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Comment by hinkley | Hacker News Reader

The value of saving 10% of your income isn’t only about what rate of return you can get for it. It’s also about normalizing your expected standard of living to 90% of your salary, instead of >105% as most people do.

If you get to old age having spent every penny you earned, your standard of living will fall off a cliff when you can’t or won’t work anymore. Someone who saved has both a larger budget and lower expectations of burn rate.

People who can’t fathom having a 6 month emergency fund are somewhat self perpetuating. People with 3 months will find they’ve moved the goalposts closer, and they just need time to get there, but less than they expected when they had 1 month in the bank.

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Honestly thinking you will save your way to a great lifestyle is a middle class and very flawed concept. Nickel and diming your life by not going to starbucks and living in a cheaper apartment does nothing.

In our demographic there are a lot of people who struggle far longer and harder than they need to. But there are also a lot of people struggling to stay in the middle class, and some of the same advice applies.

The watershed moment for me was when I realized I could pay for a burst pipe or a dead transmission or a spontaneous road trip without reaching for credit cards. Not just financially but emotionally. Money stress leads to more money stress, on and on in a loop. Had front row seats for that my entire childhood. That thread runs through my entire life. I'd rather find a way to improvise around not owning a specific tool than buying a cheap one. The "best" one is often the third most expensive, but occasionally it's the third least expensive. Making the time to think it over saves me at least as often as not.

$5 on Starbucks has different connotations for different people and in different contexts. If you can't pay your bills and have a daily Starbucks habit, then the Starbucks is a sign of a real problem you need to look at. But if it's the glue that maintains important social rituals, then maybe you keep it. If you have white coat syndrome, and that $5 Starbucks is your reward for getting that thing on your arm checked out, then spend it. Get a scone too. Because that could be the best $10 you spend in your entire life. Same for your favorite ice cream or perfume or steak after asking for a raise, or doing an interview that intimidates you.

Hedonism is not your undoing. It's the treadmill that undoes many people.

Counting pennies doesn't save anyone, no. In fact it's my r/unpopularopinion that counting calories doesn't make you lose weight either. It's the mindfulness about calories or money that works, if in fact anything dues. Treating food or spending as an emotional bandaid doesn't work and creates a greater need in the future. Fad, elimination diets suck all the fun and pageantry out of consuming food. Which is why so many impossible ones seem to work for some people. Food and money aren't fun. They're fuel. Where can you get with them?

> white coat syndrome

I'm not familiar with this turn of phrase, would someone mind explaining it please?

Edit: never mind, I googled it. I thought it was a colloquial phrase, but it turns out it is a real thing.

https://www.bloodpressureuk.org/your-blood-pressure/getting-....

You're mathematically incorrect, unless you consider a typical worker saving 25% of their take-home "doing nothing".

A typical take-home for a month's work in US might be $3000. Cheaper rent could net you $300-$600 more, which is between 10-20% of your take-home. Not going to Starbucks every day, saving $5 a day let's say, works out to 5*30 = $150 bucks a month, a full 5% of the take-home pay.

Is 25% really nothing? Maybe you make so much money that $450 bucks a month isn't a big deal, but most people don't see the insidious nature of costly habits and how they're spending thousands per year on their quality of living.

Sure, Starbucks is negligible, but that much rent (assuming you're not in San Fran) makes the difference between a nice apartment in a nice location or a bad one in a bad location (or some such mix) in many place. There's all sorts of other implications that come with a better place that we can't necessarily chalk as simply extravagant unneeded spending.

I think where people get into trouble with fractions and especially where money is concerned, is in not realizing that lowering an expense by 1/4 means that the same money lasts 1/3 longer.

I can't count the number of times I've had to explain to someone, especially in project roadmap discussions, that ±20% doesn't cancel out. 1.2 x 0.8 != 1.0. ±5% almost does, and people extrapolate to larger numbers and make strategy based on it.

There is a fairground/fundraising con based on this.

Customer gives you one or two dollars. You set up a card to keep track of a set number of coin flips - 10 say.

The deal/catch: - heads = multiply their money by 1.25. - tails = multiply their money by 0.78.

People will usually see +0.25 payout vs -0.22 cost instead of the actual fractional payout as you've already noted.

The nice thing, is one person flips a coin and is the crowd pleaser, while another is the note taker. People can join at any time.

