Go with the $flow$
March 1, 2021 8:10 AM   Subscribe

Personal Income Spending Flowchart. From Reddit's personal finance subreddit. US-specific tax vehicles may or may not be available in equivalent forms in your country.
posted by storybored (85 comments total) 31 users marked this as a favorite
 
See, the thing is, every ounce of this requires having faith that the US system isn't a house of cards that is just waiting to crumble.

Which is a very, very tall order for anyone under 40 in America.

It's really, really, really hard to look at something like this and take it seriously and not roll your fucking eyes at it because you've been busy planning how to best and safely fucking kill yourself before you're too old to be able to do it yourself.

"Would you like to retire early?"

I'd like to retire at all, motherfucker.

Even $15 minimum wage is a travesty, and it's a fucking sick joke to act like anyone can do this shit on these god damned starvation/slave wages. Oh yeah, and even $15 is too much to ask apparently, a decision made by unelected officials.

I'm so sick and tired of this horseshit. Thanks for the link but there is a reason I avoid that sub like the god damned plague that it is.

I've seen way too many people play by all the rules in this list and still get massively fucked by unexpected medical bills. Too bad all their "retirement money" went to them paying for their medical treatment, and then some.
posted by deadaluspark at 8:17 AM on March 1, 2021 [55 favorites]


Too bad all their "retirement money" went to them paying for their medical treatment, and then some.
My primary retirement plan is to GTFO at age 59 1/2 to a more equitable country, like Canada, Germany, Japan.

I am judiciously putting money into my HSA, Roths, 401k, and a non-tax advantaged trading account to execute this plan

Going on past performance, it would be a lot simpler to buy the most $$$ house the bank would give me a loan for instead, but I always manage to miss the bus on the housing market.
posted by Heywood Mogroot III at 8:25 AM on March 1, 2021 [3 favorites]


The chart is really pixelated for me, but I’d say that most Americans can’t afford to do any of that. I don’t see how anyone under 40 makes it to retirement.
posted by glaucon at 8:36 AM on March 1, 2021 [3 favorites]


deadaluspark, it's even worse than that. Take the example of an older couple when one has to go into a nursing home. They're forced to "spend down" their life's savings until it's gone in order for the person in the nursing home to qualify for Medicaid. After that, the survivor often ends up having to sell their home and lives in penury for the remainder of their life.

Advisors tell me I need to start planning for this now and to purchase long term care insurance but it's not cheap and their business model banks on the hope that I die tomorrow in a car crash.
posted by drstrangelove at 8:42 AM on March 1, 2021 [8 favorites]


The chart is really pixelated for me, but I’d say that most Americans can’t afford to do any of that. I don’t see how anyone under 40 makes it to retirement.

The US is really bifurcated by income, and this Dave Ramsey stuff is only useful for the subset of Americans who are paid decently but really really really bad with money. For actual low earners, it's useless advice because they don't have the income, and for higher income people who are decent with money, it's bad advice.
posted by The_Vegetables at 8:43 AM on March 1, 2021 [30 favorites]


for higher income people who are decent with money, it's bad advice.

Indeed; it should have an entry in there somewhere that says "acquire Golden Visa from somewhere that's actually a civilized nation"
posted by aramaic at 8:47 AM on March 1, 2021 [7 favorites]


most Americans can’t afford to do any of that
The key issue is that there is an immense difference between disposable and discretionary income.

Disposable is what you have left after taxes, and discretionary is what you have left after taxes & necessities.

And the "necessities" here are where the free market loves to extract rents on people -- any savings funded from discretionary income has to compete directly with housing, higher education, and health-care costs that come out of the disposable bucket, and thus nobody can save anything.

I suspect the relative success of the high-tax high-service nordic quasi-socialist model is that people are forced to save from their pre-disposable incomes via higher tax burdens (plus taxation is no doubt more progressive, and their service sectors much less extractive than ours).

People think tax cuts stimulate the economy, all they really do is raise house prices & rents in the end.
posted by Heywood Mogroot III at 8:52 AM on March 1, 2021 [6 favorites]


"Internet" being considered a "non-essential" bill is an example of Online Personal Finance Brain on display here
posted by windbox at 8:55 AM on March 1, 2021 [44 favorites]


I don't make a lot of money and I never have but as a person who was "really really really" bad with money in their 20's (i.e. my parents didn't have money so I couldn't learn this stuff from them) things like this chart and basic personal finance books and blogs have been so helpful to me in getting some stability and security in my life (a big one has been giving me the freedom to leave a job/city that I hated because I had the emergency fund to do so). I wish people wouldn't be so out of the gate dismissive and condescending about things like this, because it's not helping anyone. Yes, there needs to be a better safety net, minimum wage needs to be raised, etc., but individuals don't have control over that. How they allocate their money is something they can control and yes unfortunately there are people who are so abjectly poor they will never get past Step 0, but it is useful advice for the vast majority of Americans and it isn't necessarily intuitive so they need to learn it somewhere.
posted by Jess the Mess at 9:00 AM on March 1, 2021 [86 favorites]


I was blown away at how valuable a six-month "rainy day" fund could be.

My company went through a merger, and my new managing VP was from the "other" company & was instituting some changes (e.g., flattened management structure) that I didn't love. The thought of sticking it out while sending out resumes just made me feel sad.

So I quit, with no plan, secure in the knowledge that my family & I would be fine. I was able to pour all of my energy into the job search (plus doing some things that needed doing around the house), and it worked out great. Better job, higher pay, etc., etc. That "rainy day" fund gave me freedom.

When I'd started building the "rainy day" fund, I had figured it would be just for involuntary financial squeezes: sudden need for hospitalization in the family, or an unexpected layoff. But it turned out it wasn't just giving me the gift of a reassurance, it was giving me the gift of freedom in a mediocre situation.
posted by thatnerd at 9:04 AM on March 1, 2021 [23 favorites]


This does seem like a tool for a certain type of question that comes up often in personal finance forums - 'I have money and do not know what to do with it'. It's more detailed than what I've seen, and I haven't seen a flow-chart format before.

I think its intended audience must be people whose housing, partnering, children, etc. is already settled (the 40+ people as noted above), or not on the table for modification.

