There are a couple of good parts about this post. The first is the HN comments, which are an unintentional fountain of hilarity. But the second is the assumptions.<p>50% of the US population can't afford to put even a dollar into any sort of investment security. Of the 50% of the public that does own some sort of security, most of them are in the three-figures range. This index card, without realizing it at all, has targeted itself towards the top 10% of the population: people who have jobs with 401Ks, people for whom Roth IRAs will be useful.<p>In other words, if you are well into being one of the richest people in the richest country in the world, here you go - save 20% of your income, and so on. And you'll be fine!<p>So I'm just curious: suppose you aren't?
Almost all of this is excellent advice, except for one point: "save 20% of your money". That's a bare minimum, which will let you retire after about 37 years of working. Bump it to 35% and you'll retire after 25 years. Bump it to 50% and retire in 17. Bump it to two-thirds and retire in 10 years.<p>That's one of the most important factors in your personal finances: not how much you make off your investments, not whether you max your 401k, but <i>how much of your income you save and how much you spend</i>. The only more important factor is "never borrow money", and in particular "never carry a balance on a credit card".
Scott Adams, the creator of Dilbert, has a similarly good set of advice:<p>- Make a will.<p>- Pay off your credit cards.<p>- Get term life insurance if you have a family to support.<p>- Fund your 401(k) to the maximum.<p>- Fund your IRA to the maximum.<p>- Buy a house if you want to live in a house and you can afford it.<p>- Put six months’ expenses in a money market fund.<p>- Take whatever money is left over and invest 70% in a stock index fund and 30% in a bond fund through any discount broker and never touch it until retirement.<p>- If any of this confuses you, or you have something special going on (retirement, college planning, tax issues) ( hire a fee-based financial planner, not one who charges a percentage of your portfolio.<p>(source: <a href="https://retirementplans.vanguard.com/VGApp/pe/PubVgiNews?ArticleName=DilbertGuidetoPersonalFinance" rel="nofollow">https://retirementplans.vanguard.com/VGApp/pe/PubVgiNews?Art...</a>)
I consider it to be a huge oversight that they left off building an emergency fund.<p>Before buying a house, buying individual securities, or maxing any retirement contributions, you need enough liquidity in your investments to get you through an illness or layoff that leaves you without income for a year.<p>It amazes me how otherwise intelligent peers of mine will be paying extra on mortgages, student loans, and retirement funds with less than $5k in the bank.
>Never buy or sell an individual security. The person on the othr side of the table knows more than you do about this stuff.<p>The person on the other side is c++.
Am I alone in wondering if the advice about broad index funds is no longer good?<p>We're still below the s&p inflation adjusted high from ~2000 -- almost 14 years later. When will the gains finally arrive?<p>I worry that there is some systemic problem in our economy that has leaders playing whack-a-crisis every five or ten years that erases years of gains.<p>I've read John Bogle and <i>I want to believe</i>. But a few years ago I took some money out of index funds and placed it in a rental property and so far I've seen very predicable returns with no loss in principle, and it makes me wonder if I should keep bothering with index funds at all.
I trade in individual securities, but I put in the time to learn about the companies, the industry, and so on. Also, having taking econ, accounting, finance, and statistics in college helps.
Seems like good advice, though a great many Americans are at a disadvantage because their employer doesn't offer a 401k. Even with no employer match, a 401k allows an individual to save much more money in a tax-advantaged account ($17,500 for a 401k vs. $5500 for an IRA). If you're a W-2 employee but your employer doesn't offer a 401k then you're pretty much stuck paying higher tax rates on any savings beyond $5500/year.
Seeing the comments here about people is interesting. Whether it's in the comments or in reality, <i>most</i> people aren't conscious they <i>are</i> poor.<p>Poverty isn't a privilege reserved to those who live under bridges, or take showers once in a while.<p>Driving to work and back every day, stuck in traffic, getting home exhausted and not wanting to do anything <i>is</i> poverty.<p>It's amazing how many guys I know who start working and consider it a success and start spending cash, get a car on credit, get a mortgage and what not. They actually think that having an expensive car makes them rich, yet can't even afford a part of that car breaking. It's a disaster for them.<p>So, if you have to slave for a pittance (or not, you're slaving anyway). If you can't afford to be ill with some weird disease and getting properly treated for it without waiting <i>social security</i>. If you can't afford a good life for your children. If you can't buy something (a car, a house) without a loan and it still doesn't represent a good portion of your assets..<p>If you can't do that, you're poor. Poor in money, and most probably poor in time, too.