Let's say you forego your $5 Starbucks just one day per week and put it into mutual funds. $5 * 52 weeks = $260 extra invested per year.

Let's say you keep doing that each year from the age of 20 until you turn 60. Assuming an average annual rate of return of 8%, that Starbucks money would be worth ~$73,000.

Even though you only put in $260 * 40 = $10,400 total over that 40 years. Just accumulated compound interest over time works out to that.

Do it for 10 more years (50 years total), and a $13k total investment will grow to $161k.

So I'd say it does more than nothing. You don't have to go nuts with it, but even just starting early and putting in money every month, will eventually add up to a lot more than you put in.

By the way, it doesn't HAVE to be a Starbucks coffee you forego, it could be anything, or just a certain amount set aside for the investment, it's just a common luxury that's easy to replace (make coffee for a tenth of that at home) and cheap enough for illustrative purposes, which is why they use it a lot as an example. Keep the Starbucks and eat out one less time per week, or buy one less video game per month, or whatever.

If you're poor and don't really have the room in your budget for $260 a year, do whatever you can afford. Even $60 a year ($5/month) would become ~$37k after 50 years (for only $3000 put in). And hopefully over time you can better your circumstances and afford to put in a little bit more.

Disclaimer: Assumes global stability, no WW3, no environmental devastation in 40 years, etc...which is starting to look less likely.

Site where I put those variables in for the calculation: https://www.capitalgroup.com/individual/planning/tools/inves...

Would you consider not eating at a restaurant once a week for 18 years in order to save for a kid’s college fund ‘nickel and diming’?

Did pretty much that for twenty years (more than one kid) - I considered it a positive 'nickel and dime' expense that has paid off with kids graduating (honours) without a dime of student loan debt. Initially it was driven by 'not having that opportunity ourselves (spouse & I) and looking into the future and deciding that whatever education choices our kids made it wouldn't be lost value to save a bit.

One thing I'll note is that like a coffee habit, after the first year or so the concious thought of the expense disappeared - 'out of sight, out of mind'.

Yes.

Not to mention college funds are a bad idea.

If your kid isn't a dummy, they don't need a college fund. If the kid is a dummy, they also, don't need a college fund, because they shouldn't be going.

Are you insinuating that kids that can't get scholarships are dummies? Who are all of these idiots that pay for college in your statement?

I had no idea scholarships were a thing until I was well into university. No one ever mentioned them to me and I had no idea of the concept so I didn’t ask.

That said I wouldn’t have got one anyway because my life started falling apart in the last couple years of high school. Still got a physics degree though.

> Are you insinuating that kids that can't get scholarships are dummies?

No, that's what you are doing.

> Who are all of these idiots that pay for college in your statement?

I didn't say idiots, you said it.

What an asinine take. I was only able to afford college because of the post-9/11 GI Bill, and even then I still walked away with student loan debt.

I'd be in a much better position today if I didn't have to spend time in the military and income today to pay for college. So I'm ensuring that my kids won't have to do the same. Why would I ever want to burden my kids like that.

I got a job in college that opened a lot of doors for me later in life, but at the time what mattered the most is that I could work fewer hours and still pay my bills, allowing me to pay more attention to school work and the other life skills that going away to college are supposed to teach you.

I had friends who made it all work far better than I did, juggling a job and studies and extracurriculars, but only a fool couldn't see that they were walking around with a handicap in the form of having to pay as they went.

Not working at all in school ends up being a liability when you graduate, but if the alternative is being forced by necessity to work to graduate, I'm not sure how much better the cure is than the disease.

You were/are willing to go kill people you've never met and get killed, for money, and my take is asinine?

People are something else.

https://www.mrmoneymustache.com/2011/04/06/meet-mr-money-mus...

This guy almost certainly makes more money off his blog now than he did before "retired", so he's not a good example (although there's some good information on that site).

Proper retiring at 30 (not just "I'll keep hustling but in an unconventional way, i.e. having a popular blog" requires a lot more savings or a much more austere than people assume. And often doesn't take into consideration future medical expenses (especially in the US).

Couldn't find anything for 30 specifically, but here's for 35. Assume even higher numbers for retiring at 30:

"To retire early at 35 and live on investment income of $100,000 a year, you need to have at least $5.22 million invested on the day you leave work. If you reduce your annual spending target to $65,000, you'll need a starting balance of about $3.25 million in a taxable investment account."

https://www.businessinsider.com/personal-finance/how-much-mo...

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