Having paid off student loans feels great, I would always choose that first over investing, even if I could get a better return. Being debt free also gives you freedom to make life changes that might not be an option when you have payments due. I also strongly agree with the comment on considering taxes on profits; the return required to get a better net outcome investing will likely require more risk of loss.
It’s all risk/reward and timeline. If you think you’ll need any of those savings in the next 3-4 years, I’d keep it growing while being as liquid and low-risk as possible (bonds or money market fund). If you don’t need to even look at the balance for 5 years (and if failing to make gains won’t screw up your whole life plan), an ETF is probably a good bet.
Look at the MMFs from your bank(s), because some of them have been outperforming bonds this last year and they are much easier to buy and sell.
FPIFX is a 2020 target date index fund, which is currently 50% stocks and 50% bonds.
VT is a total world stock market index fund - 100% stocks, 0% bonds.
The answer to this entirely depends on “how far away are you from retirement?” - if your retirement is 20+ yrs away, go VT. If it’s like, 3yrs ago, go FPIFX.
The value is implicit to the company, the shares don’t create any new wealth. They convert equity in the company into cash. It’s a way for the organisation to trade that equity for free cash. This is why companies with very high profits and thus cash flows buy back their shares.
When you buy shares you help move the market, driving the price of the shares up if there’s demand. Obviously this makes it harder for the company to buy shares back which might be a bad thing if the company is truly a great, sustainable business, but it also means that whatever percentage of the company they do still control can be sold for more cash when it’s needed.
There is a good reason to invest in sustainable companies. From a personally selfish perspective they typically perform very well, and from a more holistic perspective, as mentioned above trading shares raises their price and increases the value of the org.
From an organisations point of view, even entirely profit motivated companies that don’t have a shred of humanity in their management are incentivised to behave sustainability and ethically in the current environment. The only companies that can really get away with being unsustainable are business to business companies and those whose products are incredibly inelastic, i.e. big oil. For everyone else, the loss of goodwill for behaving unethically and unsustainably can be too big. If you cut off a big enough chunk of your market your profits are going to be impacted. Plus all the other elements of sustainability, like treating your employees half well leads to improved employee and talent retention, more productivity, better community engagement, free advertising from all the goodwill etc.
Edit: there are also other risk factors for unsustainable management. Many more organisation are looking at their environment and their exposure to disasters. Fires are becoming a much bigger risk factor, and dangerous weather also poses a threat. For this reason some orgs now consider it prudent to go for net zero emissions for purely selfish reasons, not because it benefits everyone but because a better environment literally lowers their risk. Poor working conditions can also impact bottom line, especially if lawsuits line up. Overall, plenty of financial incentive for companies to behave sustainably these days.
Yep. Both of my parents are at social security age and neither one has more than a couple weeks-worth of savings. Semi-retirement isn't even an option.
You joke, but here’s what happens if you invest a certain amount every day for 40 years, assuming 6% growth (that’s under the inflation-adjusted S&P 500 returns):
$10/day grows to ~$500k
$15/day grows to ~$850k
$20/day grows to ~$1.1M
If we use the 4% rule, we get $20k, $34k, and $44k respectfully. The average Social Security benefit is $1700-1800/month, or $20-22k/year, so with those combined, you’re getting $40-65k/year to spend in retirement as a conservative estimate, which is right what someone with the median income would spend.
So if you save 3500-7000 every year (or about half of the IRA max up to the IRA max), you’ll have a decent retirement. $10/day is about the same as one meal from a fast food chain every day.
I know life is hard for those on the poorer end of the spectrum, but to an extent, diligence can make up for income and secure a decent retirement. So maybe there’s something we can do in K-12 to teach kids how to save for retirement so more people can be prepared.
“$10/day is about the same as one meal from a fast food chain.”
And for more than a few, that’s the one meal they’re eating that day.
Further, this isn’t a guarantee, it’s a gamble. We’re constantly on the edge of a recession these days, you cannot blame anyone for taking short term security in lieu of potential long term loss.
“I know life is hard for those on the poorer end of the spectrum, but to an extent, diligence can make up for income and secure a decent retirement.”
Everything before the “but” is just insincere windows dressing. This is just some more bootstraps BS.
We certainly have problems, but we can’t expect “society” to solve everything for us. You can do the best with what you’ve got and campaign for better solutions at the same time.
The situation is what it is, and we all have a choice to make. We can give up and live for today, or we can save a little and not have to work into our 70s and 80s. And you don’t have to start at $10/day, start with whatever you can handle, and try to increase it by adjusting spending patterns, finding a better job, etc. The goal should be consistency and working it into your budget, not a fixed amount.
