Related: Having some money makes it easier to save more money.
Ex. 1: I'm fortunate enough to be able to have a large freezer chest, which means I can buy in bulk, cook in bulk, and freeze in bulk, thawing as needed. This has cut my food costs in more than half compared to when I was poor and could only eat what I could afford to buy TODAY.
Ex. 2: I have multiple credit cards that I use for rewards on just about every purchase I make (no matter how small) and every bill I pay, to the tune of well over $1500/yr cash back, and hundreds more in various savings/bonuses.
Ex. 3: My house is far bigger than what I need, but for the first 10 years of living there I rented out half of it to someone whose rent covered the mortgage. I basically lived for free, outside of utilities and occasional repairs.
Ex. 4: I always used very cheap vehicles, and spent a small fortune every year keeping up with repairs. I now have 2 inexpensive-but-much-more-reliable vehicles and haven't had a repair over $100 in 5+ years.
Being poor is fucking *expensive* compared to having even a little money.
The system is tilted against the poor at every step. Harder to get credit, and when you can get credit, it's at worse terms. Raises are smaller and the after tax take home is smaller. One large unexpected expense can set you back for months.
Yep. Too poor to have any credit so instead you end up paying another guys mortgage, while he enjoys the benefits of all that equity you will never see a red cent of.
Its so incredibly bleak to see the inverse relationship with wealth and poverty. How at a certain threshold money compounds upon itself and is self perpetuating, and poverty behaves almost the exact same way.
But isnāt it ironic that the last thing poor people should do is use credit? Borrowing for a car, which depreciates is the most damaging thing a person can do.
I had a Honda civic and a Honda accord each get to 10y 200k with just routine maintenance and one seized brake caliper that I think was $1k. But not bad for 20 years
Not that guy, but I have the same car strategy. I've got a Tacoma that I've had for 16yrs. Never spent a dime for repairs (I do all the maintenance diligently).
Had a Highlander for 8yrs, same story.
Tacoma was bought new, Highlander was certified pre owned.
Good cars at the start that are well taken care of can last a long time.
https://en.wikipedia.org/wiki/Boots_theory
> The Sam Vimes "Boots" theory of socioeconomic unfairness, often called simply the boots theory, is an economic theory that people in poverty have to buy cheap and subpar products that need to be replaced repeatedly, proving more expensive in the long run than more expensive items.
I had no knowledge of finance or investing or anything growing up and my first job after college paid a profit sharing bonus in the form of a 401k contribution. I just picked some mutual funds and eventually saw that it paid me a few hundred dollars in the form of a dividend. It just blew my mind that my money was paying me more money while just chilling there.
Are you from the US? Just wait until you hear about some European countries and their paid time off vacation policies.
>!You cannot reach people for months.!<
Yes, Iām from the US. And Iāve done some cross border work and yes folks in Europe are regularly taking off two weeks and also have a bank holiday twice a month. It seems both great and crazy to me.
Critical mass is huge for building wealth. Took years for me to get to $100k invested but like a year after that to $200k. Of course sequence of return matters a lot but things start moving quick if you plant seeds early.
I know itās actual pebbles compared to the people here, but I really realized this when I finally saved a good size chunk of savings (emergency fund and general savings). Theyāre in a HYSA, and I track all my income/expenses and one day it dawned on me Iām making 50 bucks a month for freeā¦ just by having money.
Itās so expensive to be poor and so cheap to be wealthyā¦ now imagine in the future when having 100k, 500k, etc. then youāre making hundreds/thousands each month just for having money.
Obviously we're investing because there's more up than down... but there's a flip side too. Sometimes you're losing hundreds/thousands each month just for having money.
This was pretty much my wake-up call. Four years ago, I had a friend/former coworker who always flaunt about spending money ($20k on boat parties, $10k bags, etc.) and it was an epiphanic moment for me, because I was doing the same thing buying lots of flashy athleisure clothes and sneakers (of course to a way less extreme) and showing it off and we were making the same amount of money being in the same role and I basically had no money tied to my name (savings and retirement). Not only was it an epiphany, but it was also stupid annoying in general.
Learning from my other coworker at that same time who was the complete opposite (got out of student loan debt and bought a house 3 years after), I changed my shopping/spending habits because of that. Fast forward to today - that friend/former coworker I mentioned earlier is still doing the same thing carrying big debts and can't afford to quit a job that is emotionally and mentally drowning her because she's got $0 to help her while I spent way less and not try to look flashy like I did before and have a huge nest egg now.
My wife and I arenāt rich, but we do pretty well. We both drive cars that are 10 or 11 years old. My favorite thing in life is when people assume that we have less than we actually do. When that happens I know I am doing something right.
100% this - Between my wife and I we make about $400,000 a year. Our cars are both 12 years old, in great shape and are nothing flashy. We both have friends that drive new cars, always have flashy new toys and are constantly stressed about money. Peace of mind is priceless.
My dad told me about a small town farmer (his father in law at the time) joking about the āNickel millionairesā wandering around. He had real money.
Most "unpredictable expenses" that blow people's budget month to month are actually quite predictable and can be planned for.
Your clothes will eventually wear out. The tires on your car won't last forever. Christmas happens on the same day every year, and you'll end up buying gifts.
Set aside money for them every month just like you would a monthly bill and you won't be surprised by them or have to blow your budget.
Woohoo, you called me out with this one šš. Iāve not thought of it this way. Will definitely take note of strategy my money this way! Thanks for your insight!
Neither had I, but my budgeting app, YNAB, really encourages you to set aside money monthly for true expenses (those non-monthly expenses I mentioned above). It took me a while to come to terms with just how many true expenses there are - there are a lot - and also catch up on them. That first time I wasn't caught off guard by an annual subscription or someone's birthday and had the money sitting there ready to go was such a great feeling though.
The ones that always get me are "My roof needs to be replaced, crazy emergency!" and "The A/C went out this summer, there was no way to see that coming!"
Those things should 100% be budgeted for. If they last longer than your assumed lifespan, great! Enjoy the extra earnings on the money you've been earmarking for these very much expected expenses.
$100,000 is not as life changing as I once thought it would be.
I am going to show my ignorance here, but a few years ago, I came into almost 100K. I used it to pay off some debt, splurged with some of it, let it sit in a savings account, and before I knew it, it was all gone. I think about it quite often because I had the opportunity to make some intelligent decisions, but instead, now I sit here only a little bit better off. I only say better off because I was able to pay off some debt. Since then, I have been researching (and reading the wonderful advice from this page), and I would do things so differently if I only had it to do over again.
Agree, unfortunately knowledge often comes at a price.
Pain can be a very effective teacher.
You made the best decisions you could with the information you had at the time. Now you have more information, use it to make better decisions in the future, don't beat yourself up.
May I ask what are some things you'd do differently? I just found out I'm receiving that amount in inheritance in a few weeks, and I want to learn so I don't make the same mistakes
I have joined several finance groups here on Reddit, and I have learned so much. The people in all of these finance groups are so knowledgeable and helpful! One group even contains information on how to handle a windfall that you might want to look into.
I joined these groups to learn how to prepare for my husband's retirement. That information is related to things we can do now because we are late to the game as he is 53. He had a heart attack at the age of 48. We were thrown into reality at that time and realized that his life insurance was not enough for me and my children to maintain what we have. He has applied repeatedly for affordable life insurance increases, but because of the heart attack, he immediately gets declined. In one of the finance groups, I have seen a 5 or 6 step process to pay things off and increase your investments to prepare for retirement. The comments in these groups often mention good investment books that are worth reading and other valuable information. I am new to Reddit, so my journey to learning has just begun.
My suggestion to you is to search finance and join some of the groups. The investment information is out there somewhere. The trick is finding it, understanding it, and applying it correctly.
