all the financial advice you’ll ever need
September 16, 2013 1:26 PM   Subscribe

 
Save. Not too much. Mostly plants.
posted by miyabo at 1:27 PM on September 16, 2013 [91 favorites]


Point -1: Get a good job that gives you discretionary income to invest and save.
posted by 2bucksplus at 1:28 PM on September 16, 2013 [111 favorites]


This is really great advice for people who have money in the first place.

(Which to be fair, the post acknowledges).
posted by MoonOrb at 1:30 PM on September 16, 2013 [4 favorites]


Oh pay the credit card on time??? Makes sense now that you say it! I just pay it at random times!
posted by mattbucher at 1:30 PM on September 16, 2013 [16 favorites]


Left out: Think about that thing you wanted sooooo much that is now at the back of some closet. Think about it when you want something sooooo much.
posted by hexatron at 1:32 PM on September 16, 2013 [11 favorites]


Yeah but that doesn't stop me from buying my entire amazon wishlist because ambien.

alas
posted by elizardbits at 1:34 PM on September 16, 2013 [28 favorites]


Oh so THAT'S what I've been doing wrong! I guess I shouldn't have invested in all those individual securities rather than diversifying with a Roth IRA

j/k I live paycheck to paycheck
posted by showbiz_liz at 1:34 PM on September 16, 2013 [60 favorites]


The card came out of an RBC chat I had with Helaine Olen regarding what I view as the financial industry’s basic dilemma: The best investment advice fits on an index card.
Emphasis mine. I wish the actual message of this index card was more front-and center in the post: It's not "Do these things and you'll be financially secure," it's "Financial advisors make millions of dollars but fiscally responsible practices aren't really a secret that someone needs to impart to you."
posted by muddgirl at 1:34 PM on September 16, 2013 [28 favorites]


The thing about fees and actively managed funds though? That is good advice and is applicable to quite a lot more people than just lolrichdudes. If you have any sort of individual pension fund, that's how you get nickeled and dimed out of your retirement funds.
posted by MartinWisse at 1:37 PM on September 16, 2013 [5 favorites]


j/k I live paycheck to paycheck

Please proceed with heckling the upper class audience of this post - I agree - but I did appreciate that the last line on the card was to support social safety net programs which has nothing to do with looking out for number 1 rich guys.
posted by latkes at 1:38 PM on September 16, 2013 [22 favorites]


Oh look I made one too. I am a financial genius.
posted by phunniemee at 1:39 PM on September 16, 2013 [35 favorites]


Oh pay the credit card on time??? Makes sense now that you say it! I just pay it at random times!

I had an otherwise intelligent friend get her first post college job and at the same time her first credit card. She really surprised us buy immediately buying a new couch and top of the line TV. Her honest, didn't know any better response was "Oh, the credit card people are so nice. They let you buy a lot but only ask you to pay it back a little at a time."

Some people need that note.
posted by jermsplan at 1:41 PM on September 16, 2013 [11 favorites]


Please proceed with heckling the upper class audience of this post - I agree - but I did appreciate that the last line on the card was to support social safety net programs which has nothing to do with looking out for number 1 rich guys.

I'm all about the 99% mentality, but I think it's detrimental to the cause to lump people into the 1% just because they have an employee contribution plan. What happened to promoting the middle class?
posted by Think_Long at 1:41 PM on September 16, 2013 [11 favorites]


I should be more clear - of course not all financial advisors make millions of dollars. I'm talking about the celebrity advisors like Ramsay and Suze Orman (who recently starred in a commercial with the message "Don't spend hundreds of dollars on a dress you'll only wear once... spend THOUSANDS of dollars on a really really nice car!!!")
posted by muddgirl at 1:42 PM on September 16, 2013 [2 favorites]


This is a pretty great summary for people who have at least some disposable income. Specifically the advice for "well diversified mutual funds", saving 20%, and not carrying a credit card balance. Go through AskMe looking at investment advice requests sometime. The answers are well meaning and a totally confusing jumble of conflicting advice, most terrible.

I know a lot of people who make decent incomes and have no idea how to manage their money. Like literally no idea, not even understanding the difference between paying off their credit card or just making the minimum payment. Then they start to look at saving some money for retirement and get completely confused by acronyms, tax laws, and conflicting investment products. This little card has simple sensible advice that if followed, will probably work out just fine.

The best part of this advice is if you follow it, you don't need a financial advisor at all. Which for the 99.9% is the right choice; most advisors are double dealing scumbags.
posted by Nelson at 1:44 PM on September 16, 2013 [2 favorites]


Think_Long: "I'm all about the 99% mentality, but I think it's detrimental to the cause to lump people into the 1% just because they have an employee contribution plan. What happened to promoting the middle class?"

The middle class is too embarrassed to post on metafilter any more, at least in any post talking about money.
posted by vanar sena at 1:45 PM on September 16, 2013 [17 favorites]


Some people need that note.

IIRC my freshman orientation packet at NYU included predatory credit card offers. Does this not happen anymore?
posted by elizardbits at 1:45 PM on September 16, 2013 [5 favorites]


I'm always stumped by the "save 20% of your income" advice. I've actually never met anyone in real life who could afford to live on only 80% of what they make. Maybe I just need richer friends?
posted by anastasiav at 1:45 PM on September 16, 2013 [11 favorites]


I would love to follow all that advice. But then I wouldn't be able to pay my rent and student loans (side note, my student loan payment is more than my rent. Thanks law school).
posted by Arbac at 1:48 PM on September 16, 2013 [3 favorites]


> Oh pay the credit card on time??? Makes sense now that you say it! I just pay it at random times!

I knew people when we were all in our 20s who were seemingly blindsided by the fact that you had to pay for things you bought on credit.

The only thing that keeps me from feeling like a complete and total moron when it comes to personal finance is the knowledge that a lot of (most?) people are even dumber than I am.
posted by The Card Cheat at 1:48 PM on September 16, 2013 [1 favorite]


IIRC my freshman orientation packet at NYU included predatory credit card offers. Does this not happen anymore?

