitive advantage is your ability to take risks. Plus your skill set is incomplete, so you’re likely to see much better returns from investing in yourself than the market.

Honestly if you’re a Stanford engineer those things aren’t mutually exclusive. You can take big risks and stash some cash.

Even in the Bay Area when I was getting paid $120k with a lot of stock and supporting a family I could still put away $2k/month. (Granted, that was after student loans and all other debt were gone).

> Even in the Bay Area when I was getting paid $120k with a lot of stock and supporting a family I could still put away $2k/month. (Granted, that was after student loans and all other debt were gone).

Tangential question if you don't mind. I'm currently staring at an offer in the bay area, and the cost of living is mind boggling. Where did you live on that 120k, while still saving 2k a month and having a family? I'm not asking this sarcastically, I'm asking because I'm looking for a place with good schools, 3 bedrooms, and not $5K a month in rent in order to decide whether this is the right move. If that's possible without commuting 1.5-2 hrs each way, I'd really love to know!

As an European, reading things like these never ceases to amuse me, both the salaries that engineers earn and the crazy high cost of living to go with it. In Germany $120k is the salary of your average successful internet startup CEO and generally speaking an outrageous amount of money, in the Bay Area is about enough to get by, pay rent and save. The disconnect is astounding. And it's not like the quality of life in the Bay Area is ten times greater than in the top cities of Europe either, not to my knowledge anyway.

> In Germany $120k is the salary of your average successful internet startup CEO

If that CEO salary figure is even close to accurate (I have doubts a successful German tech CEO is taking home just $120k a year), that arguably speaks to how few enormous .com/tech success stories have emerged from Europe (we're not exactly overflowing with Googles, Apples, Facebooks and such), which is arguably a problem in itself in 2017.

I don't know when the OP was last working here, but I'd also point out that ~$120k is increasingly a pretty common level of remuneration this area for a reasonable entry-level engineering position, if you are good and make the most of opportunities significantly more than this can be made, worth remembering when looking at cost of living comparisons.

> it's not like the quality of life in the Bay Area is ten times greater than in the top cities of Europe either, not to my knowledge anyway.

This is clearly a hugely subjective, not to mention anecdotal measure, but having lived in several major European cities as well as the Bay Area for a number of years in each instance, I definitely do have the best quality of life I've had for my family in California, and for me anyway it's been absolutely worthwhile. There are very few cities anywhere that offer the incredible range of activities, nature, jobs and educational establishments etc all within driving distance that the Bay Area offers, which is a huge factor in why so many people are trying to move here.

There are very few cities anywhere that offer the incredible range of activities, nature, jobs and educational establishments etc all within driving distance that the Bay Area offers

The primary appeal of California is outdoor activities. If you're not interested in the great outdoors, it's pretty thin gruel, IMO. I far prefer Europe, for the sheer density of diversity in culture, food and way of life.

As a Canadian... :(. We get European tech salaries with rapidly-approaching American cost of living. On a median-income vs cost-of-living basis, Vancouver is actually now more expensive than SF and NYC. We lose all of our good talent south of the border on NAFTA visas.

$120k is about what a good experienced generalist developer can make in London. You can up that significantly with domain expertise, or contracting.

IMO companies on the continent, outside of places like Switzerland, pay peanuts for developers. And you know what they say: pay peanuts, get monkeys. It's a bit of a head-scratcher if people with talent didn't leave. Could have an impact on that innovation, too.

i feel the same way except i'm an American living in the midwest.

I make $70k in the midwest and save $3k/month. That's $3k after taxes, insurance benefits, rent, food, etc..

So I'm surprised the 120k guy isn't putting away more.

You're saving more than 50% of your pre-tax money? That is impressive and unusual.

I guess from that savings rate and the fact you only make 70k that you are fairly young with no kids? How much do you pay for rent/mortgage?

Not OP but in the Midwest big companies like John Deere start their engineers in the $60k range (at least when I interned there). The cost of living is just that much cheaper. My studio apartment while in college in Iowa City was $500 a month for a location just a five minute walk from the campus.

> You're saving more than 50% of your pre-tax money? That is impressive and unusual.

Many in the Financial Independence community are upwards of 70%. Having a partner with the same goal can keep that savings rate as high even with kids. Otherwise it's not very likely.

I don't understand... I live in NYC on a $130k income and am having trouble figuring out ways to spend more than 50% of pre-tax.

What exactly are people spending on? I'd think it'd be really easy for people in tech companies to save upwards of 70% with high salaries and the performance of tech stocks.

Ex-New Yorker here, I've seen my single co-workers spend all their money with expensive rents, gadgets, social life and traveling.

3k/month on rent

Germany also has such a big safety net that the only homeless people literally just don't want to change their street lifestyle. It's a trade off. Living in Chicago, which has a large homeless population, I think Germany is doing it right. You have less max earning potential but you also know that your basic human needs will always be paid for and everything you earn goes to a nicer house, nicer food, nicer clothes etc.

From the past tense in that post, I'd guess this may have been a few years ago. Today, the white-hot realestate market means living expenses are much higher.

At $120K, you're looking at a tax rate of close to 30%, which puts the usable figure at $80K or so. You want to maximize your 401(K), so your salary goes down to $65K, which is about $5K/mo. A decent 3BR with good schools (Cupertino) will run about $3500/mo (1), which leaves $1500/mo for everything else. Not doable, unfortunately.

(1) https://sfbay.craigslist.org/sby/apa/d/1500-off-move-in-book...

Appreciate the concrete math, it helps ground the abstraction of living expenses.

The missing piece here is the salary inflation over a very short period of time.

As a Stanford engineer, one should use the leapfrog technique (stay at a job no more than 18mo) to increase your salary by 2x in 5 years. That would mean by 27-years-old, this person should be in the $250k range, 35% tax = $160k usable, $15k 401k = $12k/mo.

YMMV, but this is should be entirely doable by the median Stanford grad.

Was last year. 2 BR was/is $2500.

Also if you’re maxing out your 401(K) I’d call that “saving”

Keep in mind though, you're putting away $5K/mo towards retirement. You're _saving_ 60K every year, which is no small number.

Actually that would be only $15k/year or $1.25k/mo towards retirement.

It's not possible. You can try to get your kids into a better school via the Allen Bill which means they can attend the school district where you are employed. For example, say you work in Palo Alto but live elsewhere. Otherwise you might have luck finding something in Union City / Fremont. But everyone is in this boat.. Hopefully, with increased parental involvement, the schools will improve.

can the kids still attend that school district after you get fired/quit?

Technically, no, but I would imagine something could be worked out on a case base case basis. They might, for example, let your kids finish out the current academic year and in some cases they might let you finish the school you are at (e.g. a junior in high school). You may also be able to find another job in the same district as well.

I lived in San Leandro and earned less/saved the same or more as the other guy. Two bedroom apartment for $1600, 45 minutes to an hour commute into the city for work. Definitely not a place I'd send my kids to school though.

You might have luck on the other side of the bay (Alameda is where I'd live if I ever went back) or far enough south out of the city. But no matter what cost of living will be higher than it should be.

Do you work in downtown SF? I live in the Tri-Valley area: Dublin, Pleasanton, San Ramon. You can get 3BR for under $3k/month, quick BART into the city (a little less than an hour each way). Though that doesn’t commute very well to San Jose/Palo Alto

I am a family of four living in a 1 bed. Sleep with ur wife in the living room, kids in a bedroom. I manage to live in the city in a nice (albiet too small) apartment with 15 min commute for 3.8k rent a month. You have to compromise somewhere. I am on more than 120k though.

Where on earth are you paying that much for a 1br? There are 2br apartments that can be had (still in SF proper) for less than that!

In mission Bay, next to a fancy playpark for my kids. With swimming pool etc. We get the life we want, just not in the sized house we want.

Still very possible: - Rent a room for less than 1000$ - No car (use the shuttle or other yuppies way of transport) - Don't overspend on drinking/eating

you should be able to save upto 3k a month with a 120k salary

You should be putting away way more than $2k per month. I know it's the Bay Area and all, but that's still $120k

I make $70k in the midwest and save $3k/month. That's $3k after taxes, insurance benefits, rent, food, etc..

Given the high marginal tax rate at that income level, it “costs” very little to max a 401k. The first $1400/mo in savings should be easy with the tax advantage. To save substantially more than $1500 on top of that, you’re probably going to need roommates and/or an hour-plus commute.

I think $3k is totally doable, but “way more” involves very substantial loss of quality of life. Also some of that after-tax savings will be eaten by medium-term projects like travel and moving.

$70k in the Midwest and $120k in the Bay Area are pretty close on CoL calculators.

in the comments below i wrote

the big difference is that i don't have a family. But i'm not super frugal. I pay $700/month with utils + internet for my own 1Bedroom apartment. I could've gone much cheaper if I didn't live Downtown (120,000 city population) and could've gotten a roommate in a 2Bedroom aprt. Plus I also eat out at Chipotle/Jimmy Johns almost every other day, then I go drinking maybe once or twice a month. So I could easily save another $500 if I wanted to

If you are getting a $70k salary AFTER taxes, which would then be roughly 90-100k BEFORE taxes, then that'd be equal in the bay area to what? 150k-170k? I don't think this is an equal comparison.

i make $70k before taxes and save $3k after taxes and other expenses.

all back of napkin but im guessing you're playing with 55k after taxes, so 4.6 k a month.

so your total costs (rent/mortgage, food, kids, all in) is only 1.6 k? and you're saving ~65% of what you take home? you must live extremely frugally, this is not normal. so kudos, but don't try to make it sound like everyone should do what you're doing. most people do just fine saving 20-30%, even less.

the big difference is that i don't have a family.