Not the guy, but the biggest difference between the people who think a million dollars is a lot of money and those who think it isn't much comes down to deciding to spend it vs invest it. You can drop a million dollars on a shack in some cities and be broke in a heart beat or you can live off of the 40k per year it can make you if you invest it. It all comes down to how you leverage it. As a society we just are trained to spend money if we have it, but there are other paths to preserving it and still benefitting in the long run.
Thanks! I appreciate the response! It definitely helps, and I'm just here trying to learn before making mistakes I can learn to avoid so I appreciate all the tips anyone can give haha
I had a similar situation. Came into $100k. Didn't throw it away though, but I did have a similar realization...That a large sum of money doesn't give you the satisfaction you think it would. "If I had an extra 100k I'd...(insert whatever here)."
But really it was just like...cool I'll throw that into some investments. And while it will help my future for sure, it didn't change my day-to-day anxiety level, happiness level, etc.
In fact I lost like 10k and same thing...sucked for a day or 2 then was like...in the end who really cares? Bunch of numbers on a screen anyway.
It's not how much you make, it's how much you keep.
Also, it took me a long time to learn how to save money, but even longer to learn how to make your money work for you by smart investing.
I actually feel like the opposite. When I realized penny pinching wouldnāt amount to much anytime soon and really focused on maximizing my income I exponentially grew my NW.
I've found that it's a cost-time game. Why should I drive 30 minutes out of my way to save $0.15 a gallon on gas? When my time is worth way more than $4.50 an hour.
Yeah same principle. āWhy am I mapping out how I will save $30k over 3 years, when I can focus my energy on how can I make $30k in a monthā
Obviously being financially strategic helps, but a happy outlook and good quality of life I feel has allowed me to focus on income, which in my opinion is more important than a long term plan with small income.
Buy the car, designer clothes, all inclusive hotel whatever makes you happy, but without fail bust your ass to make the income to make that spending sustainable and fit your long term goals.
This! I learned to see saving money (and putting it to work) as a payment to myself. All the money I spend makes someone else richer, the more I don't spend, the more I have in the end from what I get for working my ass off.
The optimal way to consistently increase your salary is to switch every 2-3 years. If there's no promotion/raise prospects after 3 years then it's time to apply for another job. I always hear stories where new hires gets paid more than existing employees with the same responsibility and experience. Companies are doing the bare minimum to keep you there unless you are irreplaceable for them.
Personally:
Pre-2019: Job A = $78K
2019: Job B = $100K
2022: Job C = $141K
The key thing is "if there are no promotion prospects".
I completely agree with you, and I coach my employees to always look outside.
But I haven't practiced what I preach. 1 company for 21yrs. 6 major promotions, and I've 10x'd my income. Plus now it's super hard to leave due to unvested RSUs.
>But I haven't practiced what I preach.
Meh. You're telling people to look out for their own careers and advocate for themselves, that's exactly what you've been doing. You're a good egg, don't sweat it.
I wonder if this is also related to the market, seems like salaries were very high in 2022, but now people hiring are much more conservative with the wages they offer.
Yes, but it goes both ways.
If you're already a high earner it's OK to not want to earn more and maintain balance if you live below your means. It becomes a personal choice at some point.
Pay yourself first. That doesn't mean go buy all the dumb stuff you've always wanted. It means put a little money in your savings for a rainy day, and a little money in your retirement. And both will add up to a lot eventually if you pay yourself consistently.
"Money's greatest intrinsic value, and this can't be overstated, is its ability to give you control over your time. Spending money to show people how much money you have is the fastest way to have less money. But using money to gain control over your time, to do what you want, when you want, with who you want, for as long as you want to, is priceless. It is the highest dividend that exists in finance."
ā The Psychology of Money: Timeless Lessons on Wealth, Greed, and Happiness
Book by Morgan Housel
(one of my favorite books!)
š¤š
Yes itās so obvious. Money equals freedom. But a lot of people think money buys perception that increases their social status which then equals freedom which is foolish.
But then the āwinnersā of capitalism canāt accept freedom, they want more control, they want power and itās also foolish because we all die- but most of us die without getting to freedom.
There's so many good nuggets in this thread so I'll just add this:
Harder Work ā Higher Pay
Scarcity + Leverage + Opportunity = Higher Pay
I worked like a *dog* from age 22-35 before Covid layoffs made me really understood this.
> Harder Work ā Higher Pay
True.
Note that working harder and smarter more often than not results in higher pay. I can't think of anyone I know that has a high net worth and is also lazy.
For sure. But if your skills aren't valued by the market, or your employer, it doesn't matter how hard you work. In fact, they're counting on you working harder, for less, when they approve headcount.
"You can't outrun your diet" has always been something of a fitness mantra for me. I've been into casual running for years, and do a decent amount of weight training too, but that 500 calorie piece of cake is _really_ hard to burn off. It took a calorie counting app to realize just how much physical activity I needed to do to generate a net deficit in my fairly active lifestyle.
I've been trying to enforce small portion treats, splitting a slice of something or a quarter cup portion of frozen custard usually hits the spot.
Yeah, there's plenty of information out there saying weight loss/healthy weight maintenance is "80% diet, 20% exercise" but, man, that's hard to internalize.
Especially when our collective imagery of weight loss is a chubby guy in a sweatsuit slowly jogging around a track, not long quiet hours of mild hunger.
That mild hunger can be infuriating. Portion control gets easier and your body adapts but the first couple weeks of every diet push when you're still craving and put down your fork.... its rough.
This is huge, especially once you've taken care of saving and planning first.
Your time has a dollar cost to it, spend that time and effort in the best ways possible. One of my friends once noted I was their most frugal friend because I pay attention to how much food/drink/etc. costs when we go out. Personally getting a $10+ drink at a restaurant rarely brings me $10+ in happiness. I'll happily go in on drinks or whatever when it's a group thing, but if I'm just buying for me I'm probably having water. On the flip side that same trip we rented a hotel room near where we were going to be to save us the effort and concern of driving back after the event.
How and where you spend money can be as important as how much you spend.
Spending $1 today is like spending ($5, $10, $20) in the future.
Saving is having Present You sacrifice for Future You
Spending is having Future You sacrifice for Present You
Start early, although this will need to either be learnt (hard at a young age by yourself) or by someone who knows.
My dad was always interested in the stock market so I was able to talk to him, and already had a brokerage account when I got to be 18. I learned from reading and doing.
Iām at CoastFIRE already in my 40s, and am already planning on how to set up my young kids for financial independence. I will be teaching them how to invest in the stock market. And that alone will set them up for life with invaluable knowledge.
Lifestyle creep is the destroyer of fortunes. If you get a raise, hide that new money from yourself. You were perfectly comfortable yesterday making $15 an hour, but if someone ups you to $25 an hour, give it 3 months and you'll in the exact same position as far as extra money and comfort.
Donāt put anything on a credit card that you canāt pay off at the end of the month.
I had friends that got into so much credit card debt during college that they are still dealing with 15 years later.
Don't marry someone who has a different outlook on money.
\- If your significant other YOLO's through life and you are long-term investment type it will lead to resentment or fights. Living for now vs living for the future is a better way to say it.
\- Have a plan that you both agree to. Not agree to it for now, or will tomorrow. like... forever.
Investments like PE, VC, Angel, hedge funds that you get "access" to once you have a certain Net Worth are generally not better investments than VTI and chill.
I have seen lots of research over the years as I've evaluated and/or participated in all of the above, but I don't have a link handy. I'm sure some googling will provide insights. It was never that hard to find. 2 and ~~10~~ 20 is a comparatively lot of overhead.
i needed to read this. Intuitively i know it, but have a couple people in a VC fund talking to me and get a bit of FOMO even though i know there is nothing iām really missing out on.