The implication of a flow chart is that you can reach one of the ends, and the omission of "not enough money" options or any outcome other than financial security is something!
posted by mersen at 9:05 AM on March 1, 2021 [1 favorite]


the US system isn't a house of cards that is just waiting to crumble

That is a feeling I can't really shake. All of the ironclad wisdom about the market, investing, and how to plan for retirement feels like a reflection of what has been stable for the last 70 years. Not sure how to imagine it will remain stable in the face of climate change in the coming decades.
posted by little onion at 9:07 AM on March 1, 2021 [8 favorites]


glaucon here try this
posted by aniola at 9:08 AM on March 1, 2021


I wish people wouldn't be so out of the gate dismissive and condescending about things like this, because it's not helping anyone .

I would say that if you got actual financial advice (and not this) it would have helped more, but can agree that sometimes, a little bit of so-so advice is better than no advice.
posted by The_Vegetables at 9:09 AM on March 1, 2021


People think tax cuts stimulate the economy, all they really do is raise house prices & rents in the end.

I'm all for taxes (some exceptions apply, such as military and police), and tax cuts certainly raise externalized costs, but the parts of the country with super-cheap housing (compared to urban California) are commonly found in places where I don't want to live because they do things like vote for tax cuts.
posted by aniola at 9:11 AM on March 1, 2021 [3 favorites]


Not a lot of positive comments here, so I'd like to chime in!

This chart is really helpful to a lot of my peers. So many under-40's at this point in my peer group are making 70K-140K, but don't really know what they should be doing with their money. They don't know how to make decisions for retirement, and most financial advisors have been scammers or targeting bigger fish. They have credit card debt, expensive cars, mortgages, and money is this enigma to them.

This is excellent advice. Each step on the flow chart is EXACTLY what I would recommend to people in these situations. They need to start thinking about managing their money. At any pay level, this chart should be the priority.

I'm curious to you all calling it bad advice - is it that people earning less (maybe $30K for a 3 member family) are just so hopeless that the first few stages aren't granular enough to be helpful? If so, while people buried under financial constraints so unbearable no advice would help might not find this helpful (obviously), for anyone not in that situation, but without a lot of financial education, this should be very helpful. It's both simple, but gives you the correct words and phrases that you need to research more about fixing the finances surrounding your life.
posted by bbqturtle at 9:13 AM on March 1, 2021 [24 favorites]


I'm curious how you see "actual financial advice" for an ordinary person starting from scratch knowledge-wise varying from this, The_Vegetables. I ask because almost all of the personal finance advice I've I've seen is more or less variations on what's contained in the chart and it would be interesting to hear some other methods. Or do you just mean tailored to the person's specific situation? If so, that's a big barrier in itself as professional unbiased financial advice isn't free and a lot of financial advisors turn up their noses at non-affluent people, or at least I've felt that way.
posted by Jess the Mess at 9:18 AM on March 1, 2021 [6 favorites]


My biggest beef with the chart is that the print was so damn tiny I couldn't read it without monkeying with my browser settings.

Otherwise, I agree with what people above are saying - that this is good advice, but it pre-supposes that people are actually being paid enough to follow it. For an increasingly large number of people, this is not the case - and so for a lot of people this rings very hollow. I knew 5 years ago that I should be saving X% of my money for retirement, but I wasn't being paid enough to do that, and make rent and pay down debt. I was already close to the bone on a lot of my other budget items and the only way I could balance it was by thinking of my spending constantly, and the quality of my life suffered.

And, the reason I had that debt was because of the recession 10 years ago, which left me unemployed or underemployed for a solid two years - during which time I made up the difference via tanking my regular savings and using cash advances on my credit card. I didn't touch my IRA, precisely because this kind of advice told me that it would be bad, so I was stuck with paying interest on the $200 and $300 hits I'd occasionally make to my card.

The debt's gone now, but a big reason why is because I am finally being paid an adequate living wage. Without that I'd probably still be chipping away at the debt.
posted by EmpressCallipygos at 9:30 AM on March 1, 2021 [10 favorites]


Not sure how to imagine it will remain stable in the face of climate change in the coming decades.

For better or worse, I'm having trouble imagining how a lot of this will fundamentally change due to climate change.

Even if we make sensible policies, the fundamentals of the market will probably remain the same. Paying off my credit cards and loans, investing in my Roth IRA, etc. The companies my money's invested in may change, but I can't imagine the systems change so wholesale that I'll have made a misstep. Honestly, I can't imagine the companies will *let* it change.
posted by explosion at 9:32 AM on March 1, 2021 [2 favorites]


My biggest beef with the chart is that the print was so damn tiny I couldn't read it without monkeying with my browser settings.

I had this problem (why is Imgur's UI so terrible and clicking the image doesn't actually zoom?). Managed to fix it by right clicking and "open image in new tab", in case that's helpful to others.
posted by Expecto Cilantro at 9:33 AM on March 1, 2021 [11 favorites]


Everything always recommends investing like it's the responsible thing to do. But investing just doesn't sit right with me. The companies that make money are not likely to be the things I want to support and encourage.
posted by aniola at 9:33 AM on March 1, 2021 [13 favorites]


BTW, for those having difficulty seeing it, it's how Imgur handles directly linked images. If you click the link, it loads the wrapper and shrinks the image. If you copy and paste the URL, it loads the full-size image.
posted by explosion at 9:35 AM on March 1, 2021 [4 favorites]


Everything always recommends investing like it's the responsible thing to do.