But i'm not super frugal.

I pay $700/month with utils + internet for my own 1Bedroom apartment. I could've gone much cheaper if I didn't live Downtown (120,000 city population) and could've gotten a roommate in a 2Bedroom aprt. Plus I also eat out at Chipotle/Jimmy Johns almost every other day, then I go drinking maybe once or twice a month. So I could easily save another $500 if I wanted to.

Not to harp, but the big difference is your relative cost of living. $700 for 'complete' housing is a pebble compared to > $2000 a month for housing in the bay area. It might not be frugal itself but the choice to pay what you're paying is a luxury compared to the person above.

that's why i said midwest. its not as big as SF but I live Downtown in a 120,000+ area

i know its expensive out there in the Bay but its still my $70k/year vs his $120k/year

If he pays 2k a month and you pay 700 a month thats $24,000 vs $8400 a year. Given that 120k in the bay after tax is probably roughly 95-100k (guesstimate) the simple question is, is OP's after tax pay comparable to your pay relative to housing? No its not, he pays 2.8 times more rent than you. .8 of that is EXTRA because of where the location is (extra 6k a year). So given that plus OP's family expenses its actually fantastic hes saving 2k a month. That 'extra' $500 you 'could' save is what OP pays extra per month (that 6k/12) just for you to be able to say 'oh but thats the bay area'. To make my point more clear take that extra $500, add it to his take home pay. Great, now you are both making equal amounts compared to housing. OP saves 2.5k a month, you save 3k. Now, have yourself a family and try to save 3k with family expenses.

I think after adjusting for cost of living, you are making far more with your 70k salary than OP is with their 120k salary.

> Agree. In your 20s, your main competitive advantage is your ability to take risks.

Disagree. In your 20's, your main competitive advantage is time and exponential growth.

As a early/mid 20's college grad, thanks for this.

> In your 20s, your main competitive advantage is your ability to take risks.

Why is this some "special ability" of 20-somethings? I definitely prefer the approach of becoming financially independent and then having 50+ years to do what I want ... seems like having 50+ years to take risk after saving aggressively for 10-12 allows for even more risk/reward tradeoff by eliminating the worst consequences of failure without a safety net.

It's the good old debate on building human capital vs. financial capital.

This is true.

It's also true that most people tell themselves that very thing to justify buying dumb shit.

Absolutely. I'm poor. It takes all my will to stop myself from buying a huge desktop computer.

There's a fine line between tool and toy and I often find myself on the wrong side.

your submissions so far: 1. Ask HN: What are the strongest arguments against Net Neutrality? 6 points by leifaffles 4 days ago | flag | past | web | 3 comments 2. Tim Ferris: “Silicon Valley also has an insidious infection... McCarthyism” (reddit.com) 10 points by leifaffles 8 days ago | flag | past | web | 1 comment 3. CloudFlare CEO Plots to Slow Service for Political Opponents (twitter.com) 5 points by leifaffles 9 days ago | flag | past | web | 1 comment

We've banned that other account for trolling, but what you did here and https://news.ycombinator.com/item?id=15831807 also breaks the site rules in several ways. Please don't do that. If another comment is bad for HN you can flag it or, in egregious cases, email us at hn@ycombinator.com.

Honestly, I suspect the consensus would be to use there $10,000 to start a savings account where you keep 6 months of living expenses for those times when your opportunities blow up in your face. That's risk management, and I'd have no trouble tattoing it on a 22 year old's forehead in reverse.

Further, I'd have no problems telling someone with a 6-figure income to max out their 401k and then invest more in index funds. Take it from a 50 year old, it's easy to come out if that 10 year window with nothing but painful experiences.

Yes, exactly. I don't think a new grad should be taking their $10k savings and putting it into a vanguard. They're at a unique point in their lives where they can take a risk and start a company. It'll probably fail, but even if it does, there's lessons that usually come with that that's way more valuable than the $10k lost. Also, even if it's not a smash success, there's plenty of businesses you could start that might bring in a nice side income for many years while you go do other things such as get a real job. That's also much more valuable than 5% / year off of a vanguard.

Completey disagree. If you're a new grad, the most beneficial thing is to get your feet wet - both technically and professionally in a company with a wide range of issues, while making a decent salary and investing it.

You could learn the ropes while starting your own company or at some huge conglomerate. The difference is that you're probably not able to put away much cash while doing your own thing.

Anyway, the $10K investment at 23 is kind of a red herring. The true question I've had to ask myself the last decade, is whether it's better to take more risky start-up jobs for equity or stick with safer enterprise jobs at a good salary, but with less chance to start something myself and possibly hit the jackpot.

So in my late 30s, I haven't had much start-up experience, and uncool Java and Spring are my bread and butter. But after a decade of making over six figures annually, investing most of it, living frugally, and letting exponential growth do its thing, by the time I'm 40, I'll be well placed financially to take the same risks as any 25 year old. But I'll have plenty of capital (via exponential growth) and experience. And probably better odds of creating something that at least breaks even and pays the bills.

There is many paths to the same place! Don’t be so narrow minded in thinking yours is the only one or the better one...everybody needs different things in life!

I went straight into startups after school...and boy was it though! Even when we made money we would invest it straight back into the business...I lived mostly poor all my twenties...no car, vacations, apartment (I lived at the office most of those years), etc.

What I gained was invaluable expierence and network...way beyond what you can learn in a very well defined (and confined) role at a established company.

Now at age 37 I work as a lead at on of the big 3, responsible for billions of dollars. Pulling in a high 6 figures annual compensation and also well on my way to be able to retire at 40. And I just started saving money 2-3 years ago for the first time in my life.

I have a family, own a house, go surfing in summer and snowboarding in the winter...I picked all this up in the last 6 years...I guess you could say my life plan was more of a exponential one...where the first 10 years didn’t seem to lead anywhere worth going...I always believed that doing good work would eventually pay off...and eventually it did and the grind payed off and the exponential curve started.

I be honest, I needed it that way...the linear approach to life has never been my thing...but that’s just me...people should be true to themselves when it comes to life planning!

> Don’t be so narrow minded

Hey not trying to rain on anybody's parade. :)

But, the fact that you work at one of the big 3, responsible for billions of dollars, means you probably graduated from a top school, live in the Bay area, are in the top 3-4% of intelligence and skills, had some luck, etc.

Most of us here, statistically, are not going to have these same traits.

Take a risk, but don't end up at 40 without something saved up for a rainy day. Start-ups fail more than they succeed, and we're both lucky - you in the right place at the right time (tech bubble, SV, etc) and me having invested during one of the largest bull markets in history.

So we're probably both preaching BS that may not apply going forward.

Actually a public school dropout...but other than that you are of course right...I wasn’t trying to say “do it like I did”...I was trying to say: do what’s right for you and your situation!

just curious, do you work a lead developer/architect or as a project manager?


I am a Product Manager these days

>whether it's better to take more risky start-up jobs for equity or stick with safer enterprise jobs at a good salary, but with less chance to start something myself and possibly hit the jackpot.

You're better off taking the high salary at Facebook, Amazon, Microsoft, Google etc..


Compound interest. Saving in your 20s is enormously more powerful than saving in your 30s. Losing the same amount of cash due to a poor startup is worse in your 20s than in your 30s.

I agree with the gist of your post but your consensus advice is a bit off:

>And graduated Stanford. You've even managed to save around $10K in cash from various summer jobs and gifts from relatives. The consensus advice investment management professionals would offer is to sock it away in a well-diversified set of Vanguard Funds.

Your first $10k is your emergency fund. From what I've read, the consensus is: don't invest it, instead keep it in an FDIC insured savings account + cash. If you need it, it'll probably be because you've been unemployed for a while. You are most likely to be unemployed during an economic downturn. The cash choice insulates against natural disasters.

If you do invest it, try a target date fund that's matures in the near future. For today, 2020 would be a good choice.

I agree with everything except the target date fund. They have shown to perform horribly.

Edit: there's a correction on this in the child comments.

The math on this is misleading. $10k invested for 30 years to become $1M implies an interest rate of 16.6%. Even as a nominal interest rate in the US, that would be an extremely lucky result to consistently achieve. My advice to you would be to start a hedge fund immediately with whatever secret knowledge you have, and then all money concerns will become irrelevant. :-)

A good choice for a real ('real' meaning non-nominal) interest rate in these types of projections is 7%, which would make $10k equal to $76k in 30 years. Because you used a real interest rate, the $76k is $76k in today's dollars, not in 2047 dollars. The conclusion is that you will need to invest a bit more than $10k today to retire in 30 years.

I like to use this type of calculation to frame my short-term purchase decisions. Would I like to spend $20 on this thing I don't need? Yes. Would I like to spend today's equivalent of $300 on it 40 years from now? No thank you.

