Hey, Im wondering how do people go about managing their financials, between paying off loans, saving money and investing. Do people feel like they are making the best decisions when it comes to money?
I collected data and figured out my family's average costs per week absent fixed expenses.
I have a spreadsheet that has a row for each week. I have it set up so that whenever my wife or I get paid, it adds that to the balance. Whenever a fixed expense is due, it subtracts it. It also subtracts the average costs per week for each week, and accounts for yearly projected bonuses etc.
The spreadsheet also shows any loans/loan payments.
Every few weeks I pay off my credit cards, go and look at my bank account balances, and compare that to the expected values in the spreadsheet. If they don't match, I figure out why and note that on the spreadsheet (i.e., unexpected surgery on dog, unexpected car repair, etc.).
The spreadsheet has conditional formatting that shows green if my bank balances are above my reserve amount for each week (including in the future), yellow if close, and red if under. I can see what my bank balances should be out through 3037 or so, when all my kids should be in college.
With that kind of a spreadsheet, you can instantly see when any loans you have will be paid off, and whether you can afford any purchase you're thinking of.
I use Ynab now. I used to use Hledger. Both are good but Ynab is easier for my wife to use. But the key idea is that you try to allocate your money before its spent. That way you know how much to spend.
It's all in my brain. It's not a good idea and I know I should be keeping a budget, but every time I try, I end up ending reaching the conclusion that I should just focus on making more money instead. I have reasonable rent, no debt outside of a small car note and state-school student loans, and have good credit. I live a simple life, and I max out my 401k match + a personal IRA. There's not a large amount left over that matters all that much, and fiddling with Excel won't change that.
I live well enough within my means that I don't have to bother with any kind of accounting. On a typical tech salary living in a relatively cheap COL area, I bought a house about half of the price I could afford. I exclusively purchase used vehicles (partly because I am am enthusiast and enjoy working on them, but even a 10 year old low mileage modern vehicle is pretty reliable and cheap to maintain), and I don't shop for the fun of shopping.
The result is a guaranteed growing savings which I periodically invest in various assets while trivially maintaining a buffer for emergencies.
The trick is to live modestly even if you have money. Also, stocks are basically equivalent to savings, since with modern tech liquidating funds and transferring them to your bank in an emergency can take as little as minutes.
There's so much uncertainty in money management that you're probably IMO wasting your time micromanaging. Pick a couple decent assets, or even an index fund, diversify with a little bit of gold or alternative market hedges, and leave the funds alone. There's no reason to overthink money management if you plan everything with a healthy buffer - but that requires self control. Less stress this way though.
Do you do any sort of financial planning for retirement? What you've got going for yourselves seems like it's working for you, but curious to know hat would happen if the "tech salary" were to stop.
I agree with your conclusion but for me personally, I am afraid of spending even though I have money to spend. And when I do spend the money, it gives me a lot of anxiety.
I started keeping track of my budget so I can comfortably spend without the stress.
I feel like you need a goal or you need some sort of framework to make yourself feel safe.
Say here's just an example (DO NOT QUOTE THIS): Most people don't know how much money they should have for retirement. The FIRE movement suggest Expense * 25 = Your Nest so you can take 4% annually. People don't have to follow the FIRE lifestyle but the calculation itself could give some deadline/goals to keep yourself "sane" because Mathematically it looks "sound" (better than NOBODY KNOWS!).
Yeah, that's what we do as well. After the first couple of years in my first job, during which I spent a little bit more on stuff I couldn't afford before (sport equipment and such) but within my means, we stopped spending at a level below what our combined salaries would allow. It's a nice feeling to have enough buffer for a couple of months. And the opportunity to opt for a lower salary without any financial risk. Generally sound advice to live below ones means. And stay there.
EDIT: One thing that helped a lot in doing so was to treat any bonuses, whether that is stock, years end bonuses or any variable salary elements, as just that. A bonus. Don't plan with it as part of your salary, put it aside. And only use it for stuff, like, a house. Or true emergencies.
Also, have a separate bank account at different bank. Put every month, even a small sum is enough, on that account. Every month. Every year. And never look at that account, ever. Until the world is to end and you need cash. Until that point, don't even think about that account, never ever. Forget it is there.