It's basically illegal now, at least to have them on most university campuses if I remember. We used to get them offered with free pizza. Damn you Dominos!
posted by Think_Long at 1:48 PM on September 16, 2013


Back in the early '90s, the two easiest things to get on Canadian university campuses during frosh week were condoms and credit cards.
posted by The Card Cheat at 1:50 PM on September 16, 2013 [1 favorite]


I'm always stumped by the "save 20% of your income" advice. I've actually never met anyone in real life who could afford to live on only 80% of what they make. Maybe I just need richer friends?

If you're making $50k, live like you're making $40k and save the rest.

If you're making $40k, live like you're making $32k and save the rest.

And so forth. It gets harder to do as you make less, and you're obviously saving less as you're making less.If you're making more than your peers, don't live it up more than they do. Instead, save for the future or a rainy day, and limit your spending.

Gotta keep in mind that most of this advice isn't for those living paycheck to paycheck, but those who have a lot of disposable income, and just don't get that they shouldn't be disposing of all of it.
posted by explosion at 1:50 PM on September 16, 2013 [18 favorites]


Oh look I made one too. I am a financial genius.

It's funny. When I stopped living paycheck-to-paycheck (well, wad-of-twenties-to-wad-of-twenties) the concept of being able to "afford" something immediately went from simple math to a nebulous value judgement that I'm still trying to figure out:

BEFORE:
"Okay, I want a new Game Boy. It will cost $150. I get paid $400 tomorrow. I have $200 in my drawer. This week's rent is $500 due in three days. So I can't buy it this week."

NOW:
"Okay, I want a PS3. I have the cash but I'm trying to save up to move to a nicer place. But the cost of the PS3 compared to how much I need to save is neglible. But every penny counts and I really want to move. But..."

At the very least, I take a lot longer to buy things I don't need now.
posted by griphus at 1:52 PM on September 16, 2013 [49 favorites]


Nelson: "he best part of this advice is if you follow it, you don't need a financial advisor at all. Which for the 99.9% is the right choice; most advisors are double dealing scumbags."

No kidding. My bank has twice sent financial advisors for a "complimentary" session. Both times they were nothing more than hard-sell shills for a ULIP.
posted by vanar sena at 1:53 PM on September 16, 2013 [2 favorites]


Gotta keep in mind that most of this advice isn't for those living paycheck to paycheck, but those who have a lot of disposable income, and just don't get that they shouldn't be disposing of all of it.

Yeah, this is a really important point, especially because there's a really important difference between "totally pointless advice" and "inapplicable advice that will hopefully be applicable later." With a lot of people, when disposable income finally rears its head, they have absolutely no idea how to handle it and then suddenly they're living paycheck-to-paycheck again because the new apartment or car or whatever they got is more than they can afford while retaining disposable income.
posted by griphus at 1:55 PM on September 16, 2013 [6 favorites]


Gotta keep in mind that most of this advice isn't for those living paycheck to paycheck, but those who have a lot of disposable income, and just don't get that they shouldn't be disposing of all of it.

This is true. Honestly, as my earnings have increased, perhaps the biggest detriment to my financial planning is just how long I did spend living paycheck to paycheck (or worse).

I'm at a point now, incredibly, where I could live (and support my family of four) on 80% of my paycheck. But there's still some sort of weird counterproductive imp in my mind that tries to convince me that, if there's money left at the end of the month, I'm doing something wrong, like not buying enough food or something.

I am the target audience for this index card. And I'm not an upper class elitist, I'm a former poor dude who finally has a good enough job to start building himself a safety net, but doesn't have good enough habits to actually do it.
posted by 256 at 1:56 PM on September 16, 2013 [16 favorites]


I don't see "Trick the Monkey Idol out of his pot of gold" in here.
posted by The Whelk at 1:56 PM on September 16, 2013 [21 favorites]


Point 2, which advocates that people invest in diversified mutual funds--noting, in particular, target-date funds--is in direct contradiction of the second item in point 7, avoid actively managed funds. The target-date funds are actively managed--the managers construct their portfolios with different investment horizons in mind, shifting from a more growth-oriented strategy to a more income-oriented strategy.

I also agree that I, for one, should not be trading individual stocks. But it's not because the counter-party knows knows more than you do; that a bizarre "house always wins" kind of argument that really doesn't bear out in reality, outside of activity that's a crime. People shouldn't trade individual stocks because they don't buy on the basis of financials and they buy and sell irrationally. You can argue whether a professional manager is better, but laypeople (like me) are generally bad.

Other than that, pretty solid bread and butter advice, though it leaves some big gaps--what does "diversified" mean in the context of an individual investor, for instance. Print it out and save it for later if you don't think it's relevant to you now.

I take a lot longer to buy things I don't need now.

And how. The only purchases I've regretted in the past year are the ones I didn't agonize about for a month or more.
posted by Admiral Haddock at 1:57 PM on September 16, 2013 [2 favorites]


I've actually never met anyone in real life who could afford to live on only 80% of what they make. Maybe I just need richer friends?

If you have friends who make 25% more than you make, and you can live on what you make, then they can live on 80% of what they make.

In general, lots of affluent people -- and by affluent people I mean people in the top 20% of the wealth distribution, not 1% -- can easily live on 80% of their income.
posted by escabeche at 1:57 PM on September 16, 2013 [5 favorites]


"Buy low and sell high."
posted by octobersurprise at 1:59 PM on September 16, 2013 [5 favorites]


I see Metafilter has managed to misread two Wonkblog posts in as many weeks. Carry on.
posted by zombieflanders at 1:59 PM on September 16, 2013 [1 favorite]


The best advice not included on that card, which is also the hardest to follow, is BE HEALTHY. Or at least "never ever go to the doctor for anything in case you find out something expensive is wrong".
posted by elizardbits at 1:59 PM on September 16, 2013 [24 favorites]


The only thing that keeps me from feeling like a complete and total moron when it comes to personal finance is the knowledge that a lot of (most?) people are even dumber than I am.

I think most is a safe bet. I have not followed all of these rules, or even most of these rules, most of the time. That said, I saw a thing a while back talking about what the mean and various percentiles were for retirement savings at various ages. I was stunned to learn I was in the 90th percentile for people 10 years my senior. I would think that people in the 90th percentile of income could, if they really leaned into it, save as much money as I have in a couple years. So, yeah, lots of people out there need this 3x5 card.
posted by Kid Charlemagne at 1:59 PM on September 16, 2013


escabeche nails it. The corollary to his point is that if you know anyone who makes 80% of what you make and survives it means you could save 20% of what you make and get by. And I suspect you know someone who makes 80% of what you make.
posted by Justinian at 2:00 PM on September 16, 2013 [6 favorites]


The only purchases I've regretted in the past year are the ones I didn't agonize about for a month or more.