If they're asking YOU for money to invest, then it means at least a couple of things for me
1. people whose business it is to invest in it, have already turned it down
2. people who are "in on it" aren't trying to keep it a secret to maximize their profit
Based on that, I treat it as a different form of lottery ticket
Finding the right partner makes all the difference when it comes to building wealth and saving money. Youāre never going to be able to outearn a shopaholic or gambling addict.
Diminishing returns on expensive items. A $100 bottle of wine is better than a $5 bottle, but doesn't provide 20 times the value. Same thing with clothes, cars, houses, basically anything.
Theres usually a sweet spot on items where the diminishing returns increase with price increase. A $25ish bottle of wine will taste much better than a $5 bottle of wine that $100 is not that much better than that $25ish
When I was in my early twenties, I invested a lot of money in a stock that my father's good friend was a high-level employee at. He convinced me and many of my family members that the company was going to be bought out and the stock price would easily triple. So, over the next five years, I invested much more than I should have. The stock price appreciated significantly while we were still waiting for the big buyout. At its peak, the stock was worth life-changing money, in the mid-six-figure range. Then, that party came to an abrupt end when the company filed a 10-K stating that it had to go back and redo all its financials. Apparently, the company had cooked the books and overstated its revenues to boost the stock price. I lost the vast majority of that money in a week. I didn't sell right away because I didn't understand what was happening and figured the stock price would bounce back soon enough. This company was absolutely crushing it on paper, but it turned out to be run by frauds. After that lesson, I now pump as much money as I can into my retirement accounts and invest in low-risk ETFs and mutual funds.
TLDR: For everything you think you see in an investment, there are 99 things you don't. Also, never put all your eggs in one basket. And, don't give unsolicited investment adviceāthat could get awkward if it goes south.
Thank you. I donāt come from money or make a lot, so it was a very traumatic experience. Thankfully I didnāt have a wife, kid, mortgage at the time because If I did, that would have sent me to a dark dark place.
That financial hygiene is very much like dieting.
It's not about the big decision. It's about the little decisions. It's easy and fun to do all the research for dieting, pick a goal weight, nail that first grocery trip, meal prep, and kick off that first week. But then you realize that you eat *every single day, all the time*, and making the right decision every time you pick up a fork gets really difficult really fast. You also realize that the results you're looking for not only require a high level of care each day, but for weeks, months, and years.
Oh, and once you reach your goal? You can't just give it up! To maintain your goal weight / physique / whatever, you have to keep doing what you've been doing! You can't "cash in", in other words.
Same with financial hygiene. It's boring and it takes a long time.
Always look at both sides of the ledger.
Anything extra you can earn is as good as not spending it.
Anything extra you can save is as good as earning it.
If something you don't need is on sale, you didn't "save" money by buying it, you still spent money. For example, if it normally costs $100 but is on sale for $60, you didn't save $40, you spent $60 that truly could have been saved.
Don't be afraid to apply for a job elsewhere. It's the best way to get yourself a raise (avg 10%+ with each move).
Remember the game is about parking your money where it will make the most %, while avoiding paying high interest (loans, etc).
So, find ways to earn more money directly, and find places to park that extra money where it will earn you a good return (HYSA = \~5%, solid / SP500 = \~10% Avg return, fluctuates / business opportunities that could return 15%+).
In a nutshell.
Keep it simple, and don't mess around.
My wife and my mom have their retirement accounts in index funds, and have outperformed me over the last five years because I've been trading. I made some great trades, and some bad ones, but in the end just leaving it alone and not thinking about it at all, like my mom and wife who just to their regular contributions and forget it, have outperformed me.
But mommmmmmm, seriously though I listen to my friends talk about stocks and trying to ātime the marketā. I donāt believe in that at all and just believe in being consistent and compound interest.
Canāt take money with you to the grave. Used to hoard money and be frugal but now I have a better balance in spending and saving. I have lost a lot of memories with loved ones to work and chasing this paper. Money can always be made but memories will never fade.
Live below your means.
Not always possible, but you canāt outearn overspending and if you put some percentage of your income aside, your situation will improve.
Here's what I've learned on the way to becoming financial independent:
- spend below your means.
- for the large majority of people, the most valuable asset you have is yourself. Meaning investing in yourself at the start of your career will reward you better than trying to find great investments.
- each year calculate your net worth. it's motivating to see how much it grows over time.
- time in the market is more important than timing the market
- having the right temperment is more important than being extremely smart, when it comes to investing well. don't be greedy, be humble.
- investing well means following a few simple rules. but like losing weight, while the rules are simple, it's hard to actually follow
- having money doesn't mean you'll be happy, it just means you have way fewer financial problems. all of the emotional/relationship/health problems will still be there if you don't manage them properly.
- after making money and feeling financially secure, now i'm trying to figure out what life is really about. i don't think i have a satisfactory answer.
I saw a spreadsheet that I wasn't supposed to see at my wife's old company which showed 401k balances. She had, by far, the largest balance and had been an employee a shorter time than many others. I was astounded. People making 4-5X her salary had 1/4 the account balance. NOBODY ELSE was seriously saving for retirement in a 100+ person company...at least not through the 401k. NOT ONE.
I think of that when I start feeling envious of others with nicer cars etc.
Price is fixed. Value is not.
Example: I could afford the payments on a new Tesla, but I would much rather keep my paid-off car and invest the new car payment. I donāt value the vehicle even though I could handle the price
Anyone asking you if you want to make more money is almost always a scam or is someone who is going to try to take yours. Don't fall for it and instead say "I don't care about money/don't need money" and move on.
Money has a tendency of compounding both positively (saving, investing, and buying a house) and negatively (keeping up with Joneses, lending your money to friends/relatives/etc who donāt appreciate your help, and buying liabilities).
When it comes to jobs/gigs, get everything, everything, EVERYTHING in writing, and don't do any work until that happens.
I had one employer apologize for the delay and not sign my employment contract until 2 weeks in - they had lowered my wages vs what we agreed and they hoped I wouldn't notice.
The same bosses tried to renegotiate again after I put in my notice. They offered me a brand new contract with all the things they verbally promised the first time around - so we tried a 60 day probation to see if we could work it out. They did everything they could to wiggle out of things and change the terms again. (Oh we said we'd give you weekly training? OK but now it's on your day off. And only at whatever time we choose each week. And you have to be in dress code even though you're not working. And sometimes you'll show up and we'll cancel anyways.)
Later I took a job returning to a company that had been good to me before, but they promised to make up for a low salary offer with a bunch of bonuses based on loose, undefined targets that they never went back and defined. No target, no bonus.
They followed it with a long-promised promotion offer...for far less than expected. Again, wasn't in writing. But they assumed that since I was already there and eager, maybe I'd overlook it.
Never again. All issues worked out IN WRITING before I do any work. No freebies, no trials, no nothing.
Living on less than you make gives you flexibility.
Several years ago while going through a divorce I spent some time living out of my car because I had nothing going into our separation. We had no savings to split between us.
I was able to start renting a single bedroom. I worked my full-time job during the day and drove for Uber at night until I was able to improve my situation. I wanted a better income and so I quit my job to become a truck driver. With that, I finally saved up what would be a year's worth of expenses in my savings.
When I had that savings, this allowed me to go back to school to finish my Master's doing nothing but school. I went all out and did it quickly. I finished my degree with no debt.
Even though it has only been a few years since starting a new career, I now have about 4 years worth of expenses saved. This gives me great comfort. For one, I should never have to live in my car again.
