In other words, a programmer should invest a bit more away from software than average, a realtor should invest a bit more away from properties than average, a coal-miner should invest a bit more away from energy and mining, etc.
If you have your job, you can weather a stock-downturn, and if investments are solid, you can weather a period of unemployment by liquidating some, but if both hit trouble simultaneously then that's much much worse.
I'm mostly thinking of folks that will passively invest in a big broad index fund, and then assume they've reached the end in terms of balancing industry/sector risk.
Oh, sure, it's way worse because of the fraud-angle, but even if it had just been a more honest kind of mania, the arrangement was reckless and bad.
give somebody $1000 worth of shares in their company, and a lot of folks will hang on to them. but if you gave them $1000 cash to invest, they almost certainly would not choose to dump all of that money into their own company.
In contrast, starting with Money and then choosing between StockX or StockY is an easier choice.
Presumably this is their total net worth. I think this is way more common than people on this type of forum realize. Most will work until they literally can't anymore, then scrape by on social security until they die. I think it's important to keep that perspective.
The average person is struggling in modern America.
The US is second in the world for median equivalised household disposable income, second only to Luxembourg and 10%+ above Norway. For daily median per person income after taxes and transfers, we're only behind Norway, Switzerland, Luxembourg, Qatar, and the UAE. Outside of petrostates, microstates, and Switzerland, no country has richer "average" people.
The US certainly doesn't have the safety net of some of these other states, but these aren't holes you're being thrown into by society: they're pits you've deliberately jumped into in 99% of cases.
Now, let's talk about insurance, that's also much higher. In states like California and Florida, home insurance is through the roof, in some states like NJ and NY, car insurance is through the roof. Both going up way above inflation (like the items in my first paragraph).
You might counter with energy costs are much higher in these European countries (and similar ones like Germany, Benelux, etc), and the purchasing power might be higher, but the wages are so so much lower.
That said, this trope of people misspending their money needs to consider this outrageous costs of things that many people around the world never need to think about. The shitty wages in France are overshadowed by so many essentials being available without a high cost or any cost in some cases.
A US worker at the average wage keeps roughly 70 cents of every labor-cost dollar; a worker in Belgium, Germany, France, Austria, or Italy keeps closer to 47 cents, even before you add in the effect of VAT. Nobody in Europe is getting those services you mentioned for "free" - you're just making everyone else pay for them with taxing their labor. You almost connected the dots when it came to property taxes paying for public services, but missed that Europe assesses income taxes.
>Now, let's talk about insurance, that's also much higher. In states like California and Florida, home insurance is through the roof, in some states like NJ and NY, car insurance is through the roof. Both going up way above inflation (like the items in my first paragraph).
This is a bundle of issues. As a quick list, compare the size/value of an average property in California or Florida to a property in Europe, assuming they even own the property (remember, Europe's home ownership rate is lower than Florida's). Same goes for car ownership costs: American cars are larger, more expensive, driven more, and are more exposed to damages from uninsured motorists, because states like NY, NJ, and CA think it's racist to enforce uninsured (or even unlicensed) motorist laws. Just like health insurance, allowing free-riders on insurance systems is financially disastrous.
>You might counter with energy costs are much higher in these European countries (and similar ones like Germany, Benelux, etc), and the purchasing power might be higher, but the wages are so so much lower.
I'm not sure what you're trying to say here. Yes, Europeans can get a number of services paid for by their neighbor, but it doesn't make them "richer" by any reasonable measure. Quantifying standard of living is incredibly difficult, because even as this exchange shows, people will value different things differently. But broadly speaking, my original point still stands: Americans should not be struggling to live in America, absent poor personal decisions, particularly if you're willing to lower the standard of living to that of an average European (a smaller rented property, driving far fewer miles in a compact car, no air conditioning, etc, etc).
>That said, this trope of people misspending their money needs to consider this outrageous costs of things that many people around the world never need to think about. The shitty wages in France are overshadowed by so many essentials being available without a high cost or any cost in some cases.
What outrageous costs are those? Community college remains very affordable, and costs for 2 years at a state school can be managed, especially against the greater lifetime earning potential in America. Healthcare costs OOP is capped at $9,200 on an ACA plan, which can be nearly free for middle to lower income brackets, and that debt itself is basically unenforceable in most cases these days, assuming you truly don't have the assets to pay.
24%
We are both German and in the 92nd percentile of the income distribution.
If so, by my rough math, you’re paying about 25% more in taxes than an equivalent American couple based on PPP. That American couple would have about $30K USD/26K Euro more in disposable income, would likely have good quality health insurance paid for by their job, be eligible for $3K to $4K in social security retirement income per month, and be able to individually contribute to tax free retirement accounts, tax free college funds for their children, etc.
Now redo the math.
I and most people in my peer group pay over 40 percent of income in taxes, and that's NOT including property taxes, which are much, much higher than in Europe. Some much more than that - like triple (city, state and federal).
State taxes were completely ignored from your math.
This message, and the message before it which I am at pains to rebut much of, contains a lot of misleading cherry-picking.
And you compared European universities to a two year county college degree? Healthcare costs were also greatly glossed over. I'm hoping someone else is triggered but if not I'll be forced to step in and correct this stuff.
The US median household pays roughly 10–12% of income in federal taxes. A German median-wage single worker's net rate is somewhere in the high-20s to high-30s percent.