The parent also mentioned adding to the funds on a monthly basis. Does that make the math match up more properly?

Yes, it does. I missed that. :-)

My take is different and I don’t think there is one way to live either.

I take my dad’s words: spend the money and time well, and enjoy your life.

So save enough every month and get a good meal either alone or treat your family to a good brunch/dinner. Plan a trip at least once a year. Go to movies or do something healthy you have never done before. Buy new clothes. Whatever

But have a budget. Spebd 100% is IMO a bad advice. When you need the money you have none.

I also do not recommend invest in stock market unless you are buying one of those low-price stocks that will go up crazy.

Instead I would save up enough money, buy a house. Owning a land or an apartment will do you far better in the long run. Buy some gold when you have spare. Also invest in your life insurance; Usually you pay about 20-30 years then you get money just like social security (and some you can cash all with a big bonus).

I have been through tough time. If it weren’t for the medical leave $$ my employer provides through insurance, I would be forced to sell my house at age 26 right now in NYC.

Think in the long term: professional developmebt is great but do not let career be the only thing be your long term prospect. Putting 100% without saving is a big risk you really want to avoid.

Sometimes I have the urge to tell people why I think they should stop coding after work. But hey, if that makes them happy (I get it might be a hobby) great. But please do not fall into “this is norm”. I went to a lot of conferences and hackathons; great but don’t really satisify me as much as enjoy an outdoor view. Going to a new city for a talk is good for as long as you really have the chance to experience that city. Otherwise I’d wait for video to come out (and I feel bad so nany conferences do not organize publish conference videos).

In the end, what is good for saving a million dollar when you are sick and tired all the time?

> But have a budget. Spend 100% is IMO a bad advice

Fully agree with this and everything above. However, ...

> I also do not recommend invest in stock market

> Instead I would save up enough money, buy a house. Owning a land or an apartment will do you far better in the long run. Buy some gold when you have spare.

Isn't this advice contradictory?

The goal is to reduce risk, isn't it?

Then buying a house is very risky. If it is old, reparation costs are impossible to predict. If it is new, you have to watch over a building site which can easily blow its initial budget, both in time and money.

Same for buying gold. Nowadays the gold price is almost decoupled from its material value. This is mostly circle speculating with how other people will perceive the value of gold in the future.

Of course buying individual stocks is much more risky than either houses or gold, but that's what index funds are for, aren't they?

I don't know where you live. But buying houses (as investment) is top priority for most people I know in my area (Boston). I would imagine the same goes for the Bay area.

In areas close to the city (Somerville, Belmont, and Cambridge), every new house listing is a bidding war. All contingencies waived. Because the demand is so high, a lot of people don't sell houses as a whole anymore. But instead opt to sell multi-family houses as condos. And these condos still sell quickly.

The reason for the demand is that house buying is actually a very stable investment. Rent money covers the mortgage. Remodeling cost always repays itself (and in most cases actually give you a net gain). House itself appreciates year over year. Even the last recession did not slow down the appreciation much.

The risks you mentioned actually only apply to people who are new to all this.

The problem is you have to put in the effort to maintain/repair/rent out the property you have. If an effort is needed to maintain profits then I could as well do many other things that bring better returns than properties.

The idea of an index fund is that you don't have to do anything for it to bring relatively reliable profits.

Agreed, investment house does involve some hassle =)

I was posting mostly to counter the argument that buying investment house is risky.

Buying a house that you live in is an act of consumption more than an act of investing, IMO.

I also don't subscribe to the idea that remodeling pays for itself either (partly because it's also an act of consumption IMO), but I also don't believe that most remodeling results in a >60% return of investment, let along consistently at/over 100%.

PS: If context matters, I own and live in Cambridge, MA.

I'm not sure what you mean by "act of consumption". Aren't we strictly talking about buying investment houses and not primary homes?

Remodeling houses in Cambridge has been very lucrative for some time. One of our family friends bought a small 2-family house in Cambridge (his 2nd property there) for just under 700K. This was a little over 2 years ago. He got a good deal for buying directly from a neighbor (market price was probably 800K to 900K). He spent the subsequent 2 years remodeling (while working at a full-time job). Now the estimate on the house is 1.7M to 1.8M.

And he spent a little over 200K on the remodeling cost. This includes building an extension to the house. The reason the cost is so low and it took so long was because instead of hiring a general contractor, he took his time finding different contractors for specific jobs and let them compete over price.

His example may sound a little extreme, but I don't think I've ever heard about someone renovating an investment house in Cambridge ended up with a net loss.

I feel a lot of people disagree with us. Unexpected, but too bad. We live in our subjective fantasy.

Haha yes. I was a little surprised too. I guess a lot of people here just don't like the hassle involved with house buying.

Risk is unavoidable, but we have weigh the long term risk. Blue chip stocks are great for long-term but very low return and probably don’t worth anything....

The problem with the mortage crisis in 2008 has to do with bad credit. If you save money and have a steady income, go head. Right now is still a good time as interest rate is still low (I went from variable to fixed after building enough credit). The risk is people buy a house when they can barely afford one or can’t even afford one at all. Ask family to help contribute for your first buy, and pay back. I never get the “buy alone, never bother family” thing.

Disclaimer: my parents did buy the house and I refinanced the house so I paid back. That being said I have a mortage (3k) monthly for 20 years at 4.25%. If I can’t pay back I still have to sell the house or the bank will take away, so doesn’t matter if my parents did buy the house in full initially. The risk is the same, but the money is well-spebt if you start saving now.

As far as gold, you can buy gold and save them. Perhaps this is a Chinese thing. We buy gold from stores and keep them in a safe, we don’t buy virtual golds at all knowing we don’t really own anything. The point is sell them when you can, either at high or when you really need thr cash. Remember physical is better than paper bills. Coin itself is worth more than a piece of paper. This is why I believe owning a car is far better in the long run. My dad bought one for $8000 SUV and it last about 10 years before he decided to get a new one. That old car about 15 years old was sold for $3000. Good deal!

There is a Chinese saying: we work to buy a brick. Because a brick can be reused, but a piece of contract can’t. This is so evident in NYC as Chinese immigrants own so many apartments/houses, and they rent them out to make $$. I also rent out my second floor to help pay back my mortage...

I know all the above can’t apply to everyone, espeically for those who live in expensive areas like SV (which is why I avoid working there). But look around, there must be a way for you to save money.... just review your monthly spend. Cancel a service you rarely or don’t use anymore... $100 save every month means $1200 a year.

You are doing many that the course says do not do -- stashing gold, thinking one kind of investment (buying properties) is always better than others, thinking one kind of fiat money is better than another, etc.

You are basing many of those decisions based on your personal luck and other people's anecdotal experiences, but not what the data said.

If courses can make you wealthy, we won't be having this conversation? Isn't OP also basing his personal experience what works?

Seriously, be open minded about subjective opinion. There is no right/wrong. If my method works for me, it works for me. My starting statement said there is no one definite way to live.

So let's respect that.

Seriously, be open minded about subjective opinion. There is no right/wrong.

Risk tolerance is, but refusing to diversify outside of real estate and precious metals is objectively a risky strategy without a history of outperforming lower-risk ones.

>If courses can make you wealthy, we won't be having this conversation?

Oh well, I think people will agree that following the advice in courses in reputable universities, perhaps, makes people wealthy more frequently than following advice that people disagree with on HN.

> Also invest in your life insurance; Usually you pay about 20-30 years then you get money just like social security (and some you can cash all with a big bonus).

Some of your other points I agree with, others are debatable, but this here is just objectively incredibly bad advice. A life insurance is one of the worst investments you can possibly make: You'll pay huge fees (hidden, of course) and get very limited returns (far worse than an average stock) just for the peace of mind of not having to see the value of your investment go down (which should not matter over a 20-30 year timeframe).

Like any insurance, it's a bad investment until it's needed.

Unlike some other kinds of insurance, you're not the one that will get the most benefit from it.

Then you should buy term life insurance. It’s dirt cheap to cover you when you need it most (young, raising a family, don’t have much saved, paying off a house and perhaps education) and if prudent eventually the need to insure your life is displaced (your debts have been paid and you’ve accumulated savings and the kids have moved out, etc.)

Isn't everything subjective? If there is an objective way, then we wouldn't be having this conversation. I based on my own experience and my family's experience. My dad can sell his insurance which worth at least half a million after 20 years of investment.

Take the annual premium that your dad put into life insurance over those 20 years and plug it into http://www.cfiresim.com with these params:

Start 2017, end 2037

0 portfolio to start, leave the rest of the defaults.

0 spending on the right hand side.

Scroll down and plug the annual premium (not the monthly) in as "other income" from 2017 through 2037.

Hit the big green "Run Simulation" button at the top.

I'm guessing you'll see a much higher number than $500,000. I ran the simulation with a $12,000 premium and got an average $500k payout, but the premiums are probably quite a bit higher than that if he has a $500k cash value.

The premium we paid was $5000 a year.

In general, if you need life insurance, buy term life insurance, which is a pure play insurance product.

Whole life and other investments-mixed-into-insurance frippery are designed to make the insurance companies and salespersons more money.