It's more akin to the advice of what to do if caught in a riptide. It's survival advice for living in America, not directions on how to be a contributing member of society.
posted by explosion at 9:36 AM on March 1, 2021 [16 favorites]


It's not just earning enough money. It's earning enough money AND having good insurance AND not suffering a catastrophic accident AND not having a family member suffer the above AND avoiding an chronic illness with expensive medication AND avoid long term care or having enough money for that insurance AND managing to put your money in the right place.
posted by AlexiaSky at 9:38 AM on March 1, 2021 [24 favorites]


If you copy and paste the URL, it loads the full-size image.

except on mobile, which seems to always serve up a low quality option even if you remove the URL cruft, at least for me. So if you can't read it on mobile, give it a try on a desktop browser.
posted by Nonsteroidal Anti-Inflammatory Drug at 9:38 AM on March 1, 2021




Oh, another thing this chart doesn't tell you -

I dutifully opened an IRA in my late 20s and had been making monthly contributions to it for nearly 20 years before anyone ever told me to make sure I was getting a "good interest rate" on it. And it was another 15 minutes before I thought to ask "wait, what is a 'good interest rate'?" And only then did I discover that the IRA I'd gotten 20 years prior sucked. I've since switched to a new one, but that was 20 years of interest I'd lost out on. (I also further checked the fine print to discover that my original IRA just flat-out doesn't do investments as part of your IRA package until you had some impossibly large balance stashed in there.)

Just telling people what to do isn't enough sometimes.
posted by EmpressCallipygos at 9:39 AM on March 1, 2021 [13 favorites]


So many under-40's at this point in my peer group are making 70K-140K, but don't really know what they should be doing with their money. They don't know how to make decisions for retirement, and most financial advisors have been scammers or targeting bigger fish. They have credit card debt, expensive cars, mortgages, and money is this enigma to them.

These sound like people who's parents didn't invite them into the household finances, or never discussed budgeting with them. How do you get out of middle school without realizing that your allowance won't stretch to everything you want? Or maybe my parents were just especially frank about our rather meager finances - I knew the exact cost of everything I did and counted my money to penny (okay, usually nickel - and I would look on the ground for extra nickels or dimes or quarters all through high school).

is it that people earning less (maybe $30K for a 3 member family) are just so hopeless that the first few stages aren't granular enough to be helpful?

I think that when you are very low income, everything below the first or second line on the chart is just meaningless. Even the top-line seems more like a mockery: how are you supposed to buy groceries after you've paid the damn rent (higher every year) and utilities - will it be food or water this month? You're trying to save $5/month to get new shoes, not to create a rainy day fund.

But I also do have a different perspective to a lot of people - I have been low income for years at a time, but I also come from a low-income but very budget-savvy family, and then lived without dependents, so I (for example) was able to save money while living on a graduate student's stipend. My choices weren't always the best personal options: my basic technique is "spend as little money as possible, always" - and so I did 20 years of thrift store clothes, camping vacations, cheapest take-out. And now I'm over 40, and frankly, I could have spent SOME money to have had fun and done things that would have made my life richer, and probably be in a very similar financial situation.
posted by jb at 9:40 AM on March 1, 2021 [11 favorites]


But investing just doesn't sit right with me.

The thing is, investing doesn't really help companies very much. You are buying stocks from other people, not directly from the company.

It's kind of like, okay, your neighbor has a car that was definitely once driven by George Bush and he's hoping it to go up in value. He's offering you $1000/week to store it in your unused garage. Whenever you want to, you can stop and he'll drive his car out.

Now, you might not like George Bush, and you might slightly object that your neighbor has a car of his. But at some point, $1000 is a month is pretty good money, and it's not like you are paying it to George, you're paying it to a neighbor who might sell his George Bush car to someone in the future.

In case the analogy isn't obvious, your garage is your otherwise-unused money, your neighbor's car is an index fund of slightly bad but not evil companies that no longer benefit much from the prices of stocks, and your neighbor is Vanguard.
posted by bbqturtle at 9:47 AM on March 1, 2021 [8 favorites]


Among the hardest things I ever had to learn was that there is always someone ready to tell you that anything you do with money is dumb, and also you’re doomed. Regardless of anything. Even if you’re just aiming to build the most basic safety net! The advice on this chart (I’ve seen it before and think it’s good) is a bunch of good stuff that a lot of people have never, ever heard.

As to catastrophic failures... well, yes. While you’re being mauled by a bear, getting advice about yearly checkups isn’t helpful. Doesn’t mean you shouldn’t go if you can and are not being mauled by a bear.
posted by cupcakeninja at 9:49 AM on March 1, 2021 [34 favorites]


My take is that this chart isn't terrible advice but as others have pointed out, it isn't relevant to all sorts of groups of people. The basic strategy is to save some money and not go into debt. It's not that hard, but based on how many people struggle, it's not that easy either. For low income people, there just isn't enough money. Ironically money-savings advice becomes more relevant as you become wealthier because there are all sorts of high income people who are actually terrible money mangers. And all the flowcharts in the world don't mean anything in a country without universal health care.

Weirdly this article came across the orange news site this morning:
She admitted to my wife that she just felt like she was sinking further and further underwater, and didn’t see any way out for her or her family.

Note: The hostess and her husband were both doctors. They had a combined income somewhere upwards of $200,000 a year, and as the conversation developed my wife learned that their problems started and stopped with the hostess not being able to save quite as much as she’d like once the payments on their very nice house and current-year cars were made. At the time she leaned on my wife for emotional support over finances, our family of four’s income was less than $30,000 a year.
If you are a couple of married doctors making $200K+ a year and feeling like you can't make ends meet, this chart is very much for you!

And in America low income doesn't necessarily mean unable to save as there are a fair number of people in the US in pretty low cost-of-living areas.

But ultimately charts like this are indeed a symptom of America's desire to fix structural problems with individual actions. In the meantime, have an emergency fund.
posted by GuyZero at 9:51 AM on March 1, 2021 [12 favorites]


Everything always recommends investing like it's the responsible thing to do. But investing just doesn't sit right with me. The companies that make money are not likely to be the things I want to support and encourage.

There are a lot of companies out there and not all of them are RJ Reynolds (and RAI is a shitty stock anyway). So it's possible invest semi-ethically. But there's no rule saying you need to participate in society, just that you may find it challenging to try to do so.
posted by GuyZero at 9:54 AM on March 1, 2021 [2 favorites]


While you’re being mauled by a bear, getting advice about yearly checkups isn’t helpful. Doesn’t mean you shouldn’t go if you can and are not being mauled by a bear.