Exactly. Except now I have to factor opportunity cost into things so I don't spend time making bulk purchases while trying to save 50c a unit not realizing that I just wasted an hour of my life to save $5.
posted by griphus at 2:00 PM on September 16, 2013 [6 favorites]


fucking lactaid
posted by elizardbits at 2:01 PM on September 16, 2013 [4 favorites]


The target-date funds are actively managed--the managers construct their portfolios with different investment horizons in mind, shifting from a more growth-oriented strategy to a more income-oriented strategy.

They have a continuously varying asset allocation, yes, but they are not actively managed in the sense that the fund manager is picking individual stocks and bonds that they think are going to perform well. The goal is for the fund to be as "automatic" as possible, and that's reflected in the management fees that are on order of 0.1-0.2%; comparable to any other index fund. The point is to avoid "actively managed" funds with 2% fees.
posted by kiltedtaco at 2:02 PM on September 16, 2013 [7 favorites]


of course not all financial advisors make millions of dollars. I'm talking about the celebrity advisors like Ramsay and Suze Orman

Replace Suze Orman with Jim Cramer and I'll agree with you. Orman's advice is pretty inoffensive, at least that I've ever seen. It's basically all about paying off high-interest credit cards and building up a savings account and sane retirement strategy before you go making big purchases. (She also is a big fan of some estate planning vehicles like living revocable trusts that I don't really have an opinion on either way.) You could do a lot worse.

Cramer, on the other hand, for bringing "stock picking" to prime-time cable and making more than one person I know decide to get into individual securities, deserves to take a long walk off a short pier.
posted by Kadin2048 at 2:02 PM on September 16, 2013 [2 favorites]


there's a really important difference between "totally pointless advice" and "inapplicable advice that will hopefully be applicable later." With a lot of people, when disposable income finally rears its head, they have absolutely no idea how to handle it and then suddenly they're living paycheck-to-paycheck again because the new apartment or car or whatever they got is more than they can afford while retaining disposable income.

That's why this article interested me. At 39, I have my very first job that will allow me to live a middle class life. I have zero savings and no plan for retirement or paying for my daughter's college/braces/unforeseen emergencies/etc. I need all the Personal Finance 101 I can get and this was accessible and didn't feel like bullshit meaningless gobbledygook.
posted by latkes at 2:06 PM on September 16, 2013 [11 favorites]


Never buy or sell individual representatives. Always pick a well diversified set of congresspeople and senators to pass your custom legislation.
posted by benzenedream at 2:06 PM on September 16, 2013 [5 favorites]


Exactly. Except now I have to factor opportunity cost into things so I don't spend time making bulk purchases while trying to save 50c a unit not realizing that I just wasted an hour of my life to save $5.

The number of times I have this conversation with my wife. Yes, I COULD go to Wal-Mart AND Metro because butter is 50c cheaper at Wal-Mart and milk is $1 cheaper at Metro. Or I could decide that my time is at least worth minimum wage.
posted by 256 at 2:07 PM on September 16, 2013 [8 favorites]


If you have friends who make 25% more than you make, and you can live on what you make, then they can live on 80% of what they make.

Mostly I'm just frustrated because I recently took a 20% pay increase -- now make more than I ever have in my life -- and still, after all the bills (mortgage, childcare, electric, oil, internet, cars, insurance, etc) I barely have enough to cover groceries and gas and maybe one $10 "treat" (like taking my kid to the museum) at the end of the month. We were "making it" before, although it was a scramble to pay the oil bill (we ran out of oil 3 or 4 times last winter and had to pay the premium to get them to restart the furnace - just another cost of being poor) and we were incurring some debt, which we no longer are, so I suppose the lack of new debt is an improvement. I guess I had hoped that, once I got above the US median income, we'd be able to, I don't know, take a decent vacation or not have to pinch all the pennies quite as hard. But, apparently, it just isn't so.
posted by anastasiav at 2:13 PM on September 16, 2013 [5 favorites]


Rich people saving 20% of their income is why trickle down economics will never work.
posted by dng at 2:15 PM on September 16, 2013 [8 favorites]


Orman's advice is pretty inoffensive, at least that I've ever seen. It's basically all about paying off high-interest credit cards and building up a savings account and sane retirement strategy before you go making big purchases.

That's exactly my point. I think Ramsay's advise is pretty inoffensive, too. So if their advice is generally sound and can fit on a postcard, why did they make a fortune selling that advice to us?

(And honestly, that Acura commercial lowered my opinion of Orman, plus her defense that she's running a business not a charity, which makes zero sense.)
posted by muddgirl at 2:16 PM on September 16, 2013 [1 favorite]


So, I was listening to Marketplace Money on NPR, which has a call-in segment where people call with their money problems. A dude called in and sounded kind of panicked -- "I have $80,000 in credit card debt!" The host started in to her usual speech about how there are all kinds of free debt counseling programs, you can take out a personal loan and get a low interest rate, etc. Then she asked how much he makes. "Well, last year I made about $800,000." She gulped and muttered something about how he could pay that off in like two months, and went on to the next call.

Just goes to show you can have money problems at any income.
posted by miyabo at 2:16 PM on September 16, 2013 [2 favorites]


I need all the Personal Finance 101 I can get and this was accessible and didn't feel like bullshit meaningless gobbledygook.

I've found Michelle Singletary's column to be pretty good for this kind of thing.
posted by Ice Cream Socialist at 2:17 PM on September 16, 2013 [3 favorites]


-The caviar at Whole Foods is actually well priced
-Gulfstreams aren't as cool as Learjets but they get better mileage
-Instead of store-bought mulch, compost the remains of whatever falls into your moat
-Save big on doctor's bills by replacing your blood with deathless nanobots
posted by theodolite at 2:21 PM on September 16, 2013 [40 favorites]


Also, the best piece of financial advice I ever received was from my mother. When I was seventeen and about to graduate from high school, she took me down to the bank and co-signed a credit card for me. After putting the fear of god into me about overspending, she told me to purchase everything I can on that card and pay it back, in full, every month. It was a really, really good idea in the long run and probably the single best financial move I've ever made. Not just because it built credit, but because it made me track my spending carefully. The first time I had to sign over an entire biweekly paycheck to the bank to cover a credit card bill full of fast food, video games and clothing, an Important Lesson was Learned.
posted by griphus at 2:23 PM on September 16, 2013 [3 favorites]


Avoid buying depreciating assets on credit; e.g. a car.
posted by achrise at 2:27 PM on September 16, 2013 [3 favorites]


griphus: "Exactly. Except now I have to factor opportunity cost into things so I don't spend time making bulk purchases while trying to save 50c a unit not realizing that I just wasted an hour of my life to save $5."