To be clear though, I’m in favor of policy changes to help out, such as a Negative Income Tax as a replacement for Social Security. Instead of basing benefits on how much you’ve contributed, it’ll instead be inversely proportional to how much income you have, so poorer people would get more than a wealthier person, which is absolutely not the case today. It could also extend to working years as well (i.e. if you lost a good job and are now stuck with minimum wage, you’d get a little extra to help out), since it’s based on income and not age.
If a policy change happens, awesome, you’ll be even better off if you’ve been consistently saving. But the focus should be on what an individual can do, not what other people should do to make the situation better.
I personally think it’s too long/complicated, and it should be replaced with a general guidelines and a wiki with more details. Essentially, I think it’s too complicated for people who need it. As soon as you get about halfway through the flowchart, you’ll find all kinds of situation-specific issues that a flowchart shouldn’t try to address.
My preference is a simple set of steps, not dissimilar to the Money Guy Order of Operations, and links to information about each:
Cash to cover deductibles
Employer match
High interest debt
Retirement savings
Save for other goals
Budgeting is one solution to getting there and should certainly be part of the discussion. The flowchart goes into far too much detail to the point where I can see it becoming overwhelming, and it misses a lot of nuance and often says “evaluate X vs Y” without giving information about either X or Y.
So my preference is to create a wiki with the top of the flowchart as the landing page, and have a wiki page for each step. For example, step 0 would have information on different kinds of budgeting strategies, step 1 has details on what should be considered an emergency and what shouldn’t, and so on.
I agree that it seems to be targeting someone who already knows the basics but need to get more organized about it. A simplified version like you describe might be better for people that are coming with near 0 knowledge.
I could see something like your list and then could click each bubble and it would expand and go into details or give suggestions.
I would guess 401k withdrawal is a bad call; they carry pretty significant penalties for early withdrawal, but I wouldn’t fully rule it out either if I was in your scenario.
I can’t really make suggestions about loans and I’d warn you against them if possible because you’re unlikely to get much besides a loan shark. Regardless, I have some other suggestions.
While you’re searching for a job in your field, also be applying at literally any place you can find - fast food, retail, anything to get some money coming in. You don’t have to mention it during other interviews, but it could be key in keeping yourself out of crippling long-term debt. When you get an interview for a better opportunity, you can call in sick or arrange to switch shifts. 1b. Talk to friends and family to see if they or anyone they know has an opportunity. It could be helping with yard or house work, odd jobs, or a position where you can get some stability.
Cancel all subscription services, including pausing those servers. If you don’t have enough money for rent or food, then you don’t have enough money for those luxuries.
Contact your loan provider about getting a deferment due to your situation.
Consider getting roommates, even if that means moving.
Thanks for spending time to write this, I will hold off on the 401k and loan decision. Yeah, will eventually have to pause all those servers. And try other areas outside of my sector for work, which in itself might be fruitful experience in a way. I will find out if I can defer the student loans as well.
I have been “managing” my debt by getting new cards with an introductory 0% APR and low balance transfer fees, and just doing balance transfers when each card’s intro APR expires
I do NOT condone this as a “financially healthy” solution, but it is slightly better than paying the interest when those 0% APRs expire. It’s kicking the can down the road, in order to avoid getting beaned in the face by it.
I got lucky and got a job recently, but had been out of work for months before. The job “market” fucking SUUUUCKS. I hope you are able to find a good job that pays and treats you respectfully. You deserve that.
Thanks for the motivation, it does suck. That’s a good idea though, haven’t thought of that, I will look into some now. Generally have been avoiding opening new accounts and have had only 3 cards for most of my adult life.
The fact that you only have 3 cards is a good sign that you have a healthy respect for the disadvantages of taking on debt (however necessary it may be to live a modern life). Credit companies prey on those who don’t have that, and/or are desperate enough to have no choice.
To me, credit cards feel like deals with the devil, but in a screwball fantasy world where there’s actually a lot of documentation on devil deals and how to get your soul’s worth out of them. What a goofy financial cyberpunk world we live in.
Yes. It’s important to do the math on which costs more: the transfer fee or the interest that will have accumulated by projected payoff date. Excel or LibreOffice Calc are very useful for this
I agree with the other commenter that you shouldn’t, but I have done exactly what you described because I was super poor and desperately needed the cash.
personalfinance
Hot
This magazine is from a federated server and may be incomplete. Browse more on the original instance.