This is right on. There are definitely too many financial bear maulings in America, but if you not being mauled by a bear, go get a checkup.
posted by GuyZero at 9:56 AM on March 1, 2021 [9 favorites]


To borrow the complicatedly-attributed Ginsberg's theorem on thermodynamics (and American economics, by my assertion):
0. There is a game.
1. You can't win.
2. You can't break even.
3. You can't even get out of the game.
posted by CrystalDave at 9:58 AM on March 1, 2021 [15 favorites]


Nthing that it's absolutely possible to invest in funds that suit your ethical criteria. For example.
posted by slkinsey at 9:59 AM on March 1, 2021 [3 favorites]


Also I'd like to add that if you think that a couple complaining about money while making 200K+ must be sociopaths or something, let me state that in the US you're supposed to both be rich, appear to be rich and yet never actually talk about money or how to manage it! Like 50% of the reason that gender-based wage gaps continue to exist is that people don't actually talk about their incomes so women don't know they're being underpaid! People should talk about the nuts and bolts of managing money.
posted by GuyZero at 10:06 AM on March 1, 2021 [8 favorites]


The chart may be helpful but the crime is that such a complicated chart is even necessary.

You have to become fluent with and evaluate 401(k) and 403(b) plans (employee contributions, employer match, pre-tax contributions, after-tax contributions, traditional or Roth) and IRAs (pre-tax and after-tax traditional, Roth, Roth conversions, withdrawal penalties) and SEP IRAs vs solo 401(k) and Health Savings Accounts and 529 plans for education and how this all interacts with your Obamacare insurance plan and subsidies.

It's all a nightmare that no average citizen should be expected to master just to have a comfortable retirement.

Australia, for example, has a very simple system. You have a guaranteed pension much like Social Security and then you have a IRA-like superannuation plan that your employer must contribute to and you can also voluntarily contribute to. And your superannuation plan optionally can be converted to a lifetime annuity at retirement. There are problems with the Australian system, in particular financial institutions getting their fingers into you super, but at its base it is multitudes simpler than the U.S. system.
posted by JackFlash at 10:08 AM on March 1, 2021 [12 favorites]


You have to become fluent with and evaluate 401(k) and 403(b) plans (employee contributions, employer match, pre-tax contributions, after-tax contributions, traditional or Roth) and IRAs (pre-tax and after-tax traditional, Roth, Roth conversions, withdrawal penalties) and SEP IRAs vs solo 401(k) and Health Savings Accounts and 529 plans

I have an engineering degree as well as a MBA and it took me years to finally understand "mega backdoor rollovers" upon moving to the US. The US system is extremely structurally fucked and clearly designed to generate the maximum amount of money manager fees. It's also way too coupled to employment, which is again a tactic to create more leverage over employees.
posted by GuyZero at 10:15 AM on March 1, 2021 [21 favorites]


again a tactic to create more leverage

Just about any time you find something confusing/irrational about the US, first remember that the majority of Republicans really really want to bring back indentured servitude and/or outright slavery, and then go back to see if that thing is still confusing/irrational.
posted by aramaic at 10:27 AM on March 1, 2021 [18 favorites]


first remember that the majority of Republicans really really want to bring back indentured servitude and/or outright slavery, and then go back to see if that thing is still confusing/irrational.

Don't forget that Elon Musk is spinning up indentured servitude on Mars!
posted by deadaluspark at 10:35 AM on March 1, 2021 [9 favorites]


I found this helpful, for what it's worth. Just wanted to chime in with a thanks.
posted by Orlop at 10:36 AM on March 1, 2021 [8 favorites]


I feel like Elon Musk thought Andrew Ryan was the hero of Bioshock.
posted by OnTheLastCastle at 10:44 AM on March 1, 2021 [7 favorites]


I feel like Elon Musk isn't alone in thinking that, re: Bioshock and it terrifies me.
posted by deadaluspark at 10:55 AM on March 1, 2021 [3 favorites]


Everything always recommends investing like it's the responsible thing to do. But investing just doesn't sit right with me. The companies that make money are not likely to be the things I want to support and encourage.

Also note that if you keep your retirement money under a mattress (or even just a savings account), due to inflation, it will be worth less when you retire than when you saved it. It is one of the reasons capital always wins over labor.
posted by gwint at 10:56 AM on March 1, 2021 [11 favorites]


Things like this help feed the "I am succeeding because I did things right; if you are not succeeding like me it is because you do not deserve it because you made bad choices.". Yes this graph contains good info and should be helpful to those it works for, but if you need to do all this to not live in destitution then there's a problem inherent in the system.

My wife and I are in our 40s/50s and we don't think we can retire either; divorces, underemployment, kids, bankruptcy, health issues, et al, leave a mark that takes a long time to get over. I'm finally able to contribute to the 401k to get the free money employer match but the $15,000 that I've managed to save in the past few years won't go very far unless I work another 40 years. If you tut tut about how I should have started contributing in my 20s I have a million reasons why the money just wasn't there and it's not because of overspending on luxuries.
posted by AzraelBrown at 10:58 AM on March 1, 2021 [21 favorites]


Reading this makes think that somewhere we should have a section of Metafiter devoted to anonymous, non-judgemental financial advice but I'm not sure how that would work without it turning into r/personalfinance.
posted by freakazoid at 11:24 AM on March 1, 2021 [9 favorites]


I'm not sure how that would work without it turning into r/personalfinance.

Everything related to self-improvement in the US turns into a blend of a revival meeting and a tupperware party and, like death and taxes, either you learn to deal with it or you don't and the US is an endless wave of suffering thrown against you like you're Prometheus forever bound to the rock except it's not your liver but your human dignity that keeps getting ripped out over and over.
posted by GuyZero at 11:31 AM on March 1, 2021 [22 favorites]


Nthing that it's absolutely possible to invest in funds that suit your ethical criteria. For example.

You haven't met my ethical criteria.
posted by aniola at 12:13 PM on March 1, 2021 [9 favorites]


“My take is that this chart isn't terrible advice but as others have pointed out, it isn't relevant to all sorts of groups of people”

Is there advice available that fits this criteria besides “convince other voters to substantially restructure the American economy?”
posted by Selena777 at 12:20 PM on March 1, 2021 [5 favorites]


You haven't met my ethical criteria.

Okay... I'll bite. What's your criteria.
posted by bbqturtle at 12:21 PM on March 1, 2021 [4 favorites]


Is there advice available that fits this criteria besides “convince other voters to substantially restructure the American economy?”