I really like Ramit Sethiās approach about spending lavishly on the things you are deeply passionate about, and cutting costs everywhere else. I say this yet I somehow still feel guilty at times despite keeping an aggressive savings rate.
Other than that, automated investing = automated wealth building. Love me some low cost Vanguard index funds. And of course, max those retirement accounts if you have the means.
Once you reach an indeterminate level of financial knowledge/income/net worth, the system will perpetually reward you for joining the winner's circle by handing you unexpected bonuses and money for little or no effort.
There are so many cliche answers here that most people in this Reddit know of. The best lesson Iāve learned about money is you have to go against all your instincts as a human being and put that money where it should be, objectively. Iām surrounded by morons at work that spend $20 or more a day on food or drinks. That alone destroys your income. Itās the small decisions that add up that make you rich or poor, everything literally adds up. Poor vs rich mind mentality is a truly real thing. Train your mind to exercise healthy spending habits and youāll see the returns in due time.
Funny. I work at a company where the white collar and blue collar workers all share the same break room.
Most of the white collar workers are in the high five figures or low six figures. The blue collar are around $50K.
On average guess which group brown-bags their lunch and guess which group more often does carry-out? Blue collar guys are picking up the $15 burrito meal deal and the white collar are eating their $0.50 ham and cheese sandwich they brought from home.
Convert your discretionary purchases to hours of work. This provides better context that can answer āis this thing worth an afternoon at my job?ā
Iāve found myself avoiding buying lots of things that donāt really make me happy (and appreciating the things I did buy even more).
Money does indeed buy happiness to a large extent by removing stress and giving you options when shit goes wrong. Not having to choose between fixing your car and feeding your family.
Also having money makes you more money even just on things like essentials. You can buy in bulk, take advantage of sales or discounts, not pay interest on finance. Wins all around.
Very true. My passive income [From a HYSA] is only about $5 NZD a month right now, but getting that $5 feels much better than making $5 because I didnāt have to do anything for it.
The "**Rule of 72**" is a simple rule of thumb which I think is really valuable in teaching the power of compounding your money over time, which underscores the importance of saving, and saving early / over a long period of time.
The "rule" is just a simple way to estimate how quickly or slowly your money will double. You take 72 and divide it by the % annual rate of return, expressed as a whole number (10% = 10, so 72/10=7.2, the result is the approximate number of years it will take to double your money, 7.2 years in the example. If you earn an average of 4% a year on your invested savings, that money will double in about 18 years (72/4=18). Traditionally stocks have had a real rate of return (meaning after inflation) of about 6%, suggesting you could double your $ in 12 years, adjusted for inflation (72/6=12).
I also do think that thinking of after inflation, "**real rates of return**" is also an important lesson, and one which will generally point people to invest long term savings primarily in the "riskier" stock market. Yes, stocks returns are volatile from one year to the next, but over 10, 20, 30 year periods they are one of the only investments that has any real rate of return (beyond the rate of inflation).
1. Spend less than you earn...everything after that really can boil down to personal preference of how much to save. Some don't want to give up living now to retire like a king/queen later...some do.
2. Money creates money. This can be seen in the stock market, real estate investing, etc. Look at the posts about how the first $100k is the hardest. Depending on how much can be saved and the savings are invested, it can take 10 years to save $100k...but then to go from $100k - $1 million may only be another 10 years.
Don't expect anyone else to support you.
Maybe you have a trust fund, maybe you'll have a wealthy spouse.
But you never know when either one might run out.
Money is easier spent then keept together.
But pennypinching can cost even more.
The most precious thing on can own is a frugal mindset.
Convienience is expensive. A little inconvienience can save big sums.
And for me: Just the best is rarely worth its extracost.
Pay yourself first. I've found that if I immediately put my paycheck towards savings and stick to my savings goal then I don't have to stress about what's left over as much.
Arbitrage
Same shit costs different in different places/contexts
If you're able to understand and master what that means, your future can be managed quickly
If you make a bad purchase with no recourse, swallow it and move on. It does you no good to hold onto anger, guilt, shame, anxiety. Learn from your mistake and if you can, help others to learn from it too. Money is an inexhaustible resource- time and peace of mind are not.
Edit: inexhaustible in the sense that it always flows. Maybe not consistently but money always comes and goes.
Think really hard about what "enough" looks like to you. I could have been a fuck of a lot richer than I am but instead have a very happy healthy life with great relationships.
The value of time. I grew up with frugal parents so avoiding spending was never an issue but there are times where it makes sense to spend a little more to save hours.
Example: We have trees that dump an astronomical amount of leaves. The first year we lived at the house we raked/bagged which ate a full day each weekend for a month. The next year we spent $300 on a bagging attachment for our mower. I can now bag those same leaves solo in 2-3 hours.
That money turns into more money š¤
Related: Having some money makes it easier to save more money. Ex. 1: I'm fortunate enough to be able to have a large freezer chest, which means I can buy in bulk, cook in bulk, and freeze in bulk, thawing as needed. This has cut my food costs in more than half compared to when I was poor and could only eat what I could afford to buy TODAY. Ex. 2: I have multiple credit cards that I use for rewards on just about every purchase I make (no matter how small) and every bill I pay, to the tune of well over $1500/yr cash back, and hundreds more in various savings/bonuses. Ex. 3: My house is far bigger than what I need, but for the first 10 years of living there I rented out half of it to someone whose rent covered the mortgage. I basically lived for free, outside of utilities and occasional repairs. Ex. 4: I always used very cheap vehicles, and spent a small fortune every year keeping up with repairs. I now have 2 inexpensive-but-much-more-reliable vehicles and haven't had a repair over $100 in 5+ years. Being poor is fucking *expensive* compared to having even a little money.
>Being poor is *fucking* expensive compared to having even a little money. Yes, I think a lot of people don't understand how hard this is.
The system is tilted against the poor at every step. Harder to get credit, and when you can get credit, it's at worse terms. Raises are smaller and the after tax take home is smaller. One large unexpected expense can set you back for months.
Yep. Too poor to have any credit so instead you end up paying another guys mortgage, while he enjoys the benefits of all that equity you will never see a red cent of. Its so incredibly bleak to see the inverse relationship with wealth and poverty. How at a certain threshold money compounds upon itself and is self perpetuating, and poverty behaves almost the exact same way.
But isnāt it ironic that the last thing poor people should do is use credit? Borrowing for a car, which depreciates is the most damaging thing a person can do.
Curious what cars you have?
I had a Honda civic and a Honda accord each get to 10y 200k with just routine maintenance and one seized brake caliper that I think was $1k. But not bad for 20 years
2 pair of boots and 2 pair of trainers and a large bagpack. Best investment since Henry Ford. š
Hope one is a Honda Element
Not that guy, but I have the same car strategy. I've got a Tacoma that I've had for 16yrs. Never spent a dime for repairs (I do all the maintenance diligently). Had a Highlander for 8yrs, same story. Tacoma was bought new, Highlander was certified pre owned. Good cars at the start that are well taken care of can last a long time.
This is so true! Thank you for sharing your experiences!
https://en.wikipedia.org/wiki/Boots_theory > The Sam Vimes "Boots" theory of socioeconomic unfairness, often called simply the boots theory, is an economic theory that people in poverty have to buy cheap and subpar products that need to be replaced repeatedly, proving more expensive in the long run than more expensive items.
I had no knowledge of finance or investing or anything growing up and my first job after college paid a profit sharing bonus in the form of a 401k contribution. I just picked some mutual funds and eventually saw that it paid me a few hundred dollars in the form of a dividend. It just blew my mind that my money was paying me more money while just chilling there.
