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Ask HN: What are your rules-of-thumb for personal finance and saving?
67 points by elamje 78 days ago | hide | past | web | favorite | 57 comments
I am curious what kind of algorithms and rules you all follow to stay on top of your finances.

I basically automate all the things. All of my bills are automated and audited quarterly. My income is automatically put into my checking, savings, and investments on each paycheck. I allocate a reasonable monthly stipend into my checking and the rest go into savings/investments. Each quarter I take surplus funds from the checking and move to savings/invest.

I pay off my credit cards in full each month, carrying no debt. (I was lucky enough to get a full ride to college, so no student loans.)

My finance automation strategy is largely based on Ramit Sethi's book "I Will Teach You To Be Rich", which I highly recommend.

Spending-wise, I do the Marie Kondo "Does this bring me joy?" about things that I'm going to spend money on. I will almost always spend money on food and experiences, but I am much more strict about stuff. I will happily spend $75 to go to a concert but will walk around Target with a $5 DVD in my hand for 45 minutes before putting it back on the shelf.

With the above strategies, I haven't run out of money in my checking in a long time. I am extremely fortunate to not have to think too much about money, but I credit at least some of that to automating away the necessities which limits the risk of spending money I don't have.

I follow roughly the same strategy. I put money away towards savings and upcoming quarterly/(semi) annual bills, some goes into a No Questions Asked account that I spend on whatever whenever, so that whatever is left in my checking account is the money I have to live on until the next paycheck (food, etc.).

I'm never in a position where I have to mentally keep track of the fact that some $Y out of my balance $X is unavailable to spend.

I’ve been building MyMoneyZen (https://mymoneyzen.com) an online personal budgeting course I’ve built with rails & react that exactly helps people step by step work out how to automate their finances.

I would love to hear feedback from anyone that does sign up and decides to give it a go.

My sister in law started it as a spreadsheet and used to sit with friends/family for 8 hours and help people work out how to automate everything till she finally decided to take the dive and build it into an app.

Probably should list this as a Show HN sometime and give more background.

Can you clarify how you automate and audit your bills? Are you automatically paying your bills each month and check them manually each quarter?

Yeah, pretty much. I get email receipts for everything, so nothing is a surprise, but quarterly I'll go through my automated bills and say "do I really use this?" and cut them out.

As for how to automate, I basically just have AutoPay on every service that allows it

Simple: Never couple your budget to your income.

Fit your life into $10k/year. Or $20k/year. Whatever you can pull off in your comfort zone. Then when you get that big raise, don't change anything. Don't buy the new car you can afford now. Don't buy the big house you can afford. Don't buy anything.

Most people don't do that, and let their expenses rise to meet their income. Lots of people budget to have that happen. It's a recipe for never having any savings.

I do this in self defence. I was on a £65,000 salary and then I was let go. I have autism and find it hard to find work so I was out of work for a good few months. In the end I got fed up with the "we don't think you'll make a good culture fit", "you need to work on your communication skills" comments and took up a job paying much less (£45,000).

Losing everything from my house, car and lifestyle was the most painful thing I've ever had to go through, mostly because I knew I was letting down my partner and I had no control to stop it.

Now I'm too scared to buy anything because I don't want to lose it all again.

I put all of my income into a separate "buffer" account, from which my loan and other regular expenses are automatically paid from.

I've got an automated transfer to my spending account which transfers about 2 weeks worth of money for food and non-essentials etc. If I overspend then my debit card won't work and I'll get a reminder, so that I can think about where that money went. Once "dry" I'll SMS transfer another week worth of money from my buffer account.

I found this allows me to maintain some of the "sense of spending" that I got when using cash, without actually using cash. This avoiding the "oh my, where did all that money go" moments when the loan is due a week before payday, as I know that if I have to transfer for the third time that month I should be frugal for the rest of the month.

I also got some automated transfers to a savings account and into an index fund each month, about two weeks worth of spending money total.

Usually once every three months or so the buffer account has filled up a bit, and I'll put some more into my savings.

Me and my GF also found it helps to make a weekly dinner plan, so we can go shopping once a week, rather than doing it on a day-by-day basis. This saves time and avoids all those random impulse purchases (where a lot of unnecessary money disappears) from doing more frequent grocery shopping.

I should do the buffer account deal. Right now, I just withdraw a set amount of money every week at the grocery, and that's all I get. Usually, only goes to fast food stuff, though, meaning other purchases (which aren't often, tbh) still go through. Yours sounds like a much better way, though, and, if there's leftovers, it can roll over. Could easily split my direct deposit to go into two separate accounts too.


The blogs are fantastic. It's an electronic equivalent of making envelopes and putting cash into them

It's important that you work out roughly how much you're expecting for the month and you budget every dollar that you're expecting. 'Every dollar has a job'.

I budget all my yearly expenses. Place money aside every month for those, think license renewals, car registration, car insurance, rainy day funds. These are almost always direct debits. Car serving. Home maintenance and the like. Now it's important to state here that it's ok to not budget the exact value you're expecting for car serving, house maintenance and the like. But it's important to have cash put aside every month to contribute to those expenses if they're a lot greater than expected if you have a water leak or a break down in your as an example.

