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Comment by beardicus | Hacker News Reader

> Grant is promoting saving the money you earn, but counter to most advice, he says to put the money in a good old-fashioned savings account — where your money is accessible at a moment's notice — until you have at least $100,000. Then, you can start investing.

I get what the guy is saying, sort of, but it's also the stupidest advice ever for most people. Saving $100,000 in a savings account is a whole lifetime of savings for many people. Meanwhile you're earning nothing on it, and it's not tax advantaged.

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One issue is Cardone's advice is often spot on for people already starting to buy into his mindset, but bombastic and unrealistic to everyone else.

His core message is about increasing income through huge effort above anything else. So if you're making $50K, it's all about doubling down and hammering your way to $100K, saving the difference in the bank, and then once you have that emergency fund, save to invest.

As you suggest, the majority of people can't or won't do this so the advice isn't really viable for the majority either.

He started a 50k early and has no college debt, which is a wonderful starting salary and situation that the vast majority of Americans don't see/have.

Not even many college educated Americans. His accumulation to 100k was a few years, saving 40% of his after tax income since he wasn't paying down debt.

That's wonderful for him, but I don't think it's mass advice to give back to the world. It's just sort of a 'glad that works for him'.

> Meanwhile you're earning nothing on it, and it's not tax advantaged

In some situations, you may be earning negative money! Inflation may beat whatever measly fraction of a percent your savings account earns in interest.

If you're content to leave a pile of money in an account you can spend from whenever necessary, why not at least use a Money Market? It's slightly better than a plain old savings account, but not as risky as other investments. Or, setup revolving CD's, so your money is at worst 30 days away.

A regular savings account is simply not a good place to park that much money. It's the safest, but that safety comes at a cost.

> Meanwhile you're earning nothing on it,

This is not what he's saying. The premise of the argument is that with $100,000 (or, if that's a lifetime of savings, $20,000) you can earn more by investing this in yourself than your 401k would.

He asserts that this is true because that's what he did, and it worked for him.

I would counter that this sort of good result does not work for everyone. If there was such a foolproof investment technique (Flipping houses? Picking stocks? Some secret in the "How to get rich quick" book he's selling?) then your 401k managers would do it.

Many entrepreneurs and small business lose money, and you can't extrapolate the results of a few successes over all potential entrants, except as a distribution. A few angel investors have made this work, but that doesn't mean everyone can do it.

No .. there is something to it. I socked away cash in my 401K and then found myself with a big fat 401K and not being able to afford the insane downpayment required to buy a million dollar home. Home prices in a few places increased by quite a bit over the last few years. So by not having cash accessible, I had a big setback. Since then, I lowered my 401K contribution to just be what the company matches. I expect I'll be able to increase it after I put in that 20% down payment. Btw .. I did look into getting a loan against my 401K for purpose of buying a house but I think there is a limit that doesn't reflect the current market in the Bay area (don't remember but something like 20-50K; too early to remember the details).

I think the moral of the story is that no single piece of financial advice is likely to apply to everyone.

For most people 100k before putting anything into your 401k is overkill, but for someone who wants to buy a house in SF it probably isn't.

I'd far rather hear about where to put that $100k than where to build it.

> I'd far rather hear about where to put that $100k than where to build it.

Typically, you'd put the money someplace where it does work for you (ie. earns more money).

Parking it somewhere where it does nothing can actually harm you since inflation will eventually diminish the value of your parked money, even if it's the same number of dollars. This is even true in most savings accounts since they pay so little interest.

Essentially, the author's advice is generally the opposite of what you'd normally want to do.

so, a cd. You can't buy an index fund, because for the timeframe we're talking there's a high risk the market will be down when a big opportunity presents itself.

My problem with the article is that it's missing the important piece, which is the types of opportunities this guy is talking about. My personal experience, is about once or twice a decade a good investment (10% APR or better with low risk) comes my way. Housing is an obvious one in a several areas, but I've also seen business opportunities as well.

I'd say it's not great advice in general for most people though. You have to be vigilant for opportunities, and for most people, if you already have a mortgage, 401k is often better than IRA since it's matched (be careful of 401k with >1% annual fees, there's an inflection point where lifetime fees costs more than the matching).

I agree completely with you.

However, one minor nit-pick:

> 401k is often better than IRA since it's matched

Some IRA's are matched as well. SIMPLE IRA's for example, are effectively like a 401k for the user; your company still matches up to some percentage, although you gain some freedoms in being able to take your IRA account to any investment company, not just the one your company chose. SIMPLE IRA's are cheaper and easier for a small business to run for their employees.

You don't seem to get the other half of the advice - earn more money. Get better at making money. If you spend a lifetime to save $100,000, you won't be a millionaire.

"Earn more money" seems like the most tautologous kind of financial advice.

The advice in earning money is good. The advice on where to park it is absolutely awful. Learn from Trump and Romney here: you must get the taxes under control. If you put 100k into a bank account, it will earn nothing and taxes will eat you alive.

The point of a 401k is that it is tax advantaged and the money is there when you get old, when you need it.

I can understand piling money in a bank if there is something you plan to do with it. But piling 100k in a bank when your only plan is "so NOW I am ready to do something with it" is some of the dumbest financial advice I have ever seen. Even if this guy is good at making money, he must be even better at spending it, and the tax man is going to be his biggest payee.

>If you put 100k into a bank account, it will earn nothing and taxes will eat you alive.

Huh? Assuming this is all after-tax money and isn't earning anything, what would you be paying taxes on exactly?

You pay taxes when you earn the money as salary, pay taxes on the interest. With a 401k, you pay no taxes when you earn the money as salary, and the earnings compound tax-free.

A bank account is the absolute worst place to park any significant amount of money. The only reason it's better than a mattress is you don't have to worry about the bank catching on fire.

You pay taxes when you withdraw from a 401k, and the IRS has minimum distribution requirements that ensure you will pay taxes on all that money at some point.

Personally I think a Roth IRA is the better deal from a tax standpoint -- pay taxes on contributions and then you're done. With a long enough time horizon and a little luck those contributions will be dwarfed by earnings, and I would rather pay taxes on the lesser amount.

A savings account earning >=1% interest is a negligible tax burden. What you lose from inflation is far greater than what you pay in taxes. Even so, saying it's "the absolute worst place" to put money is beyond hyperbolic.

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