Buying term and investing the difference is almost surely a +EV play.

The jump from investing in stocks to buying a house is a tall one — especially in the Bay Area.

Here is another advice. If you can't afford buying a house in Bay Area, and you need the extra cash, you may consider buying a house in Southern part of the country. It is usually about $50,000 - $100,000. Then you can rent out to college students for $300 - $500 a month. When I go to Lake George I rent a house for a few days. The owner is actually from NJ, and he just hire a contractor to look after the property on a periodic basis (maybe $1000 a month for several properties).

Imagine you get $3000 a month for a $60,000 plus $1000 to have someone manage your house on a regular basis. You get back your investment in 3 years. Let's be realistic too. How about in 8 years? Now you have a steady income $2000-$3000 a month. That's a nice bonus to your annual income.

Can you afford buying Apple stock and hope to make $500 a month with the stock is already so high? Every month you are paying more and more to cover more share. You will realize you are not making anything. Buy low-price stocks that will take off instead.

Finally, when you need $200,000 for whatever emergency, you can refinance from the bank. Can you do this from your stock investment which again has very low return? I know people who make several thousands a month but these are rare. Housing isn't. If buying property can't generate revenue, no one would be buying property and renting out. There is a reason why the property market is so expensive now, because owning a piece of land == sell high. We bought the house here for half a million, and if I actually sell it right now to build a condo I could get back my investment in 10 years or less (or sell it directly to someone).

Can you afford buying Apple stock and hope to make $500 a month with the stock is already so high?

Why do you bring up the straw man of buying individual stocks? Trying to get clever about picking stocks and when to buy/sell is directly contrary to the course's advice. Nobody but you seems to be recommending a non-diversified approach here, and you seem to hold some strange ideas as to the historic performance of various asset classes.

Portfolio only buy a small amount of shares which have low return. Try buy some from Stash which offers a basic way to invest in stocks. You certainly are welcome to invest in the high risk portfolio, but it's so risky you are likely to lose over time if one of them crashes.

If my ideas are strange, no one lives in a house. We'd all be living on the street, because why would anyone bother to buy a house and rent to people? Look at New Zealand which recently bans foreigner investing in new properties, because they are rising property price, knowing people need a place to live. Why does university have campus housing? Because university can make income.

The point is, a land is worth more than a stock. Your mortgage market can fail, but the potential sell of a land is guarantee to be high after the crash. Don't buy a house if you cannot afford it yet.

Older generation knows how to make money, yet, new generations like so many here are clueless.

Might be good to have another section on 'Inflation.'

That $1M nest egg will need to be ~$3M in 38 years (when a 22yr old might be looking to retire at 60) in order to have the same purchasing power as $1M today (which isn't much in many markets).

Certainly not enough to provide a decent inheritance for the next generation.

hahahahha. It’s a strange world when 300k+ of current purchasing power is not considered a decent inheritance. What baseline are you using? I would have loved an inheritance like that..

I'm not quite sure where you're getting the $300k from, or what assumptions you're making around retirement spending, but my point was that there likely wouldn't be much of an inheritance to give if one assumed retiring on $1m even in today's dollars. Assuming ~20 years of retirement, that's $50k/yr. Many people's medical expenses would eat that up quickly as they get older, and that's not even getting into other living expenses, whether they have their overpriced home paid off, etc.

I am projecting we mostly will live to 100 or 110. That might mean some people have 30-40 years of retirement, and many will be unprepared.

I struggle with this week to week as I fight between strictly managing my finances and funding my YOLO 26 year old "holy shit I can't believe I'm making this much money" swagger.

I'm having a really hard time justifying saving above the bare minimum - despite my experience as a recruiter, I still can't convince myself that there will ever be a time I'm not hireable, unless all jobs have vanished (apocalypse, general AI), in which case my "nest egg" is useless anyway.

It's just a logical reach to justify my excessive spending I'm sure, but I've really got myself convinced here :P

But there's another reason to save: early retirement. It may not seem interesting to you now (I know it didn't for me at 26, I was programming and was getting paid for it!) but when you're 40 it's far more appealing. Unfortunately I didn't make a ton of money at 26 or I would've beaten myself with a stick for not saving more for the future.

But I can easily "retire" early right now, just not in the USA. In two years I'd need to supplement with some little contract jobs maybe, but that needn't be full time.

I hear you though, I'm definitely trying to learn from my elders, regardless of anything I'll always at least be putting money into a savings account (that I refuse to touch but in the direst emergency). I just can't shake the feeling that this generation is the last one that will get to benefit from our 401ks, if we get to at all.

You're better off saving and trying to get a job at Facebook, Amazon, Google, Microsoft, etc..


Funnily enough (to me), I'm in a bit of a situation similar to this, financially anyway (I lack the Stanford side, but whatever).

If I were to put, say as you mentioned, $10K in cash into something like a set of Vanguard Funds, what percentage of my monthly income should be added?

I have money socked away right now from working internships, and from the past year as a full time engineer, but haven't invested it in much other than partially into my 401k. I'd love to do something with it and I know it's doing nothing sitting in the bank in a regular account.

> You've even managed to save around $10K in cash from various summer jobs and gifts from relatives. The consensus advice investment management professionals would offer is to sock it away in a well-diversified set of Vanguard Funds.

Put half of it in a Roth IRA with Vanguard. You can still do a lot of risk taking and self development on $5k, and the compounding from being in the Roth IRA that early really will make a big difference.

The thing about personal development - it's hard to confiscate or take away. It can't be seized, overtaxed, or barred from leaving the country. It can have value that isn't defined by just one nations' standards of governance. It's not liable to inflation (AFAIK people aren't getting smarter).

This makes it relatively less risky and more valuable.

I think this is really great but IMHO college is too late for this. Personal finance should be taught in middle and high schools just like health classes.

When I was 18 and a freshman in college I saw some crazy decisions including using student loans to put a down payment on a car or taking out private loans for spending money.

I was taught budgeting and basic finances in both middle and high school (I went to public school in NJ) and whatever I learned evaporated immediately because I had next to no use for it at the time. College (when people are getting more independence than they’ve had previously) is a much better time to teach people these skills.

In general, I chafe at the types of educational arguments that go “we should teach kids more useful skills, like how to file a tax return!”. I think such arguments would benefit from the knowledge that some students are already being taught this, and need to relearn it when they get out into the work force anyway.

I strongly agree.

A lot of the "teach skills early!" advocacy seems to come from people who have little contact with teaching or teachers. Teaching someone a skill they won't practice for 5+ years is a basically hopeless project; there's no incentive to learn it and little chance of retention if it is learned.

I remember learning to balance a checkbook in 7th grade. Why? What on earth did that teach me? Certainly not how to balance a checkbook as an adult; the seven year gap between learning and having a checkbook meant I learned it from scratch as an adult, and frankly it's not a hard skill to gain without formal training.

If we're going to push 'practical skills in the classroom', it ought to be done with an eye towards what's age-appropriate and likely to be retained. The same year I learned to balance a checkbook, I learned to use Microsoft Office competently, work a simplified email account, and handle basic cooking and laundry. All of those things got steady real-world practice and I retained them nicely. Instead of teaching tax returns and budgeting in middle school, I'd love to see high school students get trained in things like public speaking, studying skills, or critical reading of the news.

> I was taught budgeting and basic finances in both middle and high school (I went to public school in NJ) and whatever I learned evaporated immediately because I had next to no use for it at the time.

Absolutely. This is why, as a parent, I'm going to teach my kids about money early, letting them make consequential mistakes as early as possible, probably starting around 2nd or 3rd grade. We'll fund the roof over their heads, the food in the fridge, very basic clothes (shoes, socks and underwear, basic shirts and pants, basic outerwear) but anything else they'll have to spend their own money on. They'll get a fixed allowance plus they'll get extra money for doing things around the house. Initially this will be in "the bank of mom and dad" with a super high interest rate (like 5-10% per month) which will hopefully help make the concept of compounding interest stick earlier. Over time we'll transition to joint bank accounts with separate debit cards.

My parents taught me (most likely inadvertently) all kinds of financial lessons very early in life. I had a weekly allowance that was earned doing generic chores. There was a list of bigger spring-cleaning-style chores that had their own separate payouts. Most importantly, 50% of everything I "earned" was required to be saved in the bank. The rest was mine. Paying taxes and saving appropriately was never something I had a hard time doing as an adult.

Requiring 50% to be saved is a good move, I might steal that. I think I might also do a "match" to a Roth IRA when they're older and actually earning taxable income.

My mom never tied allowance to chores, we were just expected to do chores. The problem with tying them together is that at some point the kid will just opt out and you have no leverage. I had a bank account but we were never diligent about deposits so saving was harder for me as a young adult.

> and you have no leverage

What leverage do you have in making children do chores in case if you do not motivate them by earnings?

you could add another rule where interest doesn't accrue if they temporarily opt out of your system; in fact, it could be negative interest during that period.

reforming the tax system so that most (like the UK) don't have to file a tax return might make more sense

IMO, there's substantial benefit to people being made aware of how much they pay in taxes.

I'd also like tax returns to be due 2-6 weeks before elections, so the figures are fresh in voters' minds. (That's not to say I'm anti-tax necessarily, just that a tighter the linkage between "what I pay" and "what I expect" would be beneficial.)

