Hacker News Reader

Comment by borplk | Hacker News Reader

> "Wealth is accumulated through habits" is a great story to tell people but it seems very often to be complete BS.

Yes. It's capitalist propaganda. If you are a highly paid heart surgeon or CEO you can "accumulate wealth with habits". If you are anywhere between flipping burgers to many other types of jobs there's just not enough money "coming in" for these things to make a huge difference. You can be more sensible with your money and you may end up with a slightly nicer car, a slightly bigger house in a slightly better location than your other careless peers. But that's about it.

View on HN

That's exceptionally untrue - though it can be true in context. In the city beside mine, renting a place downtown, and working in the grocery store it's very possible to save $500 per month. For reference, minimum wage is the equivalent of $1700 USD, and renting a one-bedroom, all in will cost roughly $454 USD. With cellphone (250GB of 5G speeds) costing the equivalent of $15 USD, and groceries and electricity costing another $350, there's still plenty of space. Investing that money in the S&P at its historical rate, for 45 years will yield $2.3 million (rounded down).

Now, quality of life would be rubbish. But it's technically possible.

And most people don't flip burgers. The median household income in the US in 2019 was $68,000/yr [1]. In the part of the US I am from, and the parts I have lived most of my life, this affords an extremely good quality of life with plenty of room for intelligent financial decisions.

So crying "this doesn't apply to people with really low incomes" is true to an extent, but that's only a fraction of the population. Going around saying "well, you shouldn't give that advice because it doesn't apply to everyone, it only applies to most people" is insane.

[1] https://www.census.gov/library/publications/2020/demo/p60-27...).

> Wealth is accumulated through habits; at least in a free society like ours.

This is a pretty universal statement if you ask me, and used in the context of praise of someone who started with wealth.

Pointing out that it does not apply universally, and the extending the idea to state that people in poverty are not truly participants in the "free society" mentioned, is a fair development of the discussion in my opinion.

>The median household income in the US in 2019 was $68,000/yr [1]. In the part of the US I am from, and the parts I have lived most of my life, this affords an extremely good quality of life with plenty of room for intelligent financial decisions.

It depends what you define as a good quality of life, but I don't know of anywhere in the US where $68k comes anywhere close to protecting your family from an unexpected medical or legal expense, especially one that causes a disturbance in the income stream. Personally, that disqualifies it as a "good quality of life".

The biggest weakness is once you get into the 50 to 65 year age range. Your odds of health issues or economic conditions decrease your chances of having decent employment, especially with subsidized health insurance. Your insurance premiums also rise to about $22k per year at the silver level, with a $17k per year out of pocket maximum.

And you have no assistance until age 65 when Medicare kicks in. So if you get don't have an employer with deep pockets after age 50, and you get into a healthcare crisis, all of the assets you've saved up are now in play before Medicaid will save you, and now your family is left with not much. This is the reality for many, many Americans at $68k per year, no matter where they are in the US.

I assume the whole point of picking the S&P 500 and not, say, Bitcoin is that it is something that an average person would reasonably invest in. Presumably you don’t live in the US. Who exactly is working at a grocery store abroad and putting their savings in SPY for 45 years? Are there average people abroad who would’ve invested all their money in US markets for the past 45 years and considered that a financially sound decision? If not, the example given kinda feels cherry-picked.

I'm in Israel. This is extremely normal. We have trackers on the TLV. If you work anywhere and have any sort of pension, the default (i.e you sign your employment contract, and forget about life) is 80% tracking the S&P 500. To be clear, pensions are a thing in this country - most employees are legally mandated to pay into them, with pre-tax dollars that are received as a credit, with an employee match. That amount is 7% of your gross salary. Meaning, in my example, at a minimum, the average Israeli is saving $122 (USD) per month.

Interesting, did not know. Thanks.

Rubbish quality of life likely means further investment into mental healthcare so someone doesn't burn out of their shitty life.

And that's assuming nothing happens (literally nothing) that sets you back. Nothing breaks, no emergencies, no health scares, no economic shocks. The likelihood of this is very low.

It's technically possible, but involves forsaking: personal mobility, the ability to start a family, private healthcare, taking leisure holidays, costs of seasonal cultural/religious events, the ability to buy a home and any safety net for disasters, emergencies or unforseen events. It also excludes inflation, which is likely to outpace any pay rises or promotions.

Even if self-imposed, I'm not sure choosing to live a life which excludes things listed on the Universal Declaration of Human Rights should really count. This is why the idea of a "living wage" was created, to show the cost of entry to participate in society as it is - more than simply having a phone contract. https://www.livingwage.org.uk/sites/default/files/LWF%20Life...

The problem with the analysis is -- minimum wage has barely increased while costs have markedly increased.

What are the odds that the rent will stay the same for 45 years (per your analysis) and what are the odds that minimum wage would go up equivalently?

You also missed: taxes, healthcare premiums, healthcare copays/fees, transportation, dental.

> minimum wage is the equivalent of $1700 USD

Your first mistake is assuming you can get a minimum wage job for 40/hr (with benefits?). Maybe you can get 2 20hr/week jobs with no insurance, if you can schedule them right and travel between them fast enough.

> renting a one-bedroom, all in will cost roughly $454 USD

A room in a rooming house where I live costs $400/month, so I find this pretty suspect. Where is this extremely low COL city? Or is this assuming you have 3 roommates?

> With cellphone (250GB of 5G speeds) costing the equivalent of $15 USD, and groceries and electricity costing another $350, there's still plenty of space

$350/month for food seems low presuming you're working 40+ hours/week at multiple places. I'm assuming you're going to end up buying some prepared food at some point because you're run off your feet.

Your expenses don't include a car - does this extremely low COL city have an amazing public transit system that will help you get to your not-9-5 shifts? Or are you going to spend an hour waiting for the bus each way? How do you swing that if you have two jobs?

Assuming you don't have benefits, you better not take any prescription medication, or need glasses, or sustain any injuries. Even if you do, what's your co-pay like?

You still haven't purchased any clothes, shoes, any sort of entertainment, or enjoyed your life in any way. You need to wait until you're 65 to begin to live your life in any meaningful way, assuming you made it that far. And you certainly don't have kids to help take care of you!

Good analysis. I'd like to add the cost of change. At some point you will move places or change jobs. You will have periods of less income and more spendings. This adds up. A few months of saving evaporate.

As I mentioned, elsewhere, this is in Israel - and clearly not a HCL city like Tel Aviv. While I'm not the example, I pay less than this for many things, simply because of city I live in. My cell, with 250GB of data (as an example) is 29 NIS - about $9 USD.

Prescription medication, and glasses are covered by our equivalent of HMOs. Depending on income levels these are literally free. There are no copays - we have socialised medicine.

Yesterday, I bought a pair of jeans and a t-shirt at Fox, the local store. Their cost - 55 NIS (that's ~16 USD). For a further data point, a monthly inter-city transit pass costs ~256 NIS so < $77. It also takes an hour to get from a low cost of living city, to a HCL city where one is paid more than these minimums.

Again, I don't think that someone doing this would have a high quality of life. I'm just saying that it is very possible - but it depends on many things.

Did you live like this for a period of more than 5 years? You just gave a snapshot from an ideal situation. Fact is, income is always less, spendings are always more. Don't know about the US, but in Europe living on minimum wage, trying to cut all costs, there is very little you can save.

My grandfather flipped burgers in high school and worked his way up to VP of a glass installation firm in the Mountain West, providing his grandchildren with a college education and a small nest egg.

But if you are ego-centric then I can understand why you’d be bitter.

Reply on news.ycombinator.com