I only just recently managed to break the habit of bringing home unused napkins and keeping them in a drawer in the kitchen, though at least I never picked up my mom's habit of hoarding single-serving condiment packets.
posted by invitapriore at 2:28 PM on September 16, 2013 [1 favorite]


The one piece of this that I've started to wonder about lately is this: I agree that most people should have most of their money in low-fee index funds, but should they be globally diversified index funds or more focused on your country/region/currency?

I can think of good arguments for either and go back and forth in my head. I mean, on the one hand I have a lot more confidence in the continued growth of the global economy than any one country or region, but on the other hand there's an argument for matching your assets and liabilities, and if you're going to be exposed to your own region's inflation and cost of living and interest rates and so on... but then again if we're talking about the US or EU then you'll own mostly stocks and bonds of multinational companies with so much global exposure already...etc. Is there a consensus on this?
posted by pete_22 at 2:30 PM on September 16, 2013


"Avoid buying depreciating assets on credit; e.g. a car."

And drive that thing into the ground.
posted by jason_steakums at 2:31 PM on September 16, 2013 [6 favorites]


First establish two metrics:
1) "Amount of money I need* to live in a month, on average"
2) "Amount of money I am making in a month, on average"

Now make sure that that second metric is always higher than the first metric. If you can manage that, you're already better at this than most Americans.

* Note: Recent cultural developments have grossly distorted the meaning of the word "need".
posted by deathpanels at 2:32 PM on September 16, 2013 [2 favorites]


Please note: This 4x6 index card only fits in certain kinds of backpacks.
posted by jammy at 2:35 PM on September 16, 2013 [5 favorites]


* Note: Recent developments in capitalism have grossly distorted the ability of most people to make enough for point 1.
posted by latkes at 2:36 PM on September 16, 2013 [7 favorites]


" Remember to buy wines in the 100-75$ range, sometimes the cheaper stuff really is best."
posted by The Whelk at 2:38 PM on September 16, 2013 [2 favorites]


muddgirl, I agree, I don't think Dave Ramsay's got any especially unique or insightful financial advice. I think he -- and probably Suze Orman, too, I don't know much about her -- has earned his bijillions primarily as a cheerleader. He inspires an absolute passion for debt reduction in his fans.
posted by gerstle at 2:38 PM on September 16, 2013 [1 favorite]


The only gripe I have with this index card is that it doesn't indicate if the 20% saving recommendation includes the assorted retirement-related saving described elsewhere on the card.
posted by Mercaptan at 2:43 PM on September 16, 2013 [1 favorite]


I'm pretty sure the only sure fire retirement policy for most young people now is preparing your body for the Thunderdome. .
posted by The Whelk at 2:44 PM on September 16, 2013 [10 favorites]


The Card Cheat: "I knew people when we were all in our 20s who were seemingly blindsided by the fact that you had to pay for things you bought on credit. "

Eponysterical.
posted by Apropos of Something at 2:48 PM on September 16, 2013


I think Ramsay's advise is pretty inoffensive, too. So if their advice is generally sound and can fit on a postcard, why did they make a fortune selling that advice to us?

They don't really sell advice. They sell a story to participate in. The story is about how there is a group of savvy people being (a) morally responsible and (b) reaching financial aspirations. You can be one of those people!
posted by weston at 2:52 PM on September 16, 2013 [6 favorites]


Rejected idea for a reality TV show: 401(k) Thunderdome. Contestants square off to see who has the best-diversified, lowest-cost portfolio. Two plan enter, one plan leave.
posted by aw_yiss at 2:53 PM on September 16, 2013 [1 favorite]


> Avoid buying depreciating assets on credit; e.g. a car

I disagree. We got an auto loan at a great rate, which means we can invest the money we would have spent on a car and end up with more money in the long run.

Of course, this only works if you can take the money and invest it.
posted by The corpse in the library at 2:57 PM on September 16, 2013 [1 favorite]


The only gripe I have with this index card is that it doesn't indicate if the 20% saving recommendation includes the assorted retirement-related saving described elsewhere on the card.

I was wondering that too.
posted by sourwookie at 3:05 PM on September 16, 2013


I grew up pretty middle class, but hearing my parents joke (honestly I still don't know if they were joking) about how they had no retirement savings and my father would be working until the day he died kind of terrified me. They didn't give me too much of a financial education beyond "you should save some!", but the one thing I figured out that I think was more important than anything as far as saving was concerned was to simply have it automatically removed from my paycheck without me even getting a chance to touch it. Doesn't really matter where it goes after that (as long as it's not, you know, lottery tickets or something) - opt in to the automatic deductions and forget about it. That really changed the mindset for me from "what can I save this month?" to "I have already saved this month" and really takes the pressure off.
posted by backseatpilot at 3:06 PM on September 16, 2013 [11 favorites]


There's some in this thread for how people give information that seems straightforward once you know it. But the reality is that a lot of advice is straightforward once you've heard it. There's a reason that AskMe threads about what you should do before you turn 30 or 40 or 50 are full of platitudes, and there's a reason that much of the advice about how to get in shape involves eating less and exercising more. Doing simple, obvious stuff is actually pretty hard.
posted by Going To Maine at 3:06 PM on September 16, 2013 [8 favorites]


invitapriore, can I have your napkins? I'm almost out of mine. I even sometimes take 'gently used' napkins home from restaurants because I use them to wipe down the kitchen counters. I may be an illustration of penny wise pound foolish, but the tree hugger in me is assuaged.