I don't think that most people even look at their pay stubs - either physically or electronically, so adding yet another sheet with a big pie chart with vague slices like FICA, Defense, etc. wouldn't accomplish much.

Taxes are also hidden in various ways.

The ACA is more or less a redistributive tax charged to your health care premiums.

More than 10 percent of your salary is deducted as employer FICA contributions, but they are essentially paid by the employee in terms of salary potential.

Property taxes and municipality costs are hidden in mortgage payments and rent.

With the exception of more education, I think the only true way to get people to understand where their taxes are going would be to not auto-deduct it from their pay checks or as employer paid or bundle them in with other payments (like mortgages), but instead send them several distinct bills to be paid in-person to some representative of the beneficiary.

For example, I think defense spending would be less popular if each worker had to write a check for a few thousand dollars every six months and go deliver it in person to the local army base.

Same thing for Social Security and Medicare if young people were required to deliver a check to individual retired persons (who, would, statistically be in far better financial shape than the millennial).

Obviously, this is too absurd to be implemented.

Absurd sure, but it jibes well with the related sentiment of paying everything in cash for a short interval of time to physically feel the "pinch" of paying for things that come too casually using a credit card.

It's a pretty crazy notion that our employers are the unpaid tax collectors of the government. This is precisely why the government fought all the movement toward 1099 contract work since then there were effectively more employers to juggle and more likely to not be able to collect as effortlessly as with few large employers.

And the lawmakers in the US know a dirty secret: if taxpayers had to actually write a check for their entire tax bill on April 15 each year there would be blood in the streets.

Instead - the withholding system not only keeps the riots at bay but also makes “tax day” a happy day as money rains from the sky onto almost every US household [1]. Horray, it’s TAX DAY! Honey, we’re going to dinner and takin’ the kids to Walmart to pick out a prize!

1. https://www.irs.gov/newsroom/tax-refunds-reach-almost-125-bi...

That's a common thing I have to repeatedly explain to people, that a large tax return is essentially a free short term loan to the government. I had a friend post a photo of $9k in cash with some comment in the direction of friendly prideful boasting of some sort. I replied to him informing about what happened and that he needs to update his withholding so he doesn't have a large return and emailed him some articles about the drawbacks of large returns. It's a pretty crazy world. I've also had a friend who donated a ton of his money through the year and itemized deductions and had returns in the tens of thousands of dollars. His HR department was using the family size withholding table which maxes out at like 6 dependents or something. I imagine they did so for simplicity and probably didn't have many individuals for which that table was suboptimal. I pointed out that there's a formula withholding section to the W4 that he needs to look into so he doesn't have these ridiculous sums of money come tax season.

why so Employers benefit from state provided infrastructure and from the education of workers.

Or are you suggestion that Amazon pays a tax for every truck mile they use or pay for the cost of their employees education. and from my experience a self employment true 1099 contractors are ripped off by employers.

the point is about the interest the government takes in the ratio of the number of tax collectors to the number of tax payers and keeping that number low; it's not about the merits or abuses of the 1099 status.

You think that if FICA went away employers would give it to the employees is so I have some shares in London Bridge to sell you

It would benefit the hard right small state parties - that's one of the reasons the UK civil service has what's called purdah they are not allowed to issue information "which could be seen to be advantageous to any candidates or parties in the forthcoming election"

But in the UK we do get a yearly break down of where our taxes go - just not directly before an election

Logically if releasing at time X would benefit party Y, then it would seem that party "not Y" is benefited by releasing the information at time "not X".

No, logically, there are many more times than "X" and "not X", furthermore most countries have more parties than "Y" and "not Y".

And there are different pieces of information that could be released.

But it's also a false balance, just because two sides have different positions doesn't mean they are equal. Process abuse and dirty tricks are not okay.

> I think this is really great but IMHO college is too late for this. Personal finance should be taught in middle and high schools just like health classes.

That's all well and good, but it won't really help if the students have no real income to practice with. Sure you can warn them of going into debt, but on the other side of the coin "This is what you should do if you theoretically had a salary" is less effective than "So you have a salary. Here's what you can do with it"

This is what allowances are for, teaching them how to make right decisions with their own money early, with all the resulting consequences for bad decisions.

Absolutely this. We were actually taught basic finances, cooking, cleaning etc when I was in elementary school. They called it "hemkunskap" which literally translated to "home knowledge". I used to think it was useless then, except maybe for the cooking classes – I enjoyed those – but I can trace back A LOT of my deeply rooted knowledge for personal finances and other home skills to those classes. For instance, I moved away from home at age 15 to attend high school in a different town, and all of a sudden I had to deal with a bunch of things I never had to care about before, like weekly budgets and what not. Right then it dawned on me just how useful those classes actually were, and they really did help me out a lot.

I wish this had been a staple class throughout my entire stay in school. A lot of the stuff will be repetitive, but that's what it means running a home and a life – a lot of chores that you keep doing over and over, some maybe you'll optimize like hiring a cleaner (after working out it fits your budget!) or investing in technology that just makes things easier.

As you grow older, the classes would obviously need to become more advanced, but I think this would go a long way to make kids much more capable to deal with real world problems, and there's a lot of cross over with other subjects as well. I don't know if schools still do this, but when I went to elementary school we had wood working and/or sewing class. I enjoyed those, but we had those for way longer than we had home skills class, and it seems to me these three could be successfully combined.

We also had dedicated cooking/cleaning and health classes but basic finance was usually bundled in as a chapter or two in health classes. Having a dedicated class for personal finance would be hugely beneficial. Especially for High School seniors.

I don’t think the college prep courses really tell you what impacts student loans have. It’s more listed as an option you have if you need it but they glaze over the lifelong impacts.

agreed that having it repeated (with more advanced topics) would be more useful. learning about this stuff at age 9... doesn't hurt, but as you starting handling money (odd jobs, after school work, etc) a whole new set of issues comes up that most people aren't prepared for.

we had 'home economics' in middle school, but only for one year, IIRC. We learned a bit of cooking, kitchen safety, and some sewing. But, AFAICR, no personal/home finance stuff (but it's been > 30 years - perhaps it was there and I missed the 8 minute lecture?)

Back then Home economics was designed to teach "girls" to be a wife whilst boys did metal/woodworking.

School suggested that as a dyslexic I should do the typing course I didn't as that was for girls - in hindsight learning to type properly might have been a good idea

With the going rate for blue collar skills going to shop class might have been a good idea too.

Not much traditional engineering jobs going in the UK though I did see a ground Worker team leader post advertised locally for more than th developer role :-(

Btw Ground working is the PC term for Navvies

we had both. girls/boys did both home-ec and metal shop. we had wood shop too, and I do believe I took it, but the year before it was closed down because a teacher lost a finger (on a bandsaw, I think).

I agree that basic financial ideas should be taught in high school, but people aren't always ready for a deep dive until they've started to be more independent.

Personal finance is largely arithmetic, common sense and human enterprise related stuff.

Most adults despite seeing their parents struggle through their retirements, cannot get themselves to make right decisions.

Courses and subjects only help those who wish to help themselves.

Seems to me personal finance should be something you start learning from a young age by watching and learning from your parents and other people you interact with. If schools need to teach this because of failing parents, starting in elementary school would not be too early.

This is a class full of engineers from Stanford, many of whom are going to be making $100k+ straight out of college. Yet 92% aren't going to be responsible for any student loans.

Wealthy parents? Incredible student aid from Stanford's endowment? Both? Either way, I have a feeling this is one of the biggest advantages they will have in achieving a secure financial future.

i got to a midwest state university and our average for CS majors is $95k, for Stanford I would estimate $125k is the average.

Might depend on whether you mean mean or median, whether you're talking about base salary or total compensation, and a couple other factors.

I would be surprised if the difference in the average for a midwest state university versus Stanford varied significantly after controlling for labour market (i.e. people taking jobs in St Louis or Minneapolis are probably getting paid a lot less than people taking jobs in the Bay Area or Seattle).

Of course, UIUC is a "midwest state university" and it is on (or very close to) the same level as Stanford.

Behavior determines successful outcomes far more than circumstances.

Saving $5.5k in an IRA every year for 40 years earning 7% ARR is a retirement nest egg of $1.1M dollars.

Median family income is $60k, making this 9% of the budget. Even if you earned say... $25k/yr ($12 per hour) for your entire life, you can afford to save $5.5k per year.

There is zero excuse for most people not emerging a millionaire at retirement.

Just to put things into perspective:

According to [1], 25k/year is about 21k take home wages per year, or ~$1755 per month. $5.5k/year is ~$460/month, so you budget is essentially $1300/month for everything: living expenses, food, transportation, everything else. In other words, you’re living on what is pretty close to minimum wage.

I’ll leave it up to you to make your own decisions about that, but I question the practical utility of having a million dollar retirement fund when you’ve spent your life living a minimum wage lifestyle, even if you have the fortitude to save that much at those wages.

[1] https://www.taxformcalculator.com/tax/25000.html

It's extremely rare to make only $25k/year for your entire life. Most people improve their earnings over time. Most people get married at some point.

The important point is that even under the most pessimistic assumptions people can get by AND build a secure retirement.