I then budget my monthly expenses which are groceries, new clothes, Netflix & Spotify subscriptions. Eating out\going out for drinks. Debt payments too.

I put 10-20% of my money away as savings. Anything left over goes into a seperate savings account for emergencies/rainy days.

I am going to give YNAB a try. I have been using Mint by Intuit for months, but it has always been a little to cluttered to keep me from getting use to it.

How do you tackle shared expenses? I live in a student housing with a roommate and sometimes we buy stuff for the house ... how would I manage this?

You can split expenses with YNAB. So you can either use one ore more categories called 'House expenses' & 'Money Owed' and split the expenses between those as you require (50/50, 70/30 or otherwise).

Personally though I've not seen it recommended by others, I categories the full expense to the category. And then when I get income from my housemate or who ever, I categories that income against the same expense category which leaves me the net and true out of pocket expense that I incurred.

Split it in half if it can be quantised. If not then read game theory on watch some lectures on it. Game theory has a topic where the splitting in such cases is discussed.

Only on HN would Game Theory be quoted as a viable method for splitting expenses with a house mate in a budgeting app. :D

I've been focusing on saving a lot lately. The biggest thing that has helped me is having a checking account with all the money I'm budgeting for the month and using nothing but that. It includes all spending outside rent/bills. It has forced me to really look at what I'm spending money on, and I've been able to slash my spending by 75% this way. I used to just put everything on a credit card and pay it off at the end of the month.

The biggest savers have been around food: eating out less, paying attention at the grocery store, and cooking in bulk.

Saving comes first. Even before spending.

That's practically my advice to everyone. You'd be surprised to see many people live paycheck-to-paycheck even when their salary grow double or triple.

Lifestyle inflation is very real.

"Pay yourself first"

DONOT signup for any online subscription service with your credit card. You will not know when and how much money you are loosing from your credit card, unless you are diligent about checking credit card statements.

Side note: Its funny you cannot get real time updates/SMS when money is deducted from your bank/credit card account.

> You will not know when and how much money you are loosing from your credit card

If you aren't reviewing your credit card bill each month before you pay it, you're doing it wrong. It takes less than 30 seconds a month and you'll avoid exactly this sort of problem ("hmm, I thought I cancelled that last year").

> Side note: Its funny you cannot get real time updates/SMS when money is deducted from your bank/credit card account.

Most major credit card providers have email and sms notifications for transactions. It's pretty much instant.

Google Pay also (at least for some banks). You don't actually have to use Google Pay to pay - all transactions come through including swiped payments and online payments.

I enable all push notifications from bank, so I get emails and app notifications. I got this advise off someone here on HN in the past. It's genius and works, but yeah minimizing online subs is a good idea, or have them charge around the same time each month.

Or the stronger version: don't sign up for recurring subscriptions, period.

The exceptions are things you strictly need or that serve as investments to help you earn more; and even then, choose the least expensive plan you can possibly get away with. (In this day and age, for most of us that means internet; phone; most basic plans for each; and no digital services.)

Subscriptions add up really quickly and will drain your income before you even notice.

Interestingly, my bank in Romania does this. For every single transaction on any card, I get a text message with the amount that was deducted and how much there is left.

Actually, almost any bank in Romania offers this service. For both debit and credit cards. It's very useful.

Some companies, like Chase, do offer real time updates/SMS alerts.

You actually can and this is something I've set personally for all my cards/accounts

For me quite simple:

- spend less than what you earn

- defer purchase, most of the time you’ll change your mind

- start to save early (compound interest!)

- don’t take a loan except absolute necessary. But when yes, pay back early.

- once saved enough, learn to invest in different markets

- consider spending as an investment and always compare with the h0 alternative.

Save 25X your annual spending and you can retire. If you invest to earn 7%/yr (on avg), you can withdraw 4% forever.

Read the book The Simple Path to Wealth, or the basics in this blog post.


It's actually far harder to lower expenses than to increase income for me. I've avoided full time jobs because the transportation and food cost far exceeds any potential benefits. I've been focused on simply working faster, longer hours. Also things have gotten much better when I increased spending about 10% of income on luxury; it linked income to being a good thing.

All of the other posts are great for personal finance and savings. But at some point, if you have some money saved, look for opportunities where you can make no-risk decisions that earn you $XX or $XXX per hour spent implementing them. And value those decisions in terms of an hourly rate.

For instance, let's say you have some cash sitting in a brokerage sweep account paying 1.0% because you weren't paying attention. In <60 minutes over a few calendar days you can find an online savings account with high interest (say 2.2%), set up a transfer back and forth, and get a better rate. On 10K sweep, that's $120/hr gain annually. On $100K, it's $1200/hr annually. Although there, maybe you want to consider a bond at 2.5% and net $1500/hr.

Likewise, put expenses in terms of an annual rate. One less $5 coffee per week is $260/week annually. Then reframe in terms of your overall expenses. Over 10 years, that might get you 30 days closer to an early retirement.