I don't know how good the advise is to max out 401K and other retirement account. Some of the 401K accounts have very limited choice of investment. For example, you can't do real estate investment.<p>If you know what you are doing, you might want to retain the money outside and do the investment yourself on investment that are not available in a typical 401K account.
What about non-US people? U.S. index funds are off limits to us, and European ones are hard to trust, and normally require a lot of difficult paperwork to get in unless you are a citizen of a particular country, and operate off a very localized, and very small equities market (say Austrian, however healthy Austrian economy is i find it hard to bet my retirement savings on it, especially given neither my income nor my expenses have anything to do with it). And yes, fees of those funds are way higher than Vanguard's, due to their small size.<p>With income in 7-figure range, one can buy commercial real estate, which gives decent returns and is a good replacement for exchange-traded equities. But what about others?
First advice: max your 401k. That's selfish.<p>That's what Wall Street wants you to do. Reality is whomever manages the funds has only one short-term goal in mind: year end bonus. It's very common for traders to move on shortly after bonuses are given out leaving "cooked" books for the next trader to deal with. The plan is always to never get caught holding the short term strategy book.<p>I find the typical trader archetype to be repugnant. There's so much of it that goes against technical-minded people with even the tiniest sense of ethics. If you're financially disciplined you're better off investing elsewhere.
This might be blunt, but I found this advice to be misleading. Many lost large percentages of their 401ks in the ~2000 and ~2008 crashes.<p>Crashes historically happen at least once every decade.
As some one who takes great meticulous care in planning and investing regularly, both for the long term and super long term(retirement savings), I can pitch in and offer some advice here.<p>First advice I would give is, totally avoid using credit cards. It might sound impractical, but I've found some workarounds for it. Which is to use my debit card as a credit card. Go frugal for a few days and save some money in the savings account, then use that money as credit to yourself. The worst thing about any kind of debt/loan is the interest part. Lesser interest you pay the better, except in situation where you are making an investment with the loan(like buying a property of a home) and the value of the investment is growing faster, when the at the same time inflation is decreasing your loan's net value.<p>Second advice I can give you is to buy your own home and avoid paying rent. If you look at the whole thing having your own home is vastly more profitable than renting some one else's home on a long term.<p>Then there are a few assorted advices I would like to give, especially to people in India(My country), But I believe it applies equally to else where to. Buy gold in small quantities regularly. Gold is protected from inflation, and is the near standard of economic growth around the world. And value of growth(over long term) always grows. Once you have sufficient gold- sell it and, learn to buy real estate in city outskirts. You will see in any growing city, sooner or later outskirts merge into main city areas and then real estate prices shoot up. Take loans to do this, if and only if the loan is small and as I said before, inflation affects your loan faster than, the rate at which its value grows.<p>Make the mandatory 1 lac per year(if you can't make as much as you can), tax savings investments on things like endowment insurances which serve as both life insurance and long term investments.<p>Its good if you could rotate money by building a home which you could rent out. It will serve as a steady source of income later and after retirement.<p>Lastly at the risk of attracting downvotes, please don't invest in stocks and show pointless heroics if you don't understand that business. Far more people have burnt their hard savings hoping for magical miracles to happen and make them millionaire while dealing in stocks. In short if you know how to do it, do it. Else keep out for your own good.
Correction: Don't have a credit card bill to begin with.<p>Let the excuses and reasons for them fly, think whatever...fact is they are not necessary. While some smaller percentage of people can be responsible, for many it just invites problems. Don't get one in the first place.
this is nothing new... this is stuff straight out of the automatic millionaire by David Bach..wanna get rich? First step is pay yourself and get out of debt... then build up some solid investments.. real estate is a good way to build assets and wealth flipping or rentals..rentals for long term obviously.<p>Or do what 80% of us reading hn plan on doing ...build something awesome and get bought out for 10 mill.