The "it can't be done" mentality is not justified in 2017 America.

I feel like you haven't lived on $25k/yr, at least not without the help of student loans or family.

You take FICA out, some federal/state taxes, you've got less than $2k a month. That doesn't stretch too far in some places.

Also, since you're lower working class, you're not going to be buying in bulk. You're not going to be avoiding late fees. You're not going to have economies of scale available to you on a $100k annual income.

So, the ability to save $5.5k is much different for someone earning $25k vs $100k. I'm not saying it's outright impossible, but it will have measurable impact on lifestyle for the lower income worker, whereas not so much for the higher income worker, since each marginal dollar you earn provides less and less utility. But the first $25k you earn really is your lifeline to meet basic necessities in life.

I did it for years. I was single, had a mortgage. Ate out. Went on reasonable vacations. It's doable.

I live on 18k/year in a HCOL area. Don't tell me it can't be done.

So you earn 18k, save 5.5k, and live off 12.5k? Do you have any assets, such as paid off home, that would significantly reduce your monthly expenses? Context would be key here.

I mean my living expenses, including rent, utilities, food, transportation, health care, etc, add up to $1.5k per month (or ~18k per year).

As in, I could make $25k (at a level where the tax rate is effectively near-0) and still save > $5k per year.

Is this employer-provided health care? Sounds like you're receiving is subsidized. Living on $18k a year would be rough. Are you splitting an apartment? How much would you be paying if you had kids and needed another bedroom? Again, context is key. For a single person in their 20s, who will have the lowest level of responsibility and statistically the best health situation of their life, it's possible. But for other people, $1.5k/mo in a HCOL would not cut it.

So you don't actually live on 18k per year, and you're certainly not saving 5k/pa on 18k?

It'd be cool to see a deeper breakdown of your expenses, if you wouldn't mind?

>Behavior determines successful outcomes far more than circumstances.

Well it sure does for the kind of people who go to Stanford and emerge with no debt. For everyone else circumstance is a heavy weight.

>Even if you earned say... $25k/yr ($12 per hour) for your entire life, you can afford to save $5.5k per year.

...How many people over the age of 30 do you actually know making $12/hr? If you have kids on that kind of wage there is absolutely no room for any saving.

Most people make more than $12 an hour, which is great news! Not having kids outside of marriage is something everyone can do as well.

I don't see the relevance of this reply to my comment.

I finished grad school in 2000 and started saving then. We haven't had 7% returns for 2000-2017, even with the recent increase in the market.

40 years is a long time, and I'm talking about a notably bad start and end date (though remember how it looked between 2000-2010, almost a lost decade from the perspective of investment growth for retirement planning).

But while I still support saving and investing, a lot of people are reasonably starting to wonder, at what point should we stop assuming these kinds of returns in our planning?

40 years from now $1.1 million won't feel that much actually.

Bingo. Hopefully, this course talked about inflation adjusted ARR, that a nest egg must keep up with inflation, etc. I'm assuming it would, but it goes to show there are a lot of details that are easy to skip over.

> $25k/yr ($12 per hour) for your entire life, you can afford to save $5.5k per year.

Man, I'd love to live in a world where that would be possible.

It's extremely rare to live on 25k for your entire life. That's a pessimistic assumption.

My point is that even if you do make that for your entire life, you can still get by and build a secure retirement.

> It's extremely rare to live on 25k for your entire life.

Not where I'm from or from what I've seen.

And my point is that you can't save that amount of money on that sort of salary.

I do. See above comments. I spend $18k per year in a HCOL area. Plenty of room to save $5k in there and still have buffer for expenses that come up.

You could probably fire up a YouTube channel of your experience and strategies and tradeoffs and garner a reasonable following maybe possibly growing to a sizable subscribership and possibly making some side cash. I'd watch some videos detailing these sorts of things.

Let me make this as simple as possible.

The most important thing in personal finance is the delta between how much you net, and, how much you spend. Period. Increase the former, or decrease the latter. Preferably both. You will 'earn' far more in savings by the money YOU contributed than the amount paid to you in interest; unless you have much money over a long enough period of time, and you likely won't.

Another habit that rich people have over "poor" people is that they invest in assets and not liabilities, and their ability to categorise investments into these two buckets. An asset as in something that contributes to your net value vs a liability that deducts from your net value.

I've been using YNAB to solve my personal finance problems and it's been the best solution to my problem. Doing zero-based budgeting (you only budget money you have) is a superior approach to the traditional budgeting where you set it once. The only three things I need in YNAB to make sure my personal finance in check is:

- Giving every dollar a job

- Making sure my net value increases each month

- Making sure the money I spend is as "old" as possible

Tracking my assets and seeing what part of my mortgage goes out the window (the interest) and how some of my funds move from my bank account to my apartment each month changed how I understand the flow of money.

I know this might sound like a commercial, but I've come from a situation of having a hard time handling my money to being fairly financially literate in my personal life.

Edit: formatting


A liability is a source, an asset is a sink. You take debt to buy a house: the debt is a liability, the house is an asset.

What's neither an asset nor a liability is your (net) income (i.e. wages, returns on capital, etc. minus spending). So:

assets = liabilities + net income.

From this equation you could erroneously deduce that

net income = assets - liabilities

but I hope I don't have to explain why this is a stupid conclusion.

> assets = liabilities + net income

That's a non-equation, of course. Assets and liabilities are in dollars and net income is in dollars-per-unit-time.

Naturally, any conclusion arising from algebraic rearrangement of that non-equation will also be non-sensical.

This is a fair comment. I was looking at (delta assets), (delta liabilities).


The simplest thing is to consider a simplified accounting equation that says assets = liabilities. If I wanted to buy a house but had no personal worth, how would I afford it? Debt. The house would be the asset, the liability would be the debt.)

A liability is something you pay to keep, while an asset is something you get paid to keep. Simple and obvious examples are stocks that pay dividends and a loan that accumulates interest. How to identify into which bucket a house, a car or a company investment fall is the hard part, that was the point I was trying to make. Rich people understand this and leverage it.

The original quote is:

The rich buy assets. The poor only have expenses. The middle class buys liabilities they think are assets.

Robert Kiyosaki, Rich Dad, Poor Dad

What assets and liabilities are:


It's best to read Kiyosaki replacing assets/liabilities for "candy bars/frog legs". See if it still makes sense.

> From this equation you could erroneously deduce that...

Please elaborate. My basic arithmetic is apparently erroneous.

Similar to the sibling comment, I would also appreciate explanation.

Also, (for others who also missed it) I didn't understand the terms source and sink. this is what google gave me: "Sinking and Sourcing are terms used to define the control of direct current flow in a load. A sinking digital I/O (input/output) provides a grounded connection to the load, whereas a sourcing digital I/O provides a voltage source to the load."

Accounting (in the corporate sense; I kind of tripped trying to translate to a personal finance context) is based on one equilibrium principle:

assets = liabilities + equity

This is true by definition. So any increase in assets has to be backed either by an increase in liabilities or an increase in equity. I tried to compare this increase in equity to income (the change in "what you're worth") but muddled the issue a bit.

I happen to agree with Kiyosaki's position that a house is a bad investment ceteris paribus (millions of details apply, specially the country/city you live in, but also your own life cycle, etc.).

But it's not because it belongs to the liabilities bucket. It's because to acquire a house (an asset), you have to take on debt (a liability). Or pay down from your personal equity/personal worth, if you're rich dad and happen to be sitting in that much money.

To simplify: if equity was not to enter the equation, the sum total of your assets would be equivalent to the sum total of your liabilities. How else would you acquire things if not from debt?

Person A saves $1000 from each paycheck. She invests it in index funds, and nets ~8% returns over a 30 year period.

Person B saves $2000 from each paycheck. She behaves like the average investor, and nets ~2.5% returns over a 30 year period.

Who do you think is going to wind up with more money? Person-A by a long shot.

The amount of money you save every month is undoubtedly important, but it's only half the story, and it's somewhat common knowledge. The way you invest your money is the other half of the story, and this is where most people seem to trip up. Personally, my parents saved a ton of money because it's common sense that it will lead to future prosperity. However, their investment strategy and track records are abysmal. They buy near the peak, sell during the recession, and sit out of the markets entirely during the recovery. They could have easily ended up with a retirement portfolio that's 2-4x larger than what they ended up with. I've tried telling them numerous times to approach investing differently, but they still refuse to listen. If there's anything people need to be educated on, it's on investment strategy.




You left out the part where the market 'corrects' every 7-10 years and you lost 10-30% of your portfolio. It'll likely take you several years to recoup your lost investment at 8%.

You had a 100K invested, you lost 30K of it, leaving you 70K. At 8% interest it'll take you 5 years to just get back to where you were. Thats a full 20% of your investment life span. Count on this happening to you at least every 10 years.

Ya ya, I know. But it's happened to me personally at least 3 times in my adult life. Just how much risk is a person is willing to take is a personal question. If your shooting for an 8% avg return. You're a stuntman in real life.

The usual 7% long term figure for the S&P500 includes crashes and inflation in that number. You don't crash at 30% and then grow back at 7%. You grow at 7% on average at all times.