As for credit card advice, for years I had no idea that you paid interest on the average carrying balance for that month, not just the balance left after you paid your minimum plus whatever you could afford to pay off. This made paying for tuition on my credit card an idiot idea, never mind the mileage. Also, I had a weird moment of "yay I'm a proper American" when I overdrew my bank account for the first time.

Maybe we should update grade school math to include credit card lessons in addition to checkbook balancing?
posted by spamandkimchi at 3:09 PM on September 16, 2013 [2 favorites]


* Note: Recent developments in capitalism have grossly distorted the ability of most people to make enough for point 1.
I don't mean that as some dismissive Tea-party slogan. Really, a lot of people who are in debt are in debt because they deliberately spend beyond their means, just to keep up with their neighbors. The average debt held by Americans is $70,000 per capita. And it's not just the lowest wage earners who hold the bulk of it. I've met wealthy suburbanites with six-figure incomes who are paralyzed by debt, not because they're the unwitting victims of crony capitalism, but because they got drunk on power and bought into a lifestyle that they couldn't afford, and then things at the office didn't go well and their income went down a few notches. So now they own a giant mansion house that they are desperately trying to sell. They're rich on paper, but all their wealth is tied up in illiquid assets, with no way out.

Which I think is the type of person who this index card is aimed at, by the way. But I'm all for armchair internet Marxism too, so whatever.
posted by deathpanels at 3:15 PM on September 16, 2013 [5 favorites]


Maybe we should update grade school math to include credit card lessons

My dad opened a credit card for me back when I was about seven, back when you could do such a thing, in order to start building my credit. I got it when I was 12 or so and started traveling for away games for volleyball, for emergencies only. I vaguely remember him saying something like "when this card is yours to keep, if I ever hear that you're carrying a balance month to month I will kill you."

So far it's been the only credit card lesson I've ever needed.
posted by phunniemee at 3:17 PM on September 16, 2013 [3 favorites]


There's also an interesting link on this TWP Wonkblog about Being Poor Changes Your Thinking About Everything.
posted by ovvl at 3:18 PM on September 16, 2013 [3 favorites]


My mom's advice: don't buy stuff you can't afford, and save every penny you're not spending. I think that would fit on a postage stamp.
posted by monospace at 3:18 PM on September 16, 2013 [1 favorite]


Hey, I didn't see "Don't have kids" on that index card.
posted by Huffy Puffy at 3:27 PM on September 16, 2013 [12 favorites]


"Do not buy stuff you cannot afford."

So, in my case, that would be rent? I keep looking for a free house - have any tips?
posted by jb at 3:29 PM on September 16, 2013 [9 favorites]


You should also get married to someone who makes as much as you do. I get hit with a major life challenge difficulty bump because I don't have someone else's income with which to split my bills.

I also agree that never needing medicine drugs is important for financial stability, at least in the US.
posted by winna at 3:30 PM on September 16, 2013 [2 favorites]


So, in my case, that would be rent? I keep looking for a free house - have any tips?

Yeah there are certain kinds of debt that are not necessarily bad for society if people manage it well. Mortgages are considered one of these and student loans (in some ways and not in others) are also, because they're theoretically investments not only in you but in society. There have been a lot of changes in the past few decades about ideas of what exactly is valuable for people on a personal level. Going into minor debt for an education or a home is not always a bad idea, it just needs to be clear what level of risk you're assuming and the downsides to those things.

I'm a money hoarder and that has its own downsides. It's good to read about alternatives.
posted by jessamyn at 3:34 PM on September 16, 2013 [1 favorite]


Hey now, with easy consumer credit, you can pretend you're not in peonage while putting yourself further into it, it's a beautiful system.
posted by The Whelk at 3:34 PM on September 16, 2013 [3 favorites]


Think_Long: "Please proceed with heckling the upper class audience of this post - I agree - but I did appreciate that the last line on the card was to support social safety net programs which has nothing to do with looking out for number 1 rich guys.

I'm all about the 99% mentality, but I think it's detrimental to the cause to lump people into the 1% just because they have an employee contribution plan. What happened to promoting the middle class?
"

Anil Dash tweeted recently "Seriously, Apple shipping an unremovable Stocks app with the iPhone is like shipping a "manage your vacation home" by default."

Which is something that would surely get a lot of favorites here--even though about half of all Americans are invested in the stock market, and I'm not sure a stock app on a smartphone that you have to pay $200 out of pocket plus $75/mo minimum for at least two years, is really so far off the mark...

So yeah, this is good advice, especially when considering the actual question it is answering, rather than an imagined one.
posted by danny the boy at 3:35 PM on September 16, 2013 [2 favorites]


If we're doing all around "financial advice" the biggest thing a lot of people seem to forget is "don't buy things that depreciate in value quickly!"

This is mostly for consumer stuff, but take a minute, look at ebay completed listings of what you're purchasing (your item in ex+/mint condition) and see the difference between that and what you're paying. If it's more than about 10%, you're getting hosed and should buy used.

I apply this mostly to cameras and electronics, however, I just bought a new car. The biggest purchase I've ever made in my life. Before I bought it, I went around to ebay, autotrader, craigslist, kbb, ect. The difference in price between the new car and the used car with 10,000 miles on it was about 9%. If I'd purchased, say a Volvo S80, I've just "spent" about 80% more.
posted by lattiboy at 3:39 PM on September 16, 2013


The average debt held by Americans is $70,000 per capita.

If that includes mortgages (which it has to) and other forms of pretty-well-secured debt, then that figure is needlessly alarmist.
In March 2010, the last date at which the data can be reliably estimated, we found that:

The median American household owed $3,300 of consumer debt;
The average American household owed $7,768 and
The average indebted American household owed $17,630.

Note that the average American household owed far more than the median, and also that the average indebted household owed far more than the average household overall. Such large discrepancies indicate that a relatively small number of households were deeply underwater.
So now they own a giant mansion house that they are desperately trying to sell. They're rich on paper, but all their wealth is tied up in illiquid assets, with no way out.

I saw Queen of Versailles, too. The difference between wealthy people weathering a temporary financial downturn where the value of their assets takes a nose dive and, say, my working-class parents who struggle with minor amounts of unsecured debts and living paycheck-to-paycheck is that, when the economy turns around, the rich go back to getting richer, still have those assets, and they can wipe out their debt in a few months or maybe a year (as the Siegels did).
posted by muddgirl at 3:41 PM on September 16, 2013 [3 favorites]


even though about half of all Americans are invested in the stock market

I think this percentage includes pension holders who aren't meaningfully stock investors in the sense of needing an iphone stock app.
posted by latkes at 3:44 PM on September 16, 2013


This sounds so simple and I see many people discounting it, but I know from close family members how it can be so overwhelming.