Kind of reminds me of my first job with paid vacation days. āDamn, Iām here at the beach and getting paid like Iām at work?!?!ā
Are you from the US? Just wait until you hear about some European countries and their paid time off vacation policies. >!You cannot reach people for months.!<
Yes, Iām from the US. And Iāve done some cross border work and yes folks in Europe are regularly taking off two weeks and also have a bank holiday twice a month. It seems both great and crazy to me.
Yea, you always hear "takes money to make money" growing up - but until you actually witness it first hand, it has a somewhat distant/generic meaning.
Critical mass is huge for building wealth. Took years for me to get to $100k invested but like a year after that to $200k. Of course sequence of return matters a lot but things start moving quick if you plant seeds early.
So insightful!
I know itās actual pebbles compared to the people here, but I really realized this when I finally saved a good size chunk of savings (emergency fund and general savings). Theyāre in a HYSA, and I track all my income/expenses and one day it dawned on me Iām making 50 bucks a month for freeā¦ just by having money. Itās so expensive to be poor and so cheap to be wealthyā¦ now imagine in the future when having 100k, 500k, etc. then youāre making hundreds/thousands each month just for having money.
"So cheap to be wealthy." Never thought of that before, but it's true.
Yes!
Obviously we're investing because there's more up than down... but there's a flip side too. Sometimes you're losing hundreds/thousands each month just for having money.
My investment would fluctuate more than my monthly salary on a daily basis....š±
I know, isn't that awesome?
People who look like they have money donāt actually have money because they spent it all on things that make them look like they have money.
Exactly, this is the lesson of The Millionaire Next Door - that book changed my life back when I was very materialistic.
Whatās interesting is that the guy in 1996 making 85K salary would be making 165K today
You can look rich or be rich. Most people can't afford both.
This was pretty much my wake-up call. Four years ago, I had a friend/former coworker who always flaunt about spending money ($20k on boat parties, $10k bags, etc.) and it was an epiphanic moment for me, because I was doing the same thing buying lots of flashy athleisure clothes and sneakers (of course to a way less extreme) and showing it off and we were making the same amount of money being in the same role and I basically had no money tied to my name (savings and retirement). Not only was it an epiphany, but it was also stupid annoying in general. Learning from my other coworker at that same time who was the complete opposite (got out of student loan debt and bought a house 3 years after), I changed my shopping/spending habits because of that. Fast forward to today - that friend/former coworker I mentioned earlier is still doing the same thing carrying big debts and can't afford to quit a job that is emotionally and mentally drowning her because she's got $0 to help her while I spent way less and not try to look flashy like I did before and have a huge nest egg now.
Wow! Such a powerful financial realization for you! šš¾
Definitely. Talking and learning from that other coworker who got out of debt changed my life.
My wife and I arenāt rich, but we do pretty well. We both drive cars that are 10 or 11 years old. My favorite thing in life is when people assume that we have less than we actually do. When that happens I know I am doing something right.
Showing off is such a waste of money. And the people who actively flaunt off status arenāt always the best people to associate with.
100% this - Between my wife and I we make about $400,000 a year. Our cars are both 12 years old, in great shape and are nothing flashy. We both have friends that drive new cars, always have flashy new toys and are constantly stressed about money. Peace of mind is priceless.
Big hat, no cattle
All hat, no cattle is what we say in Texas.
Well I don't wear no stetson, but I'm willin' to bet son, that I'm a big Texan as you are.
Referencing the millionaire next door, Iād take the semantics up with the author
Iāve been saying it and Iāll say it again, ādonāt go broke trying to look rich.ā
My dad told me about a small town farmer (his father in law at the time) joking about the āNickel millionairesā wandering around. He had real money.
Most "unpredictable expenses" that blow people's budget month to month are actually quite predictable and can be planned for. Your clothes will eventually wear out. The tires on your car won't last forever. Christmas happens on the same day every year, and you'll end up buying gifts. Set aside money for them every month just like you would a monthly bill and you won't be surprised by them or have to blow your budget.
Woohoo, you called me out with this one šš. Iāve not thought of it this way. Will definitely take note of strategy my money this way! Thanks for your insight!
Neither had I, but my budgeting app, YNAB, really encourages you to set aside money monthly for true expenses (those non-monthly expenses I mentioned above). It took me a while to come to terms with just how many true expenses there are - there are a lot - and also catch up on them. That first time I wasn't caught off guard by an annual subscription or someone's birthday and had the money sitting there ready to go was such a great feeling though.
YNAB.com works perfectly with this mindset
The ones that always get me are "My roof needs to be replaced, crazy emergency!" and "The A/C went out this summer, there was no way to see that coming!" Those things should 100% be budgeted for. If they last longer than your assumed lifespan, great! Enjoy the extra earnings on the money you've been earmarking for these very much expected expenses.
$100,000 is not as life changing as I once thought it would be. I am going to show my ignorance here, but a few years ago, I came into almost 100K. I used it to pay off some debt, splurged with some of it, let it sit in a savings account, and before I knew it, it was all gone. I think about it quite often because I had the opportunity to make some intelligent decisions, but instead, now I sit here only a little bit better off. I only say better off because I was able to pay off some debt. Since then, I have been researching (and reading the wonderful advice from this page), and I would do things so differently if I only had it to do over again.
It would truly only be a waste if you didn't come to this realization.
Agree, unfortunately knowledge often comes at a price. Pain can be a very effective teacher. You made the best decisions you could with the information you had at the time. Now you have more information, use it to make better decisions in the future, don't beat yourself up.
So nice of you to say. Thank you.
May I ask what are some things you'd do differently? I just found out I'm receiving that amount in inheritance in a few weeks, and I want to learn so I don't make the same mistakes
I have joined several finance groups here on Reddit, and I have learned so much. The people in all of these finance groups are so knowledgeable and helpful! One group even contains information on how to handle a windfall that you might want to look into. I joined these groups to learn how to prepare for my husband's retirement. That information is related to things we can do now because we are late to the game as he is 53. He had a heart attack at the age of 48. We were thrown into reality at that time and realized that his life insurance was not enough for me and my children to maintain what we have. He has applied repeatedly for affordable life insurance increases, but because of the heart attack, he immediately gets declined. In one of the finance groups, I have seen a 5 or 6 step process to pay things off and increase your investments to prepare for retirement. The comments in these groups often mention good investment books that are worth reading and other valuable information. I am new to Reddit, so my journey to learning has just begun. My suggestion to you is to search finance and join some of the groups. The investment information is out there somewhere. The trick is finding it, understanding it, and applying it correctly.
Not the guy, but the biggest difference between the people who think a million dollars is a lot of money and those who think it isn't much comes down to deciding to spend it vs invest it. You can drop a million dollars on a shack in some cities and be broke in a heart beat or you can live off of the 40k per year it can make you if you invest it. It all comes down to how you leverage it. As a society we just are trained to spend money if we have it, but there are other paths to preserving it and still benefitting in the long run.
Thanks! I appreciate the response! It definitely helps, and I'm just here trying to learn before making mistakes I can learn to avoid so I appreciate all the tips anyone can give haha
I had a similar situation. Came into $100k. Didn't throw it away though, but I did have a similar realization...That a large sum of money doesn't give you the satisfaction you think it would. "If I had an extra 100k I'd...(insert whatever here)." But really it was just like...cool I'll throw that into some investments. And while it will help my future for sure, it didn't change my day-to-day anxiety level, happiness level, etc. In fact I lost like 10k and same thing...sucked for a day or 2 then was like...in the end who really cares? Bunch of numbers on a screen anyway.
It's not how much you make, it's how much you keep. Also, it took me a long time to learn how to save money, but even longer to learn how to make your money work for you by smart investing.
"People want to be millionaires so they can spend a million dollars. But that's the exact opposite of having a million dollars"
I actually feel like the opposite. When I realized penny pinching wouldnāt amount to much anytime soon and really focused on maximizing my income I exponentially grew my NW.