The only difference is volatility. If you need to cash out after the 30% crash, you lost a lot of money. Most long term portfolios reposition themselves towards less profitable but less volatile assets towards the end of their expected lifetime.

For an example you can look at the Vanguard "target retirement $DATE" indexes.

8% CAGR is a fairly conservative CAGR for a broad-based stock investments (with dividends reinvested). It is not the typical growth in an "up year". It is the cumulative annual growth rate of up and down years. Said more clearly, you don't make up the down 10-30% at 8% per year; you make them up at up 10-20% per year during bull markets.

If you're shooting for a 8% CAGR over a 7+ year period, no need to play stuntman, just buy a low-fee broad-based stock fund (VTSAX, VFIAX, etc) and resist the urge to panic and pull the money out during down markets.

The 8-10% returns are the long term average, after all crashes are accounted for. You don't have to be a stuntman to attain those numbers. Literally all you have to do is put your money into an index fund and sit on it for 20+ years

>If your shooting for an 8% avg return. You're a stuntman in real life.

Over a period of 30 years, a 7% inflation adjusted gain is "easy" (as in "do no work"). Without adjusting for inflation, I'm sure that exceeds 8%.


Yeah, my parents got in trouble with this cause they had to sell their investments at a loss to live on. This is why I plan on keeping a significant amount of cash on hand (don't want to ever have to sell at a loss).

Index funds overall returns are closer to 6 or 7%.

The small difference does make a big difference long term.

And yet it's not at all simple.

If you want to avoid sugar and corn syrup, you'll be paying 3x as much on food. You have to remember to cancel all of those superfluous monthly charges. If you get parking tickets, you're set back. If you don't check your physical mail for too long, you'll discover you accidentally ran a toll road and now they're billing you $150. Whenever you get a phone or internet plan, they never tell you what the final bill is, so you have to remember to add +50% to whatever price they're saying. If you live with someone, you have to get them interested in managing finances too, or else you'll discover you're hemorrhaging money. The list goes on and on.

If you live in the US, it costs ~$400/mo to have health insurance under the ACA. If you can't afford that and go to the ER for any reason, your credit is screwed.

Sorry, what's your point? People do have many unpredictable expenses. But managing the ones you can (like food costs, and bills, and housing costs) does a lot to reduce your monthly spending, which is half of the equation.

Just that it's easy to fall into a spiral. Also, if you can't move and don't eat out, your food and housing costs are mostly immutable.

There is no doubt that managing expenses is very difficult on a minimum-wage or close to it job in most cities in the U.S. But when you start getting closer to the median income in the U.S. (and engineer salaries), expense management and lifestyle inflation become very important IMO.

Increasing earnings gives you more money today.

Decreasing spending gives you more money today, and more money every time that you act on that same habit. Cutting your rent doesn't just put cash into your wallet now, it also decreases the amount you need to save to live (or retire) at your current lifestyle.

You are listing problems that are easily avoided by doing normal life activities (i.e. responsible, adult things).

- Don't park illegally (or if you prefer: "stop breaking the law")

- Check your mail regularly

- Track monthly expenses (so you can change things if needed)

- Check the price of something before you buy it.

- Don't entangle yourself with financially irresponsible people (this is good life advice, but difficult to always get right)

- Good point on insurance: medical coverage in the US is broken. However, you should still make sure you are covered.

Your comment can be summed up as "Just have money." If you can't afford health insurance, you can't make sure you're covered. The only option is to not have it and to go to the ER whenever there are problems.

Cities find ways of ticketing you. They make $20M/yr from parking violations. If that revenue drops, they'll change the rules until it goes up again. https://www.youtube.com/watch?v=0UjpmT5noto

For example, there are tow traps that don't look anything like tow zones. I've seen at least five cars fall into it, myself included. The city won't change it, and you can't fight it.

Another example: Street cleaning. It's a euphemism for "Move your car or we'll ticket you." No one shows up to clean the streets, ever, but they're there at 8AM to write you a ticket. When you're forced to park on the street, you can't get away from this. And the notifications for street cleaning often appear between midnight at 8AM, meaning you can end up late to work or with a $150 ticket if you don't pay rapt attention every day.

John Oliver (comedian/entertainer) is your "source of truth"?

* What is this world coming to? *

> Your comment can be summed up as "Just have money."

Not at all! None of the 6 points I made are solved by "Just have money". They are solved by making responsible choices. Just be responsible.

I certainly recognize that government policy can be ridiculous and is certainly abused, but what really got the people in John Olivers video in trouble was not taking care of their responsibilities in the first place. Yes, there are people out there who prey on irresponsible people. Don't be one of those people. Be responsible.

>When you're forced to park on the street, you can't get away from this. And the notifications for street cleaning often appear between midnight at 8AM, meaning you can end up late to work or with a $150 ticket if you don't pay rapt attention every day.

I will have to admit that this is not a problem I have to deal with, and am completely unfamiliar with the concept. I imagine it has to do with poor urban planning. I can certainly imagine a situation where you could end up in this situation through no fault of your own. However, the phrase, "Fool me once, shame on you. Fool me twice, shame on me" would seem to apply.

Unfortunately, they do it on purpose to ticket you. The planning consists of "How can we extract the maximum number of tickets out of people?"

Between midnight and 8AM, they put up a sign saying there will be street cleaning today. Every day, when you wake up for work, you must check your car. If there's no open spot on the same street, it can sometimes take up to an hour to locate a valid spot elsewhere in the city. (Most streets require a city sticker zoned to your location, meaning you can't just park anywhere.)

After a few years of this treatment, you'll stop feeling like it's possible to just obey the law. They're out to extract money from you, and the proof is that no one shows up to sweep the streets. Only to write you tickets.

What city does this happen in? Every place I lived either had a set schedule for street cleaning with clearly posted permanent signs or, for low density irregular cleaning towns, did not ticket the few cars left on the street during the day. What you are describing seems to call for 2nd amendment style reconstitution of the local government by the populous.

I think it's interesting that you replied to this comment, but not my other comment (the one referencing John Oliver).

I'm sure the situation you are describing is difficult to deal with.

Pretty much. I think people really want a silver bullet. Spend as little money as you're comfortable with. Invest the rest in an index fund. Wait. That's pretty much it.

EDIT: I also should add that the "spend as little money" part does not mean you should necessarily become homeless, or that you shouldn't experiment with things that might help you that cost money.

Fantastic set of topics! As an engineering undergrad at UC Davis, I took a course in engineering law which was incredibly helpful. It's great to see a course in personal finance for engineers. As an entrepreneur building financial services for STEM professionals, I see a distinct opportunity to educate this demographic. While financial education for all demographics is desperately lacking in the US, the STEM crowd has the mathematical training to be presented with a more rigorous treatment of the topics. Moreover, STEM professionals quite often have compensation packages that include complex financial arrangements (e.g. deferred comp.) and/or derivatives (e.g. options) that are difficult to value and/or manage.

Is there any significant benefit of thinking tens of long-term/short-term goals and planning, and managing different funds for them (emergency, travel, house, card, kid's college education..). Why not just have a 1-2 funds to dump your savings in and be smart about withdrawing from it? One could consist of conservative investment vehicles, other could have more aggressive ones.

Because when you've got one big savings account it is a lot easier to look at it and say "Oh! I can afford a new car now!" and cash out your entire savings on one thing without taking the other things into account.

Having different accounts for different goals keeps a clean separation of concerns. When your car account has enough to buy a car then you can buy it and know you aren't taking away from what you have planned for your kid's college education. If you decide to take money from one account to pay for something else you have to actually think about what you are doing and are more aware of the trade offs.

I've found de-coupling to be the key to altering this sort of behaviour. The balance of my savings and investment accounts are separate from my budgeting. I allocate funds at the budget level, the balance of my various accounts being a secondary concern.


It makes your funds easier to keep track of (what did you spend your money on?) and it makes overspending very difficult (without noticing).

I keep different buckets of money in different accounts with auto deposit.

Subdivision like that usually happens when you go from a less complex organic system to something more engineered. Compare this to just running programs, to having 27 different VMs running on a baremetal hypervisor. That serves to subdivide complexity to make it more manageable.

Question for hackernews: where did everyone else learn about this stuff?

Going through the material, I found I already knew 50-75% of it, but from bits and pieces of information I learned over the years, not one consolidated place. Is it the same for others?

Go into it with a grain of salt, but https://reddit.com/r/personalfinance is a good resource. The sidebar and recurring themes in posts are really useful. Additionally https://bogleheads.org/wiki/Main_Page is a good starting place for putting together an investment portfolio.

The Millionaire Next Door is a good read on lifestyle choices and changing perspective on what it means to be wealthy.

Random Walk on Wall Street is a great book on investing (spoiler alert: index funds).

I actually really found value in Tony Robins’ book on finance, even though it’s couched in a bit of an infomercial style. (And he advertises for some of his own companies, albeit transparently.)

You Need a Budget (the app / company) also made me think differently about budgeting. But, I still use the old version of their app and have no idea how well the new web-based version works in comparison.

None of this was covered directly at any level of school (well regarded public school system in Northern VA).

I'd guess 50% or more I learned from my parents, 25%-ish from other school work ("advanced" math in secondary school, economics major at university), and 25%-ish from experience (huh, how did I run up this credit card? I shouldn't do that again!).