The even simpler cards need to be

"Don't but anything new with credit if you have a credit card balance this month"
"Write down the names of the companies you owe money too"
"How much do you owe them?"
"How much do you make this month after taxes"
"It is okay to not buy ANYTHING besides food, electricity, mortgage, gas this month."


I know many people in my mom's generation who got really bad advice, and were taken advantage of, by financial advisers and mortgage brokers, easy credit swindlers, and the credit card companies and have lost 100ks of thousands of dollars in 2/3rd mortgages supporting a lifestyle (but with $10ks and $100k spend on fees / interesting, etc...)

Once you get on the debt treadmill it is almost impossible to get off. Very often they lack the skills, background or ability to execute that makes it seem some simple from the outside. I've seen a $250 credit balance require thousands of dollars to pay off due to late fees, interest, bounced checks, etc...

There is also a HUGE embarrassment factor. "How could I have been such an idiot?????" which prevents them from reaching out, and leads them into a revolving credit situation, getting worse and worse and worse.
posted by bottlebrushtree at 3:45 PM on September 16, 2013 [6 favorites]


Adding to my last comment - those numbers are per household. So divide those numbers by 3 to get per-capita (roughly 300 million people in the US. Roughly 100 million households). But really, it makes more sense to look at consumer debt per-household.
posted by muddgirl at 3:51 PM on September 16, 2013


Yeah I saw my Mom and her relatives get totally, completely fucked over by credit culture, sometimes cause it was confusing, sometimes cause it was misleading, sometimes due to bad luck ( hey guess who needs a car or a new hip right the fucking now?) and sometimes cause they didn't know the resources available cause seriously how would they? It pretty much convinced me to never, ever get into debt and I spent my twenties on the assumption that I would never, ever own property, a car, or savings for retirement and tried to work toward a life that would support that.
posted by The Whelk at 3:52 PM on September 16, 2013 [1 favorite]


I don't see "Trick the Monkey Idol out of his pot of gold" in here.

Must be on the other side of the card.
posted by Kirth Gerson at 3:59 PM on September 16, 2013


I am investing this fortnight's discretionary funds in GTA V futures (AU$89), whilst improving my Swedish snus portfolio (AU$40). Oh and rent, loan repayments, phone and electricity bills, possibly some food for eating because it's important to "treat" yourself from time to time.

My superannuation payout I intend to blow in a week, and I will then throw myself off a bridge.
posted by turbid dahlia at 4:04 PM on September 16, 2013 [1 favorite]


Back in the early '90s, the two easiest things to get on Canadian university campuses during frosh week were condoms and credit cards.

Things were different in the olden times a decade before, circa 1980. The common currency then was cash money, provided by a teller from a solid stone Bank Branch during banking hours, which were from approx 10:00 am to 3:30 pm Mon-Fri, extended to 4:30 pm on Fridays.

Around this time one Canadian bank, Canada Trust, expanded their hours from 8am to 8pm, (and then got the legendary artist Johnny Cash to shill for them during a lull in his career).

One of my comrades, a mature student, made the weary observation: "If I banked there, I would be broke by now." Our beer money almost spent by then, we all nodded in agreement. The very concept of a bank-machine which would happily empty your account if you asked it to was unimaginable back then.

I got a credit card a few years later by asking my father to sign off on it.

(Condoms were over the counter at the pharmacy, and the druggist was often rather gruff and grumpy. But from what I've heard it was much worse a few years before that.)
posted by ovvl at 4:11 PM on September 16, 2013


Condoms were over the counter at the pharmacy, and the druggist was often rather gruff and grumpy. But from what I've heard it was much worse a few years before that.

Yes, yes it was. When I bought condoms at the Rexall drugstore, the proprietor and noted dirty old man, Hyman J. Doodlesack* would ask me if my girlfriend would give me head if I didn't have a rubber. I never gave him a straight answer, but he never stopped trying to get one.


* His real name, I swear to God.
posted by Kirth Gerson at 4:25 PM on September 16, 2013 [8 favorites]


The only gripe I have with this index card is that it doesn't indicate if the 20% saving recommendation includes the assorted retirement-related saving described elsewhere on the card.

That would be total savings, counting retirement funds. Only a small percentage of households make enough money that they can even come close to maxing out their retirement accounts with 20% of income.

For example, the median household income is around $50,000. 20% of that is $10,000. It would take $11,000 just to max out two spouses IRAs.

If both spouses, have 401(k)s, then they can each put away another $17,500 each. You would have to make about $150,000 before you could fill up your IRAs and 401(k)s by saving 20%.

So saving 20% total, counting retirement funds is a reasonable goal for the average person. First you should save your emergency fund of 3 to 6 months living expenses. Then you should put as much as you can into your retirement accounts with a goal of at least 20%. You may also have a separate savings account for a goal such as replacing the car or making a down payment on a house.
posted by JackFlash at 4:25 PM on September 16, 2013 [1 favorite]


The common currency then was cash money, provided by a teller from a solid stone Bank Branch during banking hours, which were from approx 10:00 am to 3:30 pm Mon-Fri, extended to 4:30 pm on Fridays.

Oh yeah, I forgot to emphasize that on Friday Night, the cash that you had in your pocket was literally the amount of freely fungible money that you had back then.
posted by ovvl at 4:38 PM on September 16, 2013 [1 favorite]


Back in the early '90s, the two easiest things to get on Canadian university campuses during frosh week were condoms and credit cards.