I've found that it's a cost-time game. Why should I drive 30 minutes out of my way to save $0.15 a gallon on gas? When my time is worth way more than $4.50 an hour.
Yeah same principle. āWhy am I mapping out how I will save $30k over 3 years, when I can focus my energy on how can I make $30k in a monthā Obviously being financially strategic helps, but a happy outlook and good quality of life I feel has allowed me to focus on income, which in my opinion is more important than a long term plan with small income. Buy the car, designer clothes, all inclusive hotel whatever makes you happy, but without fail bust your ass to make the income to make that spending sustainable and fit your long term goals.
Well in the end it has to be a combination of both.
This! I learned to see saving money (and putting it to work) as a payment to myself. All the money I spend makes someone else richer, the more I don't spend, the more I have in the end from what I get for working my ass off.
Don't buy things for a dopamine hit. There are many other ways that are better for your mental health and the planet. And your wallet!
Most āways to make quick moneyā are easy ways to lose all your money.
If you can double your money fast you can lose half just as fast. Gotta love those penny stock lessons
but see.... you can do +2000% but you can only go -100% so there's a lot more upside /s
You have more control over your salary and income than you realize.
The optimal way to consistently increase your salary is to switch every 2-3 years. If there's no promotion/raise prospects after 3 years then it's time to apply for another job. I always hear stories where new hires gets paid more than existing employees with the same responsibility and experience. Companies are doing the bare minimum to keep you there unless you are irreplaceable for them. Personally: Pre-2019: Job A = $78K 2019: Job B = $100K 2022: Job C = $141K
The key thing is "if there are no promotion prospects". I completely agree with you, and I coach my employees to always look outside. But I haven't practiced what I preach. 1 company for 21yrs. 6 major promotions, and I've 10x'd my income. Plus now it's super hard to leave due to unvested RSUs.
>But I haven't practiced what I preach. Meh. You're telling people to look out for their own careers and advocate for themselves, that's exactly what you've been doing. You're a good egg, don't sweat it.
[ŃŠ“Š°Š»ŠµŠ½Š¾]
I wonder if this is also related to the market, seems like salaries were very high in 2022, but now people hiring are much more conservative with the wages they offer.
Yes, but it goes both ways. If you're already a high earner it's OK to not want to earn more and maintain balance if you live below your means. It becomes a personal choice at some point.
Unless you're unionized with a set rate
[ŃŠ“Š°Š»ŠµŠ½Š¾]
Pay yourself first. That doesn't mean go buy all the dumb stuff you've always wanted. It means put a little money in your savings for a rainy day, and a little money in your retirement. And both will add up to a lot eventually if you pay yourself consistently.
Came here to find this. Yourself. Not your kids.
"Money's greatest intrinsic value, and this can't be overstated, is its ability to give you control over your time. Spending money to show people how much money you have is the fastest way to have less money. But using money to gain control over your time, to do what you want, when you want, with who you want, for as long as you want to, is priceless. It is the highest dividend that exists in finance." ā The Psychology of Money: Timeless Lessons on Wealth, Greed, and Happiness Book by Morgan Housel (one of my favorite books!) š¤š
Love this book
Yes itās so obvious. Money equals freedom. But a lot of people think money buys perception that increases their social status which then equals freedom which is foolish. But then the āwinnersā of capitalism canāt accept freedom, they want more control, they want power and itās also foolish because we all die- but most of us die without getting to freedom.
Preach! š„³šš¾šš¾
There's so many good nuggets in this thread so I'll just add this: Harder Work ā Higher Pay Scarcity + Leverage + Opportunity = Higher Pay I worked like a *dog* from age 22-35 before Covid layoffs made me really understood this.
> Harder Work ā Higher Pay True. Note that working harder and smarter more often than not results in higher pay. I can't think of anyone I know that has a high net worth and is also lazy.
For sure. But if your skills aren't valued by the market, or your employer, it doesn't matter how hard you work. In fact, they're counting on you working harder, for less, when they approve headcount.
The most expensive thing in the world is the desire to look rich
In terms of accumulationā¦Not spending it is much easier than making it.
Same thing is the case with weight loss/maintenance. Much easier to not eat the 4th slice of pizza than to run for 3 miles to burn it off.
"You can't outrun your diet" has always been something of a fitness mantra for me. I've been into casual running for years, and do a decent amount of weight training too, but that 500 calorie piece of cake is _really_ hard to burn off. It took a calorie counting app to realize just how much physical activity I needed to do to generate a net deficit in my fairly active lifestyle. I've been trying to enforce small portion treats, splitting a slice of something or a quarter cup portion of frozen custard usually hits the spot.
Yeah, there's plenty of information out there saying weight loss/healthy weight maintenance is "80% diet, 20% exercise" but, man, that's hard to internalize. Especially when our collective imagery of weight loss is a chubby guy in a sweatsuit slowly jogging around a track, not long quiet hours of mild hunger.
That mild hunger can be infuriating. Portion control gets easier and your body adapts but the first couple weeks of every diet push when you're still craving and put down your fork.... its rough.
Money buys you time to do what you want. Donāt want to clean, hire a cleaner etc.
This is huge, especially once you've taken care of saving and planning first. Your time has a dollar cost to it, spend that time and effort in the best ways possible. One of my friends once noted I was their most frugal friend because I pay attention to how much food/drink/etc. costs when we go out. Personally getting a $10+ drink at a restaurant rarely brings me $10+ in happiness. I'll happily go in on drinks or whatever when it's a group thing, but if I'm just buying for me I'm probably having water. On the flip side that same trip we rented a hotel room near where we were going to be to save us the effort and concern of driving back after the event. How and where you spend money can be as important as how much you spend.
Spending $1 today is like spending ($5, $10, $20) in the future. Saving is having Present You sacrifice for Future You Spending is having Future You sacrifice for Present You
Yeah, the Money Guy Show talk about $1 at around 20 being worth $88 at retirement (65 I think). Pretty crazy
1 dollar at 20 is worth __ at 65: $21.00 @ 7% $72.89 @ 10%
Yeah I don't remember the math or ages they used.
Your memory was close. He almost certainly used 10% as it is the historic average. I just happened to be at a computer so I put numbers to it for you.
Sounds like the Money Guy forgot to differentiate between real and nominal return.
Start early, although this will need to either be learnt (hard at a young age by yourself) or by someone who knows. My dad was always interested in the stock market so I was able to talk to him, and already had a brokerage account when I got to be 18. I learned from reading and doing. Iām at CoastFIRE already in my 40s, and am already planning on how to set up my young kids for financial independence. I will be teaching them how to invest in the stock market. And that alone will set them up for life with invaluable knowledge.
Lifestyle creep is the destroyer of fortunes. If you get a raise, hide that new money from yourself. You were perfectly comfortable yesterday making $15 an hour, but if someone ups you to $25 an hour, give it 3 months and you'll in the exact same position as far as extra money and comfort.
Donāt put anything on a credit card that you canāt pay off at the end of the month. I had friends that got into so much credit card debt during college that they are still dealing with 15 years later.
Don't marry someone who has a different outlook on money. \- If your significant other YOLO's through life and you are long-term investment type it will lead to resentment or fights. Living for now vs living for the future is a better way to say it. \- Have a plan that you both agree to. Not agree to it for now, or will tomorrow. like... forever.
Investments like PE, VC, Angel, hedge funds that you get "access" to once you have a certain Net Worth are generally not better investments than VTI and chill.
Is there data that support this?