I had the impression that as an honors student, enrolled in primarily advanced classes from middle school onward, and then attending a top-20 university, it was just assumed I would know this stuff, or figure it out before getting into financial trouble. That was mostly true, though it's hard to comprehend how hard it can be to manage credit until you have a large credit line and a stable income.

I think that university still expects its incoming students to pick up stuff from their parents - you can see this on sites like stack overflow where graduates who are the first in their family to goto Uni - they don't seem to know stuff that say mat parents taught me

I read a bunch of books on personal finance (of mixed quality) in high school and college, and I also took actual finance classes in college, which help with concepts like compound interest, present / future value, etc.

Do you have any particular books to recommend? I've read Money by Tony Robbins. Good book, even though the guy himself is a little too much for me

The intelligent investor by benjamin graham - Warren buffets mentor

Ramit Sethi's I Will Teach You to be Rich.

The Bogleheads Guide to Investing

"A Random Walk Down Wall Street" covers a lot of that material and convinced me to start saving and investing in the stock market (through ETFs mostly).

This book

If You Can: How Millennials Can Get Rich Slowly - William J. Bernstein

And all of the sources referenced in it. The Intelligent Investor by Benjamin Graham is also a good one.

Newspaper finance sections originally (the daily telegraph is the bests in the UK) latterly the intelligent investor and mags like the Investors chronical

I remember spending a lot of time reading Investopedia the summer after my sophomore year of college.

Ramit Sethi's I Will Teach You to be Rich.

Here's an interesting idea, a game environment for testing/building one's personal finance skills:


Perhaps one where you do bootstraping ?


And you get to see the effects of random life events. You get cancer, you are laid off, you sell your startup, etc.

Yes. And it would be nice if we could train a reinforcement learning algorithm on top of it :)

I liked the idea. Does anybody here know about an implementation? I'd like to show it to my sons.

BTW, any idea to teach financial info to 11 years old children?

I am neither a professional financial analyst nor a writer, but I wanted to share what I've learned about financial management over the last 25 years with my 18 and 20 year old kids, so I wrote a series of posts called Hacker Finances. I take a lot of liberties with the Hacker notion, but all of the advice is painfully learned and hopefully the kids will read it and profit, or at least avoid major mistakes, when they are ready.


This is really cool, albeit a bit high-level and leaves you with the question: ok, what does this actually mean for me?

I hate these startup plugs on random threads (genuinely), but here it actually might be helpful for people. At Finimize, we're basically taking all the stuff that Adam is talking about and we're putting it into an algorithm that will tell you what you should be doing – from savings to investments to debt.

Like I said, not trying to pitch anything here, but feel free to check it out www.finimize.com/mylife – or ping me an email to hello[at]finimize.com if you want to get a demo (we're still in closed beta).


Can you really boil down all financial decisions to an algorithm?

For example, should I pay off a low-interest mortgage earlier with higher monthly payments, or should I invest each marginal dollar in a low-cost index fund?

There's certainly a psychological benefit (for some people) to have the mortgage paid off; it's one less bill to keep track of, but of course, over a long period of time such as a 30 year mortgage, it's quite possible that it'd appreciate more than your home (plus mortgage interest) will.

Or another question I see asked a lot: Should I take a year off work in my 20s to travel abroad, not knowing how hirable I may be in twelve months, or how the state of the economy might be for hiring early career individuals?

It seems half science and half art to me. You can graph and show what decision X vs Y will look like for your finances, showing which will leave you with more dollars in old age, but I do not think that is the difficult question for younger savers today. They wonder, is this marginal dollar I have more valuable spent on an experience today, or should it be invested for tomorrow? It's the opportunity cost of saving.

One of your most valuable assets is time, and enjoying the present sufficiently (but not gratuitously) is important for a balanced life. Saving too much or too little will lead to serious imbalances either earlier or later in life. Maybe an algorithm can hint you are savings are too low, or too high, but it can't tell you exactly what to do.

> There's certainly a psychological benefit (for some people) to have the mortgage paid off; it's one less bill to keep track of, but of course, over a long period of time such as a 30 year mortgage, it's quite possible that it'd appreciate more than your home (plus mortgage interest) will.

This is such a great point. I’ve been switching off between student loan payments, investing in index funds, and investing in individual stocks I’m interested in.

Objectively, an algorithm would tell me to invest in index funds only because they are considered to have the best risk vs return ratio - my student loans have a low interest rate (3-4%) and individual stocks are hugely variable for an uninformed investor. You could imagine adding a couple more things into this mix such as gold, crytocoins, and property as well.

I have started to rationalize this behavior as implicitly “buying the ability to choose”. Choosing where and how to allocate my money is surprisingly empowering and there is a hidden value associated with that which may be worth more than the difference between the marginal gains. Does anyone else see themselves rationalizig similar behavior that may be economically irrational through this route? I wonder how this could be exploited in some sense by a financial device that gives that same sense, but instead captures some of the value left on the table normally.

> have the mortgage paid off; it's one less bill to keep track of

Most people will get an increase in billing complexity when paying off their mortgage. I have paid off one and now have to pay insurance and real estate taxes separately (rather than them previously being escrowed amounts from the PITI payment). My tax bill cannot be easily auto-paid either, so I now have to pay more attention (insurance can be auto-paid).

well know you pay off your debt with the highest coupon first if you have a low interest mortgage it can make sense not to pay that off as inflation will hopefully reduce the cost for you

Finimize subscriber here, love it, keep up the good work :)

PS, would love beta access, email sent.

Just wanted to give you a quick shout out here. Between you guys and Morning Brew, I get my fill of daily succinct financial news/info.

This is really an excellent intro to personal finance. I came to it expecting to see the standard "save 10% of your salary" rule that's so pervasive. But this is really thorough. I wish my school had a course like this. Great work!

the key with money/investing is you want to stay alive long enough to get lucky.

if you sock away money every month, make sure you have 6 months of living expenses off to the side for emergencies, bet ~20% on crazy things with unlimited upside and the remaining 80% in a very traditional way, you stand a good chance over the very long term.

just make sure that when things get rocky you are one of the strong hands and only sell when you want to.

as for the dollar values etc ... totally tied to city-specific cost of living ... totally impossible to compare between individuals (e.g., family vs. single, country-specific tax codes, medium and long term financial goals).

I've been interested in a household finance visualiser recently, but also don't want to upload my bank statements to some random website.

This uses IndexedDB, and is pre-alpha and very buggy and feature-less still:


Just putting it out there if anyone's interested in Clojurescript/Hoplon and personal finance.

Is there a pdf version of the slides? slideshare blocked here.

Is there an audio lecture that goes along with this? I'm not seeing anything but the slides.

"Session 7: Good Investing is Boring" -- excellent title!

Can't they use something better than SlideShare? I can't even display it fullscreen on mobile. Even a stupid old PDF would be far better than promoting this commercial crap.

This is great but I think a personal finance course should be mandatory for all high school students. It is much more important than the the other curriculum.

No lecture videos on the link. Just the slides for now.

That's too bad. So other item courseware have videos?

Question for HN: do you recommend any book for personal finance?

For basics and a kick in the ass - Dave Ramsey's Total Money Makeover. (Or listen to the Radio show for a bit)

Also, the Mister Money Mustache blog for a anti-consumerist viewpoint.

Beyond the basics, I haven't read much, but enjoy the Radical Personal Finance podcast. It is a mix of really in depth content, like a multi-part series on disability insurance, and the more "radical" bits, like strategies for living out of your car.

Unshakable by Tony Robbins. Good background and some nuts and bolts about investing and how to set yourself up for success.

The Millionaire Next Door by Thomas Stanley and William Danko. Wealth generation by means of frugality. Thorough presentation of studies and research on America's millionaires what they look like and how they got to where they are now.

I will teach you to be rich by Ramit Sethi. Best starting point ever.

Looks like a fun bird course :)

Why is there nothing for lecture 9: Real Estate? That was the one I wanted to read.

Because real estate is an illusion when you live in the Bay area?

Not happened yet?

>The next seminar will be on Tuesday, November 28th at 4:30pm in Building 200, Room 034.

i don't read so well apparently

Maybe because it wasn't recorded yet? Check again in few days.

"The next seminar will be on Tuesday, November 28th at 4:30pm in Building 200, Room 034."

Step 1: Buy Bitcoins in 2010.

Step 2: Try not to cry because you failed at Step 1.


I've found the easiest way to battle FOMO is not to compare yourself between then and now but more like what you would do if you DID purchase the coins in 2010.

More than likely, you would sell in 2010.2. There would be about 100 price points where your body would say CASH OUT. Markets are all about taking money from the inpatient and giving it to the patient.

I still remember reading about this weird thing called bitcoin on this website around then, I had most of it setup to start mining but got distracted and forgot about it. That is until it hit $100 and I figured 'well it wont get much higher so there's no point now'

Did "CMD + F" to search for "Bitcoin" and "crypto"... Your government is likely to fail, trust in numbers.

Applications are open for YC Summer 2018

Guidelines | FAQ | Support | API | Security | Lists | Bookmarklet | Legal | Apply to YC | Contact