Well, right now there could be "call your Congressional Rep and scream bloody murder at them for dropping the $15 minimum wage they were going to put into the Covid relief package."
posted by EmpressCallipygos at 12:22 PM on March 1, 2021 [5 favorites]


It wasn't a lure. But as someone famous more or less said, we're not going to solve anything using the same sorts of thinking that got us into this mess. For starters, I'd want a company that isn't using motor vehicles for transportation. And excellent DEI. And with a focus on what's now called "essential" work/products/etc.
posted by aniola at 12:33 PM on March 1, 2021 [1 favorite]


These sound like people who's parents didn't invite them into the household finances, or never discussed budgeting with them. How do you get out of middle school without realizing that your allowance won't stretch to everything you want?

As a child growing up in an often economically struggling family, I knew that there were times our entire family income wouldn't stretch even to get things we needed. And for an extended period of graduate student impoverishment, most of this chart would've been irrelevant to me. But when I finally got a job with a decent salary, precisely because my parents both often had little money and were psychologically terrible with money (both can be true), this is information I needed, yet had to figure out for myself. Fortunately, this is the kind of thing I'm reasonably good at figuring out, but why should everyone have to go through that effort?

The big concern is not letting this kind of advice get wrapped up in bootstraps rhetoric, such that people are blamed or blame themselves for not being in a position to take advantage of it. That is a big risk, and I try earnestly to avoid it when giving advice on AskMe. But otherwise it's too easy for those who might find it beneficial to lose opportunities to lack of knowledge or to predators. My mom had an unexpected modest inheritance from a distant relative. After her retirement, I had to spend about a year getting her out of all the inappropriate vehicles her slimy "advisor" (rando at an insurance company) had wasted her money in. Those fucking 5.75% front-end loads in subpar investments for a woman whose retirement income was visibly maybe going to be $40K (and did not own a home). If I ever saw that guy, I'd punch him. Mom still doesn't understand what he did wrong.
posted by praemunire at 12:36 PM on March 1, 2021 [16 favorites]


Selena777, there’s a pile of “personal finance” advice to be had out there that isn’t aimed at the middle and upper classes. It’s rarely called that, because “personal finance” is a salable good, whereas “help the destitute-to-struggling improve their lot” is not.

The best stuff that I’ve seen comes up for Google searches like working poor financial advice or financial advice exiting poverty. Likewise, studying the financial strategies of recent immigrants can sometimes be super-helpful, if they’ve managed to navigate the system and amass some wealth. Not necessarily talking about immigration to U.S., though that’s my framework.

And, of course, AskMe is full of Q&A about finance, often asked anonymously.
posted by cupcakeninja at 12:38 PM on March 1, 2021 [9 favorites]


I'm someone who grew up poor and did not get personal finance education at home, so had to figure all this shit out as I went. I also had the experience of being around middle class, upper class, and astronomically rich people in college and beyond, and I noticed that people in those socioeconomic groups approached money way differently than poor people do. I remember that for a long time anything beyond a checking and savings account felt like strange and threatening territory and that it took a long time to piece things together about personal finance, what all these financial instruments were, how to prioritize. And I'm great at math, so it's not like numbers scare me. I remember how hard it was to get the big picture and put things into perspective when there are a lot of strange and scary new concepts out there.

All this to say: I love the flow chart, so much so that I recently recommended it on the green. I wish it were around when I was 20 year old. Failing that, I recommended it to my 20 year old kid, who is just now starting to wrap his head around handling money as an independent adult and is intimidated by it all. There is/could be a LOT of depth and detail in each and every one of the steps. I think there's value in presenting it in this stepwise format. It's not necessary to do a deep dive on retirement savings when someone is still in the basic budget and emergency steps--it's helpful to have a guide that says "put your problem solving to work where you are" knowing you can leave the rest for when the time is right.
posted by Sublimity at 12:39 PM on March 1, 2021 [18 favorites]


Well, right now there could be "call your Congressional Rep and scream bloody murder at them for dropping the $15 minimum wage they were going to put into the Covid relief package."

They didn't drop it. You would be wasting your time calling your congressional representative because they already voted and passed the relief bill that includes the $15 minimum wage on a vote of 219 to 212 without a single Republican. You can read it with your own eyes here in Section 2101: Raising the Minimum Wage.

The bill is now in the Senate and the only two votes that matter are Democrats Manchin and Sinema. Both their votes are required to get to a 51 vote majority with Harris. Both have said they won't support the $15 minimum wage to that's it. It's over. They may be able to come to some other dollar number, but $15 is dead.

It doesn't help matters when you go about falsely disparaging the very representatives who did the right thing.
posted by JackFlash at 1:47 PM on March 1, 2021 [11 favorites]


first remember that the majority of Republicans really really want to bring back indentured servitude and/or outright slavery, and then go back to see if that thing is still confusing/irrational.

Moreover, and this crosses party lines, the ideal state of capitalism is $0 labor costs, AKA slavery.

Overall, and maybe this is addressed/explained concisely in Redditland, but to look at a chart like this and come across steps like "Evaluate the merits of the "Avalanche" and "Snowball" [debt-payment] methods and their advantages in your personal financial/psychological situation and apply accordingly to pay off these debts," without further pointers to acquiring the expertise to evaluate these things, my spidey-sense goes "yeah great thanks." I expect that it will take searching and reading myriad posts until the landscape is known, then the decisionmaking process comes in and hey does anybody have a chart for that? This is why I think the Dave Ramseys feel useful: simple and to the point. That is, if there are more opaque steps hiding complex decision processes in this chart, I'm half-expecting to reach "naked shorting" by the end.
posted by rhizome at 2:05 PM on March 1, 2021 [1 favorite]


>rhizome

I'm unsure of what your complaint is here - is it that, while the topics are useful to you, and you don't understand the concepts, you are unwilling to follow the instructions to evaluate the steps?

For instance, I put in "Avalanche" and "Snowball" [debt-payment] methods into google, and it brought up several resources. If each step were to include an article on its own, it'd be much harder to parse.