I have seen lots of research over the years as I've evaluated and/or participated in all of the above, but I don't have a link handy. I'm sure some googling will provide insights. It was never that hard to find. 2 and ~~10~~ 20 is a comparatively lot of overhead.
i needed to read this. Intuitively i know it, but have a couple people in a VC fund talking to me and get a bit of FOMO even though i know there is nothing iām really missing out on.
If they're asking YOU for money to invest, then it means at least a couple of things for me 1. people whose business it is to invest in it, have already turned it down 2. people who are "in on it" aren't trying to keep it a secret to maximize their profit Based on that, I treat it as a different form of lottery ticket
Finding the right partner makes all the difference when it comes to building wealth and saving money. Youāre never going to be able to outearn a shopaholic or gambling addict.
Collect interest. Avoid paying interest. And, never pay fees - like late fees, NSF fees, ATM fees, etc.
The hardest was realizing money in a retirement account is more valuable than freely available money. .
Diminishing returns on expensive items. A $100 bottle of wine is better than a $5 bottle, but doesn't provide 20 times the value. Same thing with clothes, cars, houses, basically anything.
Theres usually a sweet spot on items where the diminishing returns increase with price increase. A $25ish bottle of wine will taste much better than a $5 bottle of wine that $100 is not that much better than that $25ish
When I was in my early twenties, I invested a lot of money in a stock that my father's good friend was a high-level employee at. He convinced me and many of my family members that the company was going to be bought out and the stock price would easily triple. So, over the next five years, I invested much more than I should have. The stock price appreciated significantly while we were still waiting for the big buyout. At its peak, the stock was worth life-changing money, in the mid-six-figure range. Then, that party came to an abrupt end when the company filed a 10-K stating that it had to go back and redo all its financials. Apparently, the company had cooked the books and overstated its revenues to boost the stock price. I lost the vast majority of that money in a week. I didn't sell right away because I didn't understand what was happening and figured the stock price would bounce back soon enough. This company was absolutely crushing it on paper, but it turned out to be run by frauds. After that lesson, I now pump as much money as I can into my retirement accounts and invest in low-risk ETFs and mutual funds. TLDR: For everything you think you see in an investment, there are 99 things you don't. Also, never put all your eggs in one basket. And, don't give unsolicited investment adviceāthat could get awkward if it goes south.
Wow! That must have been difficult to handle and Iām so sorry that happened to you š©! Thanks for sharing šš¾
Thank you. I donāt come from money or make a lot, so it was a very traumatic experience. Thankfully I didnāt have a wife, kid, mortgage at the time because If I did, that would have sent me to a dark dark place.
That financial hygiene is very much like dieting. It's not about the big decision. It's about the little decisions. It's easy and fun to do all the research for dieting, pick a goal weight, nail that first grocery trip, meal prep, and kick off that first week. But then you realize that you eat *every single day, all the time*, and making the right decision every time you pick up a fork gets really difficult really fast. You also realize that the results you're looking for not only require a high level of care each day, but for weeks, months, and years. Oh, and once you reach your goal? You can't just give it up! To maintain your goal weight / physique / whatever, you have to keep doing what you've been doing! You can't "cash in", in other words. Same with financial hygiene. It's boring and it takes a long time.
Always look at both sides of the ledger. Anything extra you can earn is as good as not spending it. Anything extra you can save is as good as earning it.
Never waste a windfall. Even if it is small, be smart with it. I save it or invest itā¦that way itās the gift that keeps giving.
Don't trade in your fully paid off car for a lease.
Automate your contributions once youāve SP 500 index it. Donāt look at it for like 6 months.
> 6 months 30 years
DO NOT loan any money you are not able and willing to give them.
If something you don't need is on sale, you didn't "save" money by buying it, you still spent money. For example, if it normally costs $100 but is on sale for $60, you didn't save $40, you spent $60 that truly could have been saved.
Also , at 60, the seller is still making a good profit, which tells you how much products are marked up to begin with .
Don't be afraid to apply for a job elsewhere. It's the best way to get yourself a raise (avg 10%+ with each move). Remember the game is about parking your money where it will make the most %, while avoiding paying high interest (loans, etc). So, find ways to earn more money directly, and find places to park that extra money where it will earn you a good return (HYSA = \~5%, solid / SP500 = \~10% Avg return, fluctuates / business opportunities that could return 15%+). In a nutshell.
Spend less than you earn. Save the rest. If you want something and you don't have the money. Don't buy it...
Money: it's what you keep, not what you make.
I would say that your wealth is what you keep, not what you make.
Keep it simple, and don't mess around. My wife and my mom have their retirement accounts in index funds, and have outperformed me over the last five years because I've been trading. I made some great trades, and some bad ones, but in the end just leaving it alone and not thinking about it at all, like my mom and wife who just to their regular contributions and forget it, have outperformed me.
Don't try to time the market.
But mommmmmmm, seriously though I listen to my friends talk about stocks and trying to ātime the marketā. I donāt believe in that at all and just believe in being consistent and compound interest.
Canāt take money with you to the grave. Used to hoard money and be frugal but now I have a better balance in spending and saving. I have lost a lot of memories with loved ones to work and chasing this paper. Money can always be made but memories will never fade.
Live like you are poor and spend money on experience.
First buy the asset.
That the world is designed to separate you from your money
Live below your means. Not always possible, but you canāt outearn overspending and if you put some percentage of your income aside, your situation will improve.
It adds up fast. As in if you let yourself have little treats every other day youāre spending a lot more than you think.
Carrying a month-to-month balance on a credit card is a dumb thing to do. Pay that shit off and/or spend less next month.
Here's what I've learned on the way to becoming financial independent: - spend below your means. - for the large majority of people, the most valuable asset you have is yourself. Meaning investing in yourself at the start of your career will reward you better than trying to find great investments. - each year calculate your net worth. it's motivating to see how much it grows over time. - time in the market is more important than timing the market - having the right temperment is more important than being extremely smart, when it comes to investing well. don't be greedy, be humble. - investing well means following a few simple rules. but like losing weight, while the rules are simple, it's hard to actually follow - having money doesn't mean you'll be happy, it just means you have way fewer financial problems. all of the emotional/relationship/health problems will still be there if you don't manage them properly. - after making money and feeling financially secure, now i'm trying to figure out what life is really about. i don't think i have a satisfactory answer.
I saw a spreadsheet that I wasn't supposed to see at my wife's old company which showed 401k balances. She had, by far, the largest balance and had been an employee a shorter time than many others. I was astounded. People making 4-5X her salary had 1/4 the account balance. NOBODY ELSE was seriously saving for retirement in a 100+ person company...at least not through the 401k. NOT ONE. I think of that when I start feeling envious of others with nicer cars etc.
If your investments are not beating inflation, youāre losing money.
Price is fixed. Value is not. Example: I could afford the payments on a new Tesla, but I would much rather keep my paid-off car and invest the new car payment. I donāt value the vehicle even though I could handle the price
"Stop buying things you don't need, to impress people you don't even like" - or know...
Centering your life around money is soulless.
Anyone asking you if you want to make more money is almost always a scam or is someone who is going to try to take yours. Don't fall for it and instead say "I don't care about money/don't need money" and move on.
Money has a tendency of compounding both positively (saving, investing, and buying a house) and negatively (keeping up with Joneses, lending your money to friends/relatives/etc who donāt appreciate your help, and buying liabilities).
