Comment by roenxi | Hacker News Reader

Comment by roenxi | Hacker News Reader

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There is a real problem with asking 'to be given financial advice'. Before any meaningful talk can be had about setting common financial levers to get a result, what people really need is someone to sit down with and have an in-depth conversation about what life goals.

You can't really receive meaningful financial advice without taking position on the following:

1) Are you comfortable committing to a lifetime of working?

2) Is there reasonable scope for a high risk high reward venture? Eg, entrepreneurship, acting.

3) Do you determine your personal comfort in terms of how other people perceive it (expensive & common option), or do you use your own metrics?

4) What is your personal understanding of retirement?

Without that orientation, there isn't really a generic position to take on debt (it might be good or bad). There isn't a generic position on investments (might be good or bad). If someone is really being taken to the cleaners maybe there is a quick change to be made, but really "personal finance" is more about expectations and habits than knowledge ad howto guides.

The fundamentals of personal finance intuitively easy to grasp, to the point of absurdity - if you consistently spend more than you earn, you will run out of money. End of the story. If you spend a lot less (10-20% of your earnings go into savings), you will weather surprises easily. If you earn a stupid amount less (40%+ pre-tax earnings saved) you will have a very easy later life.

That all only scratches the surface of orienting a strategy, let alone the details of how the myriad investment options and retirement mechanisms work.

I don't think that's true at all. I think the main thing for young people to learn is that being frugal, avoding luxuries, is probably more important to financial well being than earning a lot of money. Also that as your income rises you need to be aware of (and fight against) the natural urge to spend (and often waste) more money. Need to fight against the urge to "spend what you earn" and develop habit of saving money every paycheck.

Our society encourages outrageous consumption of unnecessary goods at ridiculous prices. It's not hard to live much more cheaply if you can get over (difficult) psychological hurdles of (1) disregarding marketing that we're bombarded with every day, and (2) getting out of the competition for social status. What's more, you will tend to lead a happier life if you can do this. A good book that I don't think was mentioned in the linked page is "Why Smart People Make Big Money Mistakes".

Also, my mind has been boggled by what people seem to take from even good books on finances. For example, _The Millionaire Next Door_ is a good book. But I have friends who have read it, claim to believe it and try to adopt some of its advice, but the life they lead is ridiculously extravagant, not at all consistent with the book. Self-awareness of bad psychological attitudes towards money is not always easy.

> Also that as your income rises you need to be aware of (and fight against) the natural urge to spend (and often waste) more money.

This is probably the most important thing to remember. For many years every time I received a raise, I just upped my savings/retirement by the same amount. My take home never changed, so it was easy to stay at the lifestyle I had become accustomed to.

Perspective is also important. I did not have much growing up, so while what I have now is modest it is way more than I ever thought I would have. Another trick is to listen to old rap ;) In the 90s it was extravagant to have 50" TVs and game systems.

Plus now when you pager beeps people think you are a on-call doctor rather than a drug dealer.

>I don't think that's true at all. I think the main thing for young people to learn is that being frugal, avoding luxuries, is probably more important to financial well being than earning a lot of money. Also that as your income rises you need to be aware of (and fight against) the natural urge to spend (and often waste) more money. Need to fight against the urge to "spend what you earn" and develop habit of saving money every paycheck.

My being 28, sorry, but I wouldn't call this good advice. My dominant expense is and always has been rent. I can cut everything else to the bone, and it won't make half as much impact on my savings rate as finding a way to just live somewhere less obscenely expensive -- and yet having work for me to do.

I am super grateful to Microsoft. They moved me to Seattle + moving expenses and paid me enough so I could save to buy a house and applied for my green card. For someone from Kenya, I am very grateful for the life I lead.

> Self-awareness of bad psychological attitudes towards money is not always easy.

How true!

This comment shows that you'd awful at giving advice since you seem completely unable to introspect on your own preferences, see them as preferences, and understand that other people have other preferences that lead to different optimizations.

Most people in their twenties haven't thought of answers to your questions, and don't have the kind of plans that financial advice presupposes.

I agree. Financial advice for someone in their twenties should probably start with getting them to think about the above questions in some detail. Once you have answers to the above, your financial choices become significantly more obvious.

These are a few things someone could think through in an afternoon. Perhaps too much of the self help and motivational encouragement people receive is to blindly press forward without thinking.

No one thinks twice about checking the map/GPS to make sure that the road they are driving on actually goes where they intend to end up. Yet, many will work hard and pay loans for years without minutes or a couple of hours of upfront critical thinking and very basic grade school math.

You don't need to get that deep. Most young people need to be filled in on basic information that they should have been taught in school, and that's where I would start:

- A summary of the different kinds of retirement accounts, e.g. 401ks, IRAs, Roth vs traditional, etc.

- Basic understanding of compound interest, and its impact on loans and investment growth

- The importance of having savings for an emergency

These things can be taught to young people without requiring a psych eval and a detailed questionnaire.

Good points. But on the attitude questions about how one feels about a lifetime of working and what retirement means to them, the way a person at 20 feels (a kid, really) is not very predictive of the way they'll feel at 55 years of age. It's hardly worth taking their feelings into account at all.

Well put

Life can be diverse in experience (speaking as a man unemployed for over a year at one time) and ultimately finance is about risk management

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