And, in its current state, it's much better than the previous versions I saw in the early 00's, with better advice and more detail.
posted by bbqturtle at 2:19 PM on March 1, 2021 [2 favorites]


And that's great! However it just seems like "too concise." Maybe there should be an icon in those steps that mean "you're going to have to google this one" rather than it being a step in itself.

I realize I may just be sealioning this and if so I apologize! I'll bow out.
posted by rhizome at 2:44 PM on March 1, 2021 [1 favorite]


Like I said, there is likely to be need for a research, problem-solving and refining at every step of the way. If you’re not at the point in the flow chart where it makes sense to have to strategize about paying off debt, then it’s not relevant to you and don’t lose sleep over it. But when you do get to that point, “avalanche vs. snowball” succinctly points you toward the two main strategies, and you’ll be more motivated to dig into it because it’s relevant and helpful.

Believe you me, it gets more baroque the farther along you go. Getting bogged down because you don’t know it all at the outset is counterproductive. Again, IMO, that’s precisely what’s valuable about this stepwise approach. Do the problem solving and refining where you are, then move on to the next.
posted by Sublimity at 2:47 PM on March 1, 2021 [8 favorites]


Alot of my peers live on short contracts, student loans, freelance, gig work, personal loans, grants, family money, and the like. I am 40, and though I work in the academy and as an artist/writer so my sample sized is skewed, I know almost no one who has a traditional employer. The advice here is for people with a day job, and not the Frankenstein monster of cobbled together employment that seems real here. From the very first step, they are disqualified, even if they make 70k. (i am very bad with money, but I think in a way that is common, often when I gain a windfall, it goes immediately to pay back what I borrowed to eat.)

And these are what would have been 10 years ago stable, middle class jobs--librarian, priest, university professor, software developer, high school teacher, even taxi driver.
posted by PinkMoose at 5:30 PM on March 1, 2021 [8 favorites]


JackFlash - and all - while I am not entirely sure I deserved QUITE that much ire in being corrected, I still apologize for mis-stating incorrect information when I said that the Reps had dropped the minimum wage. I was repeating something I had thought I'd heard on the radio this morning, and apparently I mis-heard it.

Financial health is a topic that gets everyone a little bit upset, as it is intensely personal; especially when the current climate is so inequitable for so many. It may behoove us all to take a deep breath, and not only double-check the information we are given before repeating it (as I need to do), but also allow each other the space to recognize their mistakes before jumping straight to accusing them of malice.
posted by EmpressCallipygos at 5:45 PM on March 1, 2021 [1 favorite]


Believe you me, it gets more baroque the farther along you go

Exposing my privilege here, but god does it ever. Loopholes and weird quirks pile on top of each other. I'd say it's legislative malfeasance, except that I'm familiar with crufty codebases and I know, with great pain in my bones, how well-meaning decisions made in a moment can come back to haunt you in horrible horrible ways when that those decisions encounter other decisions which encounter reality.

Imagine software bugs that have lobbyists. That's Global Finance.
posted by aramaic at 5:58 PM on March 1, 2021 [10 favorites]


For instance, I put in "Avalanche" and "Snowball" [debt-payment] methods into google, and it brought up several resources. If each step were to include an article on its own, it'd be much harder to parse.

I think that since it comes from r/finance, those terms are well-known terms of art there.

It's illustrative to look at this flowchart from the POV of a full-time worker, 40 hours @ $15/hour, or about $1800/month. Pay rent. $800 left. Buy food. $500 left..
posted by mikelieman at 7:15 PM on March 1, 2021 [5 favorites]


I feel like the environmental jackpot that's going to hit in the next 25-30 years is going to render this flowchart entirely moot with respect to retirement. The wealth cutoff for maintaining a 2019 lifestyle in 2049 is going to be way, way higher than what the vast majority of Americans could ever hope to save, no matter how much they set aside or how wisely they invest it.
posted by lefty lucky cat at 9:34 PM on March 1, 2021 [3 favorites]


wealth cutoff for maintaining a 2019 lifestyle in 2049 is going to be way, way higher
The decent West LA apartment I rented for $700/mo in 1991 now rents for 3X that, while inflation is only up 2X since then.

Theoretically if other sectors rise in cost dramatically the high rents in the housing might be beaten down in response.

But I wouldn't stake any money on that, as rents never ever go down.
posted by Heywood Mogroot III at 10:30 PM on March 1, 2021 [1 favorite]


For those complaining that this does not provide enough details, please be aware this flowchart is not intended to be a standalone resource. It is a guide to help people know what details to read up on next in the comprehensive r/personalfinance wiki given their personal circumstances.

For those who feel that helping people understand how to effectively deal with their finances within the US capitalist system is bad and anyone who tries to do so should feel bad for doing it and not even try because not everyone in the US can buy groceries, I don't know what to tell you ...
posted by superna at 12:12 AM on March 2, 2021 [20 favorites]


The thing about advice on the internet is that unlike advice given personally 1:1, it comes without context about the receiver.

There's millions of people in what is left of the broad American middle class for whom a simple flowchart like this is quite useful at least as a guide to what one should be doing. Even people who can't get quite get past the first two rows might still find it useful to think about what the next step looks like if they think there will be a next step for them.

The lack of context about the reader and the extremely unequal structure of American society means that any advice will be either laughably tone deaf in its grand ambitions or completely lacking in detail for people outside its intended income range. I think reddit also has /r/povertyfinance as a response to the somewhat alienating "how do I invest $50k of savings a year?" content of the /r/personalfinance sub.

It can simultaneously be true that there are households with two high double figure annual incomes who struggle with money due to poor management and (many more) households who carefully manage a household income of $25k and still struggle because money management isn't magic, it can only really be applied to post-subsistence income and if you don't have any...

This is also what I found offputting about early retirement / FIRE people. Yeah fine, the central idea that plenty of people are happy consuming only $25k/yr (n.b. not the same as only having that amount to consume) so if you earn $100k you should be able to accumulate enough to stop working very early is obvious once pointed out and makes a lot of sense. The problem is that too many of those people are way too boosterish and also imply that this same logic will work for someone who actually only is earning $25k which is obvious nonsense because of the floor on cost of living related spending.