I'm so tired of these types of comments on HN that say investing in individual stocks is like gambling. It's such a tired piece of advice. Don't invest more than say, 5%, in an individual company, but choosing a selection of high quality companies that you believe in is not in any way like going to the roulette table.
It depends on the time-frame you plan to invest. If it's a short time frame, investing in individual stocks can be OK.
There's just so many variables that go into the price that something that causes the stock to go up/down 20% can be completely unforeseen.
A broad market index won't have these weird fluctuations. Almost every single market strategy underperforms broad market indices in the long run.
Even hedge funds that outperform the S&P in one period perform average in the next period. In other words, past performance of funds has no impact on future performance. On average hedge funds picking individual stocks consistently underperform compared to broad market indices.
The issue I have with your statement is not that you're guaranteed in any way to beat the market, but saying that investing in individual stocks is gambling. It just isn't true.
Again, if you have no more than 5% of your portfolio in an individual stock then a 20% drawdown on that one stock is not going to significantly hurt you.
People should feel free to decide for themselves if they want to spend the time to actively invest vs throwing everything into an ETF and no one should be shaming them into thinking it's akin to going to a roulette table in Vegas.
As someone in tech, I've done quite well investing in high quality tech companies like Apple, Netflix, Amazon, and Nvidia over the years. I keep my 401K in a broad index fund but enjoy actively investing a part of my wealth.
> As someone in tech, I've done quite well investing in high quality tech companies like Apple, Netflix, Amazon, and Nvidia over the years.
I feel like I have a number of coworkers who make investments like this, that haven't really been burnt on this because of the bull market. And because they know tech better than most, that's what they focus on, and it becomes a huge sector risk, even though no more than 5 percent is invested in any particular symbol. If five years from now we learn that someone in big tech has been cooking the books (https://en.wikipedia.org/wiki/MCI_Inc.#Accounting_scandals) that could lead to a sector wide dip for a variety of reasons, far worse than a 5 percent drop.
What it comes down to for individual investors is that diversification is at odds with well researched investing. You just don't have the time to pour over 100 quarterly 10-Qs, build sales forecasts, or predict next year's return on the 10y treasury bond. It can be a fascinating hobby, and while I have a small trading account with the IEM, all my real money goes into VOO/AGG.
I don’t take investing so seriously like pouring over financial statements outside of skimming through earnings reports. I don’t live everyday worrying Tim Cook is committing massive accounting fraud. I invest in companies I understand, use/like, and reasonably trust, and it’s worked out well for me. There may come a time the whole market crashes again, but my gains are far above the index fund over the last 10 years, and if I need to derisk I will make that decision at a later time.
Again, I just thinking screaming “anything except index funds is stupid gambling and irresponsible” is untrue. I also think those who become truly wealthy in life necessarily have to do things that the average person is unwilling to do, like invest understanding there’s a risk involved.
Then how do you know you aren't over paying for stocks? Your plan is to buy high and sell higher?
> it’s worked out well for me
My unvested RSUs have more than doubled in value over the past year, and ESPP has done just as well lately. The market has worked out great for everyone, especially those of us in high tech.
> if I need to derisk I will make that decision at a later time.
To me this reads as 'I will sell when the market drops hard enough to make me anxious.' A ton of institutional investors (think pension funds and university endowments) did exactly that, and it made them worse off in the long run. David Swensen calls that institutional strategy out as 'buy high and sell low.' IMO, buying into a down market is the real step the average person is unwilling to do, even though it's incredibly easy implement: sell off your winners and buy more of your losers.
If you have something more complicated in mind, I just am not ready to believe someone unwilling to bother calculating the present value of forecasted future earnings is bothering with looking at their Sharpe ratio and deciding 'welp, time to buy some VIX to offset this risk.'
> Again, I just thinking screaming “anything except index funds is stupid gambling and irresponsible” is untrue.
Even if you don't accept the premise (I don't[1]), doesn't mean active investors are a priori smart. I have yet to speak with anyone upset by the index investing philosophy I consider prepared.
[1]: There are clearly people who make a living doing this who dig far beyond financial statements. Random example I know of from a lecture given at Yale by a trader (https://www.youtube.com/watch?v=DMbhgSBIUfk&t=3875s if you can stomach the umms and ahs) reading Bond contracts ("indentures") and looking for companies that were likely to delay financial statements and owed bondholders par immediately. One such notable source of delayed financials was backdated options, and this exact accounting irregularities even affected the tech giant you mentioned, back in 2007. You may recall another facet of this story from HN favorite 'Why I did not go to jail' (https://a16z.com/2014/02/06/why-i-did-not-go-to-jail/) as this was widely practiced at the time.