You got fucked either way.
posted by anothermug at 5:07 PM on September 16, 2013 [4 favorites]


Never buy or sell individual representatives. Always pick a well diversified set of congresspeople and senators to pass your custom legislation.

omg you guys lobbies are like mutual funds of corruption
posted by odinsdream at 5:10 PM on September 16, 2013


One note on the "people who make 80% of what you make are doing fine" thing- in my particular demographic, those people also have lower expenses, because their student loan payments are tied to their income. When I left temping for a full time job, suddenly after tax time my new loan payments were $150 more than they had been. And I still haven't hit the unadjusted rate. So... if I were making less money... I'd have lower expenses!
posted by showbiz_liz at 5:30 PM on September 16, 2013


"Learn to write smaller."
posted by limeonaire at 5:57 PM on September 16, 2013 [1 favorite]


Income based loan repayments cost an extra $125 / month, or $1500 / year if you go from $40,000 to $50,000 - so a person earning $50,000 has $1500 more in student loan payments than a person earning $40,000. That extra $10,000 will also add $765 in payroll taxes, somewhere between $0 and $2500 in federal income taxes, and somewhere between $0 and $1000 in state income taxes.

If you earn $50,000 / year and live exactly the lifestyle of the person down the street who earns $40,000 / year, you'll have at least $4235 in excess income that can be saved for the future.

So, given that $40,000 / year isn't exactly "Where is my next meal coming from?"-level poverty, a person earning $50,000 / year should be able to put away at least $4000 / year in savings.
posted by Hatashran at 6:18 PM on September 16, 2013 [1 favorite]


Where the hell can I buy one 4 X 6 index card?

I don't have the cash or space to stockpile cards.
posted by srboisvert at 6:25 PM on September 16, 2013 [2 favorites]


> You got fucked either way.

Well, by the end of frosh week I must have had 50 condoms sitting in my dresser drawers. I was flattered by the (misplaced) confidence various university organizations seemed to have in my ability to get laid.
posted by The Card Cheat at 6:32 PM on September 16, 2013 [2 favorites]


Income based loan repayments cost an extra $125 / month, or $1500 / year if you go from $40,000 to $50,000 - so a person earning $50,000 has $1500 more in student loan payments than a person earning $40,000.

Income based student loans are based on Adjusted Gross Income (AGI) which is what is left after making contributions to tax deductible IRAs or 401(k)s. So if you got a $10,000 raise and put all of it into you and your spouse's IRAs and 401(k)s, your AGI would not go up at all and neither would your loan payments or income taxes.
posted by JackFlash at 6:43 PM on September 16, 2013 [1 favorite]


Right out of high school, I went to an engineering university where the student body was ~80% male. The welcome boxes had, like, Nyquil in them. I was speaking to one of my professors about it who told me she felt bad because back when she went to college, they got dexedrine and condoms.
posted by griphus at 6:49 PM on September 16, 2013 [1 favorite]


For what it's worth, Scott Adams, the author of 'Dilbert', publishes a 9-point financial plan.
posted by Multicellular Exothermic at 8:05 PM on September 16, 2013 [1 favorite]


He seems to have left out "Promote yourself under a false name on a community weblog."
posted by Daily Alice at 8:23 PM on September 16, 2013 [7 favorites]


"It is okay to not buy ANYTHING besides food, electricity, mortgage, gas this month."

Just learned this one. It'd be a good tattoo, but those are a rip-off.
posted by Hennimore at 11:07 PM on September 16, 2013


Or at least "never ever go to the doctor for anything in case you find out something expensive is wrong".

So, so glad that this is one thing I don't need to worry about, living in a civilised country.
posted by MartinWisse at 11:58 PM on September 16, 2013 [2 favorites]


I'm always stumped by the "save 20% of your income" advice. I've actually never met anyone in real life who could afford to live on only 80% of what they make. Maybe I just need richer friends?

There is a difference between "could afford" and "don't want to". The advice isn't so much to reduce your spending to 80% now, but that you should never start spending more than 80% in the first place. IE, going forward, try to reduce spending as much as you can, and save any extra money you start earning.

I'm not going to pretend that I save 20% of my income either. I should, and I could. But I don't. But what I DO do is that whenever I get a raise or pay bump via a new job, I split the difference and save half. Every time, almost no exceptions. It didn't take long to get to the point where I was saving 10% of my income, and I didn't even notice it. I'm at the point now where I could almost pay off my mortgage with my retirement savings. It would be silly to do that, but it is a nice feeling. And I make less than (almost) all of my peers- rounded to the nearest $100,000, my income is $0.

If we're doing all around "financial advice" the biggest thing a lot of people seem to forget is "don't buy things that depreciate in value quickly!"

Sort of yes, sort of no. The resale price of something is meaningless for things that depreciate. If you are buying something that wears out with the idea that you will somehow make money by selling it at the other end, you are doing it wrong. For things that wear out, the proper advice is to buy things that give the greatest utility for the least money. Used things last less time, so you have to do the math on whether it is worth it or not. In many cases, the end result is the same, but not always.
posted by gjc at 4:13 AM on September 17, 2013


"Hesitation is the deadliest form of denial" Just put off buying stuff that you don't need, and with any luck you'll never get around to buying it.

As has been said above, live at 80% of what you earn (if possible) nor 120%. I used to work in a bank, and ironically all of my colleagues would live up to the maximum their card companies would allow, and pay the minimum every month. If they got a pay rise they'd get their credit limit extended, and live to that.
posted by DanCall at 6:14 AM on September 17, 2013 [1 favorite]


Used things last less time, so you have to do the math on whether it is worth it or not.

If the depreciation curve is nonlinear, as it is for most consumer products (hell, most products have a giant discontinuity when it goes from "new" to "used") but the utility curve is linear (driven by the product's tendency to wear out) then you are very hard pressed to come up with a situation where buying new is really a good idea, financially.

Relatedly, there is some evidence suggesting that the price-based depreciation curve of most American cars is nonlinear in at least two places (somewhat obnoxious article but it seems to be based on actual data in part) so it's possible to get burned more badly than you have to even by buying some types of used cars.

tl;dr: Cars are terrible and try to avoid owning them.
posted by Kadin2048 at 6:25 AM on September 17, 2013 [3 favorites]


I have a 4 x 6 card too - it says "be smarter with money than you are", and I ignore it as handily as handily as I would ignore this card. Everyone knows, really, what they need to do: spend less, save more, pay attention. But making it glib doesn't help. It's not the saying, it's the doing.
posted by dirtdirt at 6:31 AM on September 17, 2013 [1 favorite]


My 4x6 card says "You're fucked, basically" in 72pt type. On the other side it says "You don't get less fucked by turning the card over, you know."
posted by Grangousier at 7:13 AM on September 17, 2013 [12 favorites]


Gotta keep in mind that most of this advice isn't for those living paycheck to paycheck, but those who have a lot of disposable income, and just don't get that they shouldn't be disposing of all of it.