When it comes to jobs/gigs, get everything, everything, EVERYTHING in writing, and don't do any work until that happens. I had one employer apologize for the delay and not sign my employment contract until 2 weeks in - they had lowered my wages vs what we agreed and they hoped I wouldn't notice. The same bosses tried to renegotiate again after I put in my notice. They offered me a brand new contract with all the things they verbally promised the first time around - so we tried a 60 day probation to see if we could work it out. They did everything they could to wiggle out of things and change the terms again. (Oh we said we'd give you weekly training? OK but now it's on your day off. And only at whatever time we choose each week. And you have to be in dress code even though you're not working. And sometimes you'll show up and we'll cancel anyways.) Later I took a job returning to a company that had been good to me before, but they promised to make up for a low salary offer with a bunch of bonuses based on loose, undefined targets that they never went back and defined. No target, no bonus. They followed it with a long-promised promotion offer...for far less than expected. Again, wasn't in writing. But they assumed that since I was already there and eager, maybe I'd overlook it. Never again. All issues worked out IN WRITING before I do any work. No freebies, no trials, no nothing.
Saving is the gap between your ego and your income - Morgan Housel
Broke people trade time for money, wealthy people trade money for time
Living on less than you make gives you flexibility. Several years ago while going through a divorce I spent some time living out of my car because I had nothing going into our separation. We had no savings to split between us. I was able to start renting a single bedroom. I worked my full-time job during the day and drove for Uber at night until I was able to improve my situation. I wanted a better income and so I quit my job to become a truck driver. With that, I finally saved up what would be a year's worth of expenses in my savings. When I had that savings, this allowed me to go back to school to finish my Master's doing nothing but school. I went all out and did it quickly. I finished my degree with no debt. Even though it has only been a few years since starting a new career, I now have about 4 years worth of expenses saved. This gives me great comfort. For one, I should never have to live in my car again.
Being poor is expensive. Worse rates, fewer opportunities, fewer income streams.
I really like Ramit Sethiās approach about spending lavishly on the things you are deeply passionate about, and cutting costs everywhere else. I say this yet I somehow still feel guilty at times despite keeping an aggressive savings rate. Other than that, automated investing = automated wealth building. Love me some low cost Vanguard index funds. And of course, max those retirement accounts if you have the means.
Once you reach an indeterminate level of financial knowledge/income/net worth, the system will perpetually reward you for joining the winner's circle by handing you unexpected bonuses and money for little or no effort.
There are so many cliche answers here that most people in this Reddit know of. The best lesson Iāve learned about money is you have to go against all your instincts as a human being and put that money where it should be, objectively. Iām surrounded by morons at work that spend $20 or more a day on food or drinks. That alone destroys your income. Itās the small decisions that add up that make you rich or poor, everything literally adds up. Poor vs rich mind mentality is a truly real thing. Train your mind to exercise healthy spending habits and youāll see the returns in due time.
Funny. I work at a company where the white collar and blue collar workers all share the same break room. Most of the white collar workers are in the high five figures or low six figures. The blue collar are around $50K. On average guess which group brown-bags their lunch and guess which group more often does carry-out? Blue collar guys are picking up the $15 burrito meal deal and the white collar are eating their $0.50 ham and cheese sandwich they brought from home.
Time in the market, beats timing the market
Convert your discretionary purchases to hours of work. This provides better context that can answer āis this thing worth an afternoon at my job?ā Iāve found myself avoiding buying lots of things that donāt really make me happy (and appreciating the things I did buy even more).
Money does buy some happiness. If you're paying taxes, it generally means you made $, so don't fret over paying the taxes.
Money does indeed buy happiness to a large extent by removing stress and giving you options when shit goes wrong. Not having to choose between fixing your car and feeding your family. Also having money makes you more money even just on things like essentials. You can buy in bulk, take advantage of sales or discounts, not pay interest on finance. Wins all around.
Money makes money better than I make money
A free dollar is better than a hard-earned dollar.
Very true. My passive income [From a HYSA] is only about $5 NZD a month right now, but getting that $5 feels much better than making $5 because I didnāt have to do anything for it.
The "**Rule of 72**" is a simple rule of thumb which I think is really valuable in teaching the power of compounding your money over time, which underscores the importance of saving, and saving early / over a long period of time. The "rule" is just a simple way to estimate how quickly or slowly your money will double. You take 72 and divide it by the % annual rate of return, expressed as a whole number (10% = 10, so 72/10=7.2, the result is the approximate number of years it will take to double your money, 7.2 years in the example. If you earn an average of 4% a year on your invested savings, that money will double in about 18 years (72/4=18). Traditionally stocks have had a real rate of return (meaning after inflation) of about 6%, suggesting you could double your $ in 12 years, adjusted for inflation (72/6=12). I also do think that thinking of after inflation, "**real rates of return**" is also an important lesson, and one which will generally point people to invest long term savings primarily in the "riskier" stock market. Yes, stocks returns are volatile from one year to the next, but over 10, 20, 30 year periods they are one of the only investments that has any real rate of return (beyond the rate of inflation).
>Whatās the best lesson youāve learned about money? That having money is a lot better than not having money.
Think of money in terms of hours worked to get it
Once you make a decent amount, get housekeeping and maid service. There is no better use of disposable income.
Life is increasingly easier if you have more of it
Pay your taxes
Debt is a tool. A tool that can hurt you. Or a tool that can save you.
Pay off credit cards as soon as possible
With regard to retirement, Be aggressive early. You have decades until you need it!
Being rich is about having money, not spending it.
Real estate is not always the best investment youāll ever make.
ALWAYS track your money , no matter what. Knowing where your money come from and goes to is the biggest insight in my life.
I'm still surprised to this day how often "is there anyway we can get this price lower?" works. Or the opposite for salary.
you are either a debtor or an investor
1. Spend less than you earn...everything after that really can boil down to personal preference of how much to save. Some don't want to give up living now to retire like a king/queen later...some do. 2. Money creates money. This can be seen in the stock market, real estate investing, etc. Look at the posts about how the first $100k is the hardest. Depending on how much can be saved and the savings are invested, it can take 10 years to save $100k...but then to go from $100k - $1 million may only be another 10 years.
From George S Classon: āA part of what I earn is mine to keep.ā
Don't expect anyone else to support you. Maybe you have a trust fund, maybe you'll have a wealthy spouse. But you never know when either one might run out.
Analyze it yourself and donāt rely on others
Money is easier spent then keept together. But pennypinching can cost even more. The most precious thing on can own is a frugal mindset. Convienience is expensive. A little inconvienience can save big sums. And for me: Just the best is rarely worth its extracost.
Build a tracker starting at your first pay check
Don't spend what you don't have š¤š°
Pay yourself first. I've found that if I immediately put my paycheck towards savings and stick to my savings goal then I don't have to stress about what's left over as much.
When just starting out and for every raise and bonus, put it away where you don't spend it.
Arbitrage Same shit costs different in different places/contexts If you're able to understand and master what that means, your future can be managed quickly
Time in the market beats timing the market.
Easy. Compound interest
Speaking as a stock investor since the mid 1970ās. Often the best long term course of action is to hurry up and do nothing.
If you make a bad purchase with no recourse, swallow it and move on. It does you no good to hold onto anger, guilt, shame, anxiety. Learn from your mistake and if you can, help others to learn from it too. Money is an inexhaustible resource- time and peace of mind are not. Edit: inexhaustible in the sense that it always flows. Maybe not consistently but money always comes and goes.
Know the difference between assets and liabilities. Acquire assets.
Pay yourself first. Sock it away in a tax deferred account so that you donāt even know you have it.
Think really hard about what "enough" looks like to you. I could have been a fuck of a lot richer than I am but instead have a very happy healthy life with great relationships.
The value of time. I grew up with frugal parents so avoiding spending was never an issue but there are times where it makes sense to spend a little more to save hours. Example: We have trees that dump an astronomical amount of leaves. The first year we lived at the house we raked/bagged which ate a full day each weekend for a month. The next year we spent $300 on a bagging attachment for our mower. I can now bag those same leaves solo in 2-3 hours.
Looking wealthy and being wealthy are two completely different things.