If you have income and you're young, you can afford to take risks. Big tech is disproportionately represented in SPY/QQQ so if we're in a massive bubble it's all going down anyway.
I consider active investing to be a hobby. I get a kick out of seeing earnings reports come in from companies I'm invested in. Again, I've dramatically outperformed SPY over 10 years and the gains have nearly secured my retirement as someone in his early 30s.
I occasionally hedge with SPY puts or gold calls if I think we are in an actual correction. If it's sustained I would do that over selling.
It depends on which index. The Dow Jones is an exceeding poor index and a good actively managed fund will out perform it easily.
The Dow does not take into account market cap or float, and when a security comes off of it at $5 a share and a new one goes in at $105 per share, then the index jumps $100 in value.
The S&P is better, but managed funds are usually better.
90% of managed funds have underperformed the S&P over the last 10 years and studies have shown the funds previous performance has little to no impact on future performance.
I work in this industry. We have detailed reports on damn near everything, including private hedge funds and how they perform. 80-85% of any active management or financial advisory services have not beat low cost index investing over the long haul. The top 15% or so can and do, but the vast majority of the active investments players (that 80% or so) don't make enough to beat passive investment once their fees are taken into account and an appropriate passive benchmark is used. Meaning, if they are actively investing for their client using only US securities and products, we use a major US benchmark to compare against. If they are global, Asia-Pac, Dev/emg, etc. we use one of those to compare against so we are looking at apples to apples. A lot of times they will simply invest in a high growth emerging market and tell their clients that they are beating the S&P 500. Yeah, of course you are. But you aren't beating the relevant emerging markets growth products.
While it's true the Dow doesn't take into account market cap because it is a price weighted index, it is not true that removing a $5 security and adding a $105 one jumps the index $100 in value.
Every index has a divisor, which acts to preserve the return. The general calculation for an index level is Level=MCAP/Divisor. With the Dow, the MCAP is simply the sum of the prices instead of the sum of all MCAPS for the individual securities. When you drop one security and add another, the divisor is calculated such that it offsets the change in MCAP. In this way, when the index opens the next day it opens at the exact same level as the previous close and then the real time feeds kick in and update based on the gap up/down of each security in the Dow. The same basic logic applies to all top level indices. The calc changes for gross/net returns, currency variants, hedge calcs, etc. But the same principal applies that there must be a way to preserve the day over day return so that adding and removing securities doesn't throw off the actual index levels and returns.
Your 401k and other investment accounts that report performance do the same thing behind the scenes - particularly 401k. With a 401k you are consistently adding money to your investment pool and placing small trades to obtain more shares of a pool of securities. This influx of money doesn't artificially inflate your personal return for the year because the way the calculation is done is very similar under the hood to how an index is calculated.
Every Friday I have a two hour window blocked on my calendar to work on financials. I review and categorize all transactions for the week, review how I am doing on my budget, check my credit score, pay bills, and check in on my goals (paying off debt, savings, etc.). I use Mint as my primary bookkeeping software, I also use Trello as a checklist to make sure I do everything each week and can also manage one time tasks.
I don't pay too close of attention to it, I'm fortunate enough that I don't have to watch my finances closely.
I try to keep as little in my checking account as possible. I have enough in a high yield savings account to probably last me a year. I max out my 401k. I have some money in six month treasury bills that gets reinvested whenever they mature. I have a recurring monthly transfer into a brokerage account that I put in a high dividend index fund. The only debt I carry is a mortgage that I overpay on. Anything leftover at the end of the month I throw into a Betterment account.
i’m 28, i make 36k per year, i have a masters degree and two bachelors degrees, all in hard science. i pay $800/month for rent, i ride public transportation, i try to cook at home, i don’t socialize. i can save about $5k per year. i’m comfortable and could live for a lifetime on less than $40k per year.
I hope OP means something like I don't go to bars. Alcohol in a place that encourages you to stay around for a while is what passes for socialize to a large number of people.