I feel like the environmental jackpot that's going to hit in the next 25-30 years is going to render this flowchart entirely moot with respect to retirement. The wealth cutoff for maintaining a 2019 lifestyle in 2049 is going to be way, way higher than what the vast majority of Americans could ever hope to save, no matter how much they set aside or how wisely they invest it.

This strikes me a little like Survivalist wish fulfilment. When the big collapse comes, they'll all get theirs! Is it not more likely that it is precisely the people best prepared financially who will have the best 2049, even if 2049 is worse in absolute terms?
posted by atrazine at 3:45 AM on March 2, 2021 [13 favorites]


In case the analogy isn't obvious, your garage is your otherwise-unused money, your neighbor's car is an index fund of slightly bad but not evil companies that no longer benefit much from the prices of stocks, and your neighbor is Vanguard

This unfortunately isn't the case. It's true that after the IPO plenty of shares are held by third parties, but the corporation and it's executives are generally the largest shareholders, so an increase in stock price directly benefits them: they can sell the shares they held back to raise capital for the corporation or for themselves personally long after the initial listing. Zuckerberg is rich because he owns 50% of Facebook and when you buy Facebook stock you make him marginally richer even if you're buying it from your next door neighbor Lisa
posted by dis_integration at 5:32 AM on March 2, 2021


Zuckerberg is rich because he owns 50% of Facebook and when you buy Facebook stock you make him marginally richer even if you're buying it from your next door neighbor Lisa

Surely you only make Zuckerberg richer if you by the stock for a price higher than the last traded price. If the price at which Facebook stock changes hands drops, Zuckerberg gets poorer.
posted by liebchen at 6:46 AM on March 2, 2021 [2 favorites]


This flowchart seems most useful for people who are at or past the red boxes about emergency funds -- you have made it that far, you have "extra" unspent money available, and the flowchart provides a guide about what to do with that "extra" money sequentially.

If you are poor (in the sense of earning too little money to be able to move through the first boxes and end up with a a surplus after building an emergency fund), you need some extra steps or options that aren't on the flowchart. For those people, there need to be steps like "sign up and maintain elegibility for public or private assistance programs" and "increase income and income stability" -- a dollar more an hour or a more stable schedule is going to make a huge difference to a low earner.

Right now those early boxes are there as something that the intended audience can move through easily , not needing help because they are stuck in "set realistic goals" or "pay down debts."

And that's ok, the flowchart doesn't have to be everything to everyone, but being aware of its intended audience and how it does and does not help various groups of people seems important.
posted by Dip Flash at 7:38 AM on March 2, 2021 [6 favorites]


This is also what I found offputting about early retirement / FIRE people

This is what I find offputting about this chart. Consumer finance isn't linear - you should invest (if you wish to), save a bit, and pay your debts all at the same time, ideally starting when you are young since the magic of compounding for investing takes a long time if you don't start out wealthy.

Also due to the fact that debt rises lockstep linear with income, having debt isn't a personal failing, therefore presenting 'avalanche vs snowball' is unnecessary complexity, and suggesting that emergency funds can't be available debt, since debt is implied to be negative.

Oh and also besides that fact that half the advice is poor, that most of the decision points aren't actually decision points (like for example, you can invest in both a ROTH IRA and a regular IRA at the same time [and if you have a spouse you probably should]).

Other than all of that, it's ok.
posted by The_Vegetables at 7:51 AM on March 2, 2021 [1 favorite]


The /r/personalfinance wiki has a companion page giving additional detail and definitions for the flowchart.
posted by Nonsteroidal Anti-Inflammatory Drug at 7:53 AM on March 2, 2021 [2 favorites]


Yeah most of us are stuck at the red boxes, and going to be for a while. Maybe the green ones (401k/IRA) if we're lucky.
posted by thefool at 7:58 AM on March 2, 2021


atrazine, thank you for pointing out r/povertyfinance. Their wiki alone is pretty great.
posted by Jess the Mess at 8:01 AM on March 2, 2021 [1 favorite]


Also due to the fact that debt rises lockstep linear with income, having debt isn't a personal failing, therefore presenting 'avalanche vs snowball' is unnecessary complexity, and suggesting that emergency funds can't be available debt, since debt is implied to be negative.

I think this comes back to the point of a flowchart not really being "advice". Many people come to these things with a reality where they've got loads of consumer debt incurred carelessly and for those people, "debt is bad" might be something helpful to hear. Even if it's not really true.

On the other hand, nobody who has a productive relationship with debt should contemplate something like a "debt snowball method". Apparently some radio show clown came up with it. It's not like real estate project finance guys wake up in the middle of night worried about how they're now "in debt", that's the whole point of how they're organised! Without knowing someone's circumstances you can't really have a flowchart like this. I've got loads of debt, doesn't bother me one bit.

I don't know about debt rising linear with income but it's certainly true that what really matters is debt servicing capacity rather than amount. Right up through the upper middle class, a very large number of people use about as much debt in their personal capital structures as lenders will give them. I don't know that it's necessarily such a bad idea for them of them to de-lever a little.
posted by atrazine at 9:18 AM on March 2, 2021 [3 favorites]


This is what I find offputting about this chart. Consumer finance isn't linear - you should invest (if you wish to), save a bit, and pay your debts all at the same time, ideally starting when you are young since the magic of compounding for investing takes a long time if you don't start out wealthy.

Um, did you actually look at it? Literally the first thing that happens once you get past the black "essentials" boxes is a cascade of how to do *all those things*, in reasonably prioritized order: First, get a small emergency fund. Next, invest *if* you can get free money from your employer (employer match) to do so. Next, get rid of high interest debt (greater than 10% interest). Then beef up your emergency fund to 3 to 6 months. Then get rid of moderate interest debt (greater than 4%). Then start investing based on your situation...

There are *so* many question on /r/personalfinance from people who finally have a little bit of money more than the basics and don't know what to do with it because it seems like there are too many bases to cover all at once. The above sets out a really sensible way to prioritize.
posted by Sublimity at 9:23 AM on March 2, 2021 [9 favorites]


This is what I find offputting about this chart. Consumer finance isn't linear - you should invest (if you wish to), save a bit, and pay your debts all at the same time

You should do these things in the exact order that the chart says. You can't just "save a bit" AND "pay your debts" if you have a finite amount of money. That's the point of the chart.