I was just thinking this morning how much cheaper having debt is now than it was when I was earning £15k less per year, when I first moved to London. Back then, I'd pay unauthorised overdraft fees (my favourite was the £50 I was charged for going 2p over my limit), my interest rate was something like 25% with no option to take out a cheaper credit card, and while a lot of my spending was down to being abysmal with money/having a moocher boyfriend/buying too much convenience food as shifts made me lazy, the cost of that spending was higher. I couldn't increase the rate on my credit card for love nor money, but then I could only afford to pay off the minimum.

Now the debt I do carry is at 0%, and credit card companies are falling over themselves to increase limits or get me to take out a new card. The depressing thing, though, is that the debt I actually want - a mortgage - is out of reach, not because of my credit rating, but because the cost of a deposit is between one and two years' wages. (This makes saving for this as a goal very difficult, as it seems a bit like collecting chicken bones in the hope that one day I'll be able to build them into wings and fly to work.) I wonder if there are people in my position who are raising the deposit using credit cards.
posted by mippy at 8:39 AM on September 17, 2013


For what it's worth, Scott Adams, the author of 'Dilbert', publishes a 9-point financial plan.

Step 1: Stop masturdebating.
posted by mippy at 8:47 AM on September 17, 2013


For what it's worth, Scott Adams, the author of 'Dilbert', publishes a 9-point financial plan.

Welcome back to Metafilter, Scott!
posted by Ndwright at 8:57 AM on September 17, 2013 [5 favorites]


But there's still some sort of weird counterproductive imp in my mind that tries to convince me that, if there's money left at the end of the month, I'm doing something wrong, like not buying enough food or something.
I've got the same imp. The trick is to make that imp work for you instead of against you: if there's enough money left in your checking account at the end of the month, you're doing something wrong by not investing it better.


Many thanks to latkes.

First, for the fun smug feelings I got by reading down that card and thinking "I figured that out ten years ago, I figured that out five years ago, that should be intuitively obvious", etc.

Then, more importantly, for the smugness-shattering feelings I got when I hit something I didn't even recognize. What the hell is a 529 account?

It turns out that my dad's college savings planning advice (keep parents' funds out of the kid's name or they'll just disqualify him for more financial aid) became partially obsolete several years ago, and there's basically no reason for parents *not* to save for college in a tax-advantaged account anymore. I just moved some of my savings into a new 529 fund.

This was a very good post.
posted by roystgnr at 10:00 AM on September 17, 2013 [2 favorites]


I gave my kids a 3x5 index card with Mr. Micawber's advice on it:
"Annual income twenty pounds, annual expenditure nineteen nineteen and six: result? Happiness. Annual income twenty pounds, annual expenditure twenty pounds ought and six: result? Misery."

posted by AsYouKnow Bob at 11:25 AM on September 17, 2013 [4 favorites]


If you're not making/saving much, and think that your income might improve in the future, it still might be worth your effort to put some money away in a Roth IRA. It's a rather nice investment option for middle class folks.

A Roth IRA lets you put money into the account post-tax (so, no tax benefits now), but lets you take it out tax-free when you retire. If you expect to be paying a higher tax rate when you retire, or for your portfolio to increase in value, this could work out to be a very good deal for you.

However, the beauty of Roth accounts for us average folks is that you can withdraw the principal (ie. the money you put in) at any time, without penalty. As long as you choose some reasonably low-risk investments, a Roth can be a great place to keep your rainy-day fund. If you need to use it, it's there for you; if you don't, you've got a tax-advantaged retirement account left over.

You can only contribute to these accounts if you're making under $173k, and can only put in $5500 a year. Those are both rather large numbers, but it doesn't hurt to evaluate your finances at the end of the year, and determine if you've got any money "left over" that could be moved into the account.

Basically, if you've got money that you want to stuff away for a while, you might as well put it into a Roth.

I use Betterment, and they make it stupidly easy to set up a savings plan with reasonable investment choices.

I guess I'll also jump on the "Saving 20% is completely impractical for me" bandwagon, because my health and sanity do have a price (no, I'm not going to be able to sleep well and perform well at my job if I'm living in an 8-bedroom group house). However, even if you're not able to save a ton of money, it doesn't hurt to be smart with the small investments that you can make.
posted by schmod at 12:47 PM on September 17, 2013 [2 favorites]


Oh, here's one:
Don't own a car.

It's less impractical than you probably think it is.
posted by schmod at 12:49 PM on September 17, 2013 [1 favorite]


> there's basically no reason for parents *not* to save for college in a tax-advantaged account anymore

There's one good one: my kids can get loans for college, but I can't get a loan for retirement. If you're going to set up college funds then 529s are good, but maybe you shouldn't set up college funds at all.
posted by The corpse in the library at 1:06 PM on September 17, 2013 [2 favorites]


There's one good one: my kids can get loans for college, but I can't get a loan for retirement.
Good point. If you haven't already maxed out IRA contributions, you still want to do that first - AFAIK IRA withdrawals for educational expenses (even for your kids) are unpenalized, whereas if you make a 529 withdrawal for retirement expenses you have to pay the capital gains tax plus a non-qualified-withdrawal penalty.
posted by roystgnr at 1:16 PM on September 17, 2013 [1 favorite]


Oh, here's one:
Don't own a car.

It's less impractical than you probably think it is.


I would wager that the higher rent that people pay when they live in areas where cars aren't necessary more than makes up for the cost of a car.
posted by gjc at 2:04 PM on September 19, 2013


I would wager that the higher rent that people pay when they live in areas where cars aren't necessary more than makes up for the cost of a car.

In my experience, rent profiles in US cities are substantially different, but that's definitely true here in Toronto.

We have two kids, and having a backyard big enough to play soccer in is important to us. So we live in the suburbs and pay $1250 rent, and own a car that we paid $8000 cash for. alternately, if we still wanted a backyard of that size, we could live downtown and pay $4000 rent, which means that our car entirely pays itself off in avoided rent payments in about 5 months.

Of course, there would be other, less quantifiable, advantages to living right downtown.
posted by 256 at 5:04 PM on September 19, 2013


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