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Comment by tswartz | Hacker News Reader

It seems that most people are immediately pointing to why the author is wrong or that his numbers are incorrect. I think we are missing the broader point that spending less than you make and saving consistently for 10+ years is going to help you have the financial freedom to work less. Save 15% of your income into retirement and you will be set.

Another key point is to stop thinking that there is good debt (i.e car loan at 2%) and to stop the 'keeping up with the Joneses' mentality. If you need a loan to buy something besides a house, you probably can't afford it. Being debt free can give you a mental and emotional peace that is hard to find elsewhere.

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Is it really all that interesting to say that if you save a big piece of your income, you will end up with a large pile of money which will greatly improve your financial position? I mean, I thought this was the sort of obvious thing that everybody knows, like that the sun rises in the morning.

The hard part isn't knowing that you should save. The hard part is figuring out how to save, and figuring out where to put your savings. The article doesn't help at all in this respect.

If the article is merely saying that you can improve your financial situation if you save a lot of money, then it's pointless. If the article is giving more specific advice than that then saying that you can improve your financial situation by specifically getting a great job as an executive and putting your savings into investments that are so good they're effectively magic, which is also pointless.

You know, I don't think everyone knows this. Many people I know chose living with their parents and no job over paying rent but getting savings. Not to mention thinking no retirement account and a tax refund is better than a 401k and $0 back on their tax return.

I'm still working on explaining why a savings account with .75% interest is not a good place to keep money long-term.

I don't know that there is much in the way of good debt practically available to most people, but your example is bad. If your choices are:

1. Buy a car with cash up front.

2. Buy the same car with financing at 2% APR.

Then you should exercise option #2, and take the money you don't immediately spend and invest it aiming to get 4% return on investment (which should be achievable), then pay off your loan and realize a net 2% return.

The problem with option 2 is that it doesn't take into account risk. You need a much higher and more secure place for a return to alleviate risk. Similar to what others said most people are taking out loans for things that they don't have the cash for. They aren't taking out the loan at a low interest rate so they can invest their cash somewhere else. But they are told, take the cheap money and invest elsewhere. They just forget to do that last part.

This may well be true, but the takeaway there is not "2% APR is bad debt," it's leading into the confluence of issues about how to get people to invest.

You're right.

But in general when people take out loans to buy cars they do so because it is a big purchase for them and human psychology may favor spending more if it comes out of an account in little chunks than all at once. So the "debt is okay" attitude is not good for those who do not know and cannot properly correct for their inherent biases towards spending more in small ways than in one large purchase.

I follow a slightly less aggressive, but similar strategy to the OP. I save about 30% of my income in most months. It leads to some fun financial benefits like a much higher interest rate on your savings and checking accounts and easy financing terms. Sometimes you can have your cake and eat it too. I saved up all the money for my car and they gladly gave me 0% financing (having almost no debt and a perfect credit record doesn't hurt either). I took that and kept the money in a stable investment.

Sometimes the trite saying of "Money makes money" is spot on. For most people though, you're right, that 2% deal would be a steal.

The advice is only sound if you can find some investment that will consistently generate over 2% for you over the life of the car loan.

Getting more than 2% annualized return isn't terribly difficult. Getting 10% annualized return like the OP says is super-hard.

There are lots of pretty safe investments that get you 3-4% real return. Now, are they zero risk? No. But I'm not suggesting that anyone bet their life savings on this, I'm talking about buying a car, something that people will generally do a bunch of times in their life and won't be spending their retirement on. If you can get 2% APR on your car purchase, and you invest the money you save, you should more than cover that APR the strong majority of all times.

The point is well taken, but sitting on my couch in PJs everyday would definitely make me very, very depressed; economic freedom or not. I'm very sincerely happy that this guy found his way, but I can confidently say that this is not for me.

Along the lines of what you say about debt reminded me of this: http://jasonkelly.com/books/fsp/

Exactly. A lot of people here are mistaking the trees from the forest (as programmers are wont to do), but the guy seems to be doing it, so he can't be that far from the truth.

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