Oh and also besides that fact that half the advice is poor, that most of the decision points aren't actually decision points (like for example, you can invest in both a ROTH IRA and a regular IRA at the same time [and if you have a spouse you probably should]).

It literally says this. It says "Evaluate the merits of Roth vs Traditional IRA in the context of your situation and max the yearly contributions accordingly.

This chart has been poured over by thousands of financial analysts, experts, and people like you and I. I don't believe that half the advice is poor. I don't believe that any of the advice is poor. Maybe you should take a step back, and ask yourself, "Is there a reason that the chart says to do this step BEFORE that step that makes sense in terms of maximizing my financial returns?" before just rejecting it entirely.
posted by bbqturtle at 10:03 AM on March 2, 2021 [8 favorites]


I get a feeling most of the people critical of the chart haven't read it very closely. For instance, it doesn't say "all debt is bad, pay it all off in a snowball before you do anything else". It actually encourages people to get rid of their high interest (credit card) debt ASAP, but stuff like paying off a mortgage or student loans comes way down the road after other things like retirement funding are taken care of.

I think people see the words "personal finance" and are knee-jerk equating it with something like the Dave Ramsey philosophy which does say you need to pay off ALL your debt before you do just about anything else or you are a bad person. But this is not that, at all.
posted by Jess the Mess at 10:19 AM on March 2, 2021 [10 favorites]


It's not like real estate project finance guys wake up in the middle of night worried about how they're now "in debt", that's the whole point of how they're organised!

Those guys have one-off project LLCs to run their finances through. They're not in debt personally. Individuals shouldn't be looking to corporate finance for best practice. Due to individual economic vulnerability in current U.S. society as well as predatory industry practices, it's only at a fairly high socioeconomic level that one can even begin considering having "a productive relationship with debt." Most people are better off minimizing their debt, though not always at the expense of other goals.
posted by praemunire at 10:51 AM on March 2, 2021 [3 favorites]


This is very similar to the time the psychiatrist showed me the picture of three penises and a dog in black and white.

People seem to be seeing what they want to see. (Or rather, not really seeing anything and telling you what they imagine they saw.) Metafilter is really great at making you feel like it's time to go lie in a ditch somewhere no matter what.

edit: My own internal reply to my post: "Look at you, fancy pants, you have a whole DITCH to yourself."
posted by OnTheLastCastle at 11:01 AM on March 2, 2021 [9 favorites]


The chart is great financial advice. I grew up with zero financial education and no one explained any of it to me - in part because we were in the space before the flowchart. I got lucky and am able to cover basic living expenses now with money left over and I had to go and find all this information on my own. I wish I had had this flowchart earlier.

I think it would be hard to add in the steps for not making enough to cover essential expenses and kind of unnecessary given the scope of "personal finance" instead of "surviving American capitalism". Local aid programs are a patchwork and keeping an up to date list of what's available for who and where would be an enormous task, sure you could have a list of things like "look up aid programs, try to earn more, or seek employment with more stable hours so you don't have to pay as much for childcare" that you recommend but those are not as amenable to a flowchart format.

As for the world ending so what's the point in trying to save any money - in the event that everything goes so poorly that all money is worthless and society collapses then at worst you didn't spend all the money you could have. If you don't save AND invest and then the world doesn't end... the outcome is much worse. Structurally similar to Pascal's wager, I know, but this one is based on real consequences instead of hoping you win the afterlife lottery. To me it's because of pessimism that you should save - if you do end up surviving somehow you'll probably need whatever money can get you in the future more than something you can live without now. I don't want to go back to living the way I did when I was younger and I wouldn't want that for anyone else either.
posted by Nec_variat_lux_fracta_colorem at 12:06 PM on March 2, 2021 [7 favorites]


Just chiming in to say that this chart is helpful to me. And that it doesn't seem very productive to say: "This chart doesn't apply to 100% of individual circumstances. And it doesn't explain every detail or nuance of every step. And it's bullshit that we live in a world where such a flowchart is even necessary. Therefore, the chart is bad."

I mean, if there's a war on, then the ultimate, ideal solution is to end the war. But in the meantime, I would be grateful for a well designed "How to Survive the War" flowchart – even if it's (by design) somewhat high-level, and isn't able to help every single person.
posted by escape from the potato planet at 4:15 AM on March 3, 2021 [9 favorites]


My only gripe with the chart is some small ordering details. I would have put "Get company matching funds" in step 1. Always take maximum money from your boss. Never leave any on the his table. You can even use it as an emergency fund - there are penalties for withdrawing it early but they are not so big you shouldn't try to take as much of your boss's money as he is willing to give you. Plus the withdrawal penalties will force you to treat it as a genuine emergency fund rather than a slush fund. I'd then put "pay down high interest credit cards" as step two because they can also double as an emergency fund once you get space under your limit and paying down that debt has a HUGE impact on cash flow. Then I'd build up an actual emergency fund. I'd pay into the retirement at the same time as paying down moderate to low debt (generally your retirement fund returns will slightly beat moderate to low interest rates when you factor in tax advantages).

The biggest thing for me to climb out of the hole, and it was a deep one, was actually modelling my debt and repayment plan. Once you see how much you are paying in interest over time and how much putting down even a little more can save you in the long run you will become extremely motivated to shrink your debt. I even setup a calculator on my debt spreadsheet where I could put in an amount I wanted to spend now and it would show me the real cost to me of spending that money rather than paying down debt. It's pretty eye-opening to realize that spending a dollar today means paying eight dollars over 10 years in debt service. I used this debt reduction calculator by Vertex42, the free google sheets one, to get my wife and I out of debt and I consider it one of my better decisions and greater achievements.
posted by srboisvert at 12:16 PM on March 3, 2021 [3 favorites]


How do you build a prosperous nation?
With healthy educated citizens.
How do you get that?
With living wages, single-payer healthcare, and free education.
How do you get that?
Fix your political system.
How long does it take?
A generation or two, better get started!
What about all the other problems?
A healthy educated populace will take care of them pretty quickly.
posted by blue_beetle at 6:37 AM on March 4, 2021 [2 favorites]


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