Germany will be 10 to 20% higher in total taxes: income, property, sales/VAT, etc; than an American at a comparable professional income. If you claim to be paying 40, you'd be paying 50%+ in Germany. $10 to 30K a year more gives you a lot of room to save for college, pay for medical expenses, etc: the "safety net" in Europe only helps you if you don't want to work or don't want to earn a significant income.
States feature low or 0 income tax, including desirable places to live like Florida and Texas. Yes, they'll have property taxes or others, but again: personal decisions. If you choose to live in CA, vote for CA policies, then you have to pay for CA's waste.
If you read my comment, you'll see I'm saying you can minimize college expenses by doing 2 years at CC, then transferring, yielding a total college spend of just a few thousand dollars (not the absurd $100K student debt loads people incessantly whine about online). Healthcare costs are simple: if you pay for ACA-aligned insurance, again, your costs are capped: $10K OOP max sucks, but if you made the decision to purchase insurance, you're not paying the $200K medical debt people claim online.
My central claim was and remains: America provides more opportunity to earn money, and people misrepresent the "downside risk" of America's approach to healthcare, college, and income by refusing to acknowledge that the worst outcomes are of people's own making. America gives you far more opportunity to excel, but also doesn't backstop your personal failures with your neighbor's work to the same extent (at the individual level, ignoring govt. bailouts of companies).
Bottom line was that stuff is so much cheaper here than over there, that not much would have changed. We’d be able to save up a lot of money if we were willing to live frugally in the US though.
In the end the volatility of the current American political landscape in addition to the hostile immigration laws made it unattractive to move, at least for now.
Here's the easiest example: with ACA subsidies the average cost of an ACA plan is $50, with low income people qualifying for plans as low as $10 a month. This will cover basic preventative care like screenings, tests, and vaccines; and importantly caps your OOP maximum, preventing a financial disaster if you have a significant illness.
Despite all that, many people still aren't insured. They aren't insured despite it being massively subsidized for them by taxpayers. They aren't insured despite the government running advertisements throughout open enrollment.
At this point, if you have a complaint about a massive healthcare bill, my very first question is: did you have insurance?
The same ideas apply to college, housing, cars, and health/diet: "the system" gives you a massive range of options, but people consistently choose poorly, shortsightedly, and wastefully. People need to take personal responsibility for their decisions.
Some people don't even have $10 per month spare. Wealth inequality in the USA is extreme. But more importantly: they are busy and stressed. If it's so easy to get health insurance it should either be mandatory and automatic, or it should be a checkbox on your taxes or some other form.
When I paid my student loan it was a matter of just ticking a box on the employment tax declaration that I had a student loan. And then it was automatically taken from my paycheck. It wasn't about the money, but about the ease of use. If I had to send a monthly payment with a paper check I'd surely miss payments.
The phrase "personal responsibility" is a thought-ending cliche used when someone doesn't want to see the big picture. It's like if Microsoft changes Windows 12 to break Valve games and you blame the game because "developer responsibility" or "executable file responsibility" and ignore the bigger picture that Microsoft is trying to drive Valve out of business to move games off Steam and onto the Microsoft Store.
For loan payments, somehow generations managed to pay mortgages, property taxes, and more with nothing more than a checkbook they manually balanced and gasp paper, envelopes, and stamps. Again, even if you have to log into a website to manually trigger an ACH, put a recurring calendar event in your phone and include a link. I bet you could get that down to 3 minutes a month, assuming they don't have autowithdraw.
Your Windows/Valve example has Windows taking action to make things harder for people. All the examples you provided are things that are easier now than they ever were in the past.
Even your initial premise that these options are inherently self-destructive is wrong. If you're a trust-fund kid and want to study art history for $100K a year, great! We shouldn't take the option away from everyone just because some people rack up $200K of student debt. We shouldn't further bureaucratize and regulate the healthcare system just because some people are too busy (read: watching TV) or stressed (read: can't follow instructions written at a 4th grade level) to work through a few questions on a website.
401k lets you rebalance a portfolio with zero tax implications.
The downsides are generally high fees and a 10% penalty for early withdrawal which makes them surprisingly bad for young people. They tend to start in lower tax brackets, have fewer reserves when unemployed, and face fewer risks from an unbalanced portfolio.
Pay down debt then Roth IRA when young 401k after 40 is often better than defaulting to a 401k, but saving anything tends to be more important than such optimizations.
Cars, student debt, credit card debt all gone. (And I dread needing a new car). Covered downpayment on my house and cash for a nice shed that matches the house and a fence so my kid can play in the back yard with no issue.
Invested low 5 figures into myself taking a year off and now I am getting serious about the 401k at 41. And I am ok with that.
I never worked at a big tech company and I covered my mom's down payment and appliances and new carpet and part of her move for her to move close to me. Dad died when I was 11 so I am all she has and she was a public school teacher so she's on a small pension.
We all walk a different life and I know people that make my entire life savings in a year but I will eventually grow a retirement to get me through 10-15 years and then it will be what it will be. (Maybe a tank of helium and bag)
So most people get taxed at lower marginal rates in retirement when they take money out. Which makes deferring taxes a meaningful advantage. This is especially true if you intend to money to a state with lower tax rates in retirement, but a worse deal if you intend to do the reverse.
Surely you need about 20 years?
1x is plenty IMO.