The point is that you probably are overlooking very trivial opportunities to improve your lot. Convert the metrics into savings or earnings over time, and turn that into whatever future goal you have (early retirement, size of yacht, months of rent/mortgage, etc.) and you realize that with a very small amount of effort, you can have a huge compounding effect on your goal.

I don’t follow any rules of thumb. I simply don’t buy anything I don’t absolutely need. I guess I do have a small rule: don’t sweat the small stuff. If I don’t really need it but it makes my life easier somehow then I will buy it without sweating over it. Everything is saved by default. Investments auto topped off. Credit cards auto paid.

The only thing I do is occasionally review my subscriptions to see if there’s anything I can do without. All withdrawals and deposits over 500$ are sent as notifications and I can swipe them away quickly.

Avoiding items that cost more than $2 at the grocery store if the cost per oz is good. Eating and cooking the same kind of cuisine can save you from having to buy special ingredients all the time. I've been eating a lot of mexican food. I found that refried beans, flavored rice, enchelata sauce is pretty good all by its self, low calorie, low cost and easily upgraded with tortillas guacamole sour cream. I've forgon adding cheese and been saving a lot of caloric intake. Mexican without cheese is fine.

This is a really good idea - thanks

I think I need more protein though. I've been losing too much weight that can be accounted for the missing calories.

1. 3 month emergency fund (bills, deductibles)

2. If available, contribute at least employer match to 401k

3. Pay off >8% debt

After this, options are more fluid depending on risk tolerance

4. Contribute max to tax advantaged space (IRA/401k/HSA/Backdoor Roth IRA etc)

5. Bump up emergency to x months

6. Pay down <8% debt

7. Contribute to passive taxable accounts i.e index funds

Other rules-of-thumb

Take care of your body, eat whole food, move quickly for short periods of time and lift weights

Consider disability and term life insurance. Avoid WHOLE life insurance.

Live below your means and aim to save 20% gross income

Life is mostly random, so don't get too attached to your plans. Nothing works out the way you think it will, but it generally does work out somehow.

Unless you're really into the whole old-fashioned white picket fence kind of life, marriage is probably a bad idea.

Max out your 401k. Don't worry too much about an ordinary savings account.

Oops, I got married last May :'-( RIP to elamje. I totally understand your take, and I think we would have been fine doing long term dating.

I don't know what the legal situation is like for you where you live, but in my country it's definitely a benefit to get married if you plan on co-owning property or having kids. You could go to a lawyer and draft contracts and agreements over how things should be divided etc. in the event of divorce or death, or you could get married and literally everything is already covered by existing laws and you don't have to worry about missing a loophole.

Yeah, in my early 20s and the loss of freedom + increase in responsibility that comes with marriage makes it a real head scratcher.

You can always have extramarital kids right?

When you find someone you want more than you want your freedom, then it will make perfect sense.

When you have been through a difficult divorce, then declining to get the law involved in any future romantic affairs will make perfect sense.

- spend < 25% of income on rent.

- cook your own meals.

- don't buy useless shit.

- if you have to buy something, buy good quality.

Inflation is the killer. If you’re saving without buying assets; you’re doing it wrong.

If gov hit it’s target of 2% inflations for the next 30 years, you’d need $1.8 for every dollar today for purchasing parity.

I wrote this tool to better visualize the impact of various expenses and savings on long-term wealth: https://colab.research.google.com/drive/1922LVZ515e-UjCw1CsA...

I plan out the month in advance, instead of buying things in the moment. I might say "I'll get a new pair of shoes sometime this month" then fit it in my budget, instead of randomly choosing to buy shoes when I see them.

I personally enjoy impulse purchases, but plan them out in advance to not be so damaging.

1. Everything I want to buy I write down the best price I can find. For example a mouse at $48 or a game at $15. I will only buy at that price or better, which keeps me from falling for a "sale".

2. I set aside one spending account and debit card for all unnecessary purchases.

By definition, it's not really an impulse purchase if you plan it out

Controlled chaos.

One day I was going home from a long day at work, I had some hard earned money I wanted to spend.

There was a gamer store. I just walked in, saw a mouse I had on my list for about 3 years. I didn't need it but it was under my budget. Swiped the spending account card and it went through.

Also once I had this large budget I didn't know what to use on. Took it all out from the ATM and gave it to my wife in cash. She was so surprised she suspected me of having an affair, lol.

YNAB is fantastic for this.

“Annual income twenty pounds, annual expenditure nineteen six, result happiness. Annual income twenty pounds, annual expenditure twenty pound ought and six, result misery.”

― Charles Dickens, David Copperfield

I have separate accounts for my expenses, income and savings. It's so simple it's stupid but it works for me.

Rents are bad in the long run.

Except when they aren't.

You should really evaluate the current housing market at your city, the mortgage rates, your other investment opportunities, your income, your potential future income, plans for moving/marriage/children.

It's not as simple as buying being always better than renting or the other way around.

You grossly misunderstand. If you are renting, the going rent is often relatable to the mortgage.

You have to set it up as a paid for equity if it's rentable.

Your returns from the market may not offset your living expenses unless you have >$500k invested if you are paying $3000 in rent. So don't give people investment ideas without doing the run rate.

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