There are plenty of other social things you can do in life, but I've noticed that there is a crowd where none of them count. Either you sit in your favorite bar and talk, or you don't socialize. My time spent camping with friends is interesting, but it doesn't count even though we spent plenty of time around the campfire (just to name one activity I do)
no i simply don’t speak to people casually outside of work. i just skateboard alone or explore or read or other solo stuff. i just don’t like being around people in a friendly manner.
I think the entire concept of living within a targeted amount changes once you marry and have kids. but , you did a nice work there in shelving profits.. Public transportation is a boon for major cities
Lots of reading (books, blogs, etc.) has been helpful for me the past few years and it seems like I pickup new things all the time. A few things I use/reference:
- YNAB (You Need A Budget) - budgeting/tracking app, plus lots of great content on how to use the software and generally manage your budget/expenses
- /r/personalfinance subreddit - checkout their wiki [1] and flowchart [2] in particular for a really helpful overview
- For investments I use spreadsheets to track allocation, targets, etc.
- Bogleheads wiki - investing, heavy on index funds, low fees, etc.
- Whitecoat investor - a lot of good content, mostly aimed at high income earners plus some content specific to medical doctors [3]
- A variety of books - there are a lot of good ones out there
The /r/personalfinance flowchart is actually the best summary I've seen on the priority on spending. Some comments I'd add:
* If you run out of money before getting to the employer retirement match, you are living beyond your means and you need to rectify that ASAP.
* Avoid credit card debt especially; the interest rates are not in your favor.
* If you're making tech sector salary, it's probably best to maximize Roth IRA early and hard--you're likely to hit the salary cap on Roth IRA before too long in your career ($120K is when the contribution is reduced; $137K is when it disappears entirely--although note that 401(k) contributions are excluded).
All good points. Roth vs traditional can be complicated when you think about the long term possibilities (change in tax rates, early withdrawal, lower/higher income in the future, etc.) but definitely max out Roth/Traditional/Backdoor Roth IRA if at all possible after getting max employer 401k match. I like the idea of diversifying with pre and post tax retirement options to an extent. Backdoor Roth IRA is useful for high earners that don't qualify for a Roth IRA or Traditional IRA deduction.
My 401k is maxed out and all in on FSKAX. Taxable brokerage is all in on VT and VTI. I have a Roth that I max out and invest more aggressively in due to the favorable tax treatment. 6 month emergency fund I’m thinking about bumping up to 9.
I don’t have any debt at a rate that makes me feel like I’m in any hurry to pay it off.
I have my budget in a spreadsheet. Top line is income, then the rest are expenses. The spreadsheet is really just for projecting what fixed costs and savings I can afford, I don't follow it strictly.
The key thing is the way all my accounts are set up. All money flows into the checking account, and then automatic deductions take the savings into different accounts for short term and long term. Money does not sit in the checking account for long (except for a small-ish cushion.) All spending is done on credit cards, which I pay off in full with automatic payments from the checking account. This way, I know when I'm over-spending, because I have to transfer money back into the checking account. This is key, because it means as long it's planned (for a vacation, for example), it's fine. But if it's unplanned, I know I need to be more careful.
I can't express enough how YNAB has changed my habits and make me realize _how_ to plan, forecast, and save money. They have lots of video tutorials and it's been worth every penny. Here's my referral link, happy to answer questions on how I use it too!
I use Quicken, but not happy with it since they moved to annual subscription model. But with more than 20 years of data in it, I'm locked in. Looking to migrate to beancount, but the data migration is hard. I'm contemplating starting anew with beancount and forgoing my historical data. I could easily do without the data, but something psychological is at play, and I can't get over it yet.
Yeah I bailed on Quicken about 5 years ago and never looked back. Using GnuCash now, and it’s awesome because I can store the data in a local Postgres database and do whatever I want with it.
The learning curve is a bit steep if like me you have to learn both the software and the concepts of double entry accounting. It took me a few iterations to get it right but now that it's rolling I couldn't be happier.
Since my girlfriend and I share some of our common expenses I developed a web app à la Splitwise/Tricount that can export transactions to GnuCash. It works very well but I never polished the thing, I wonder if it could be useful to other GnuCash users.
Oh man, my current project is to automate accounting for my cryptocurrency trades in GnuCash. I trade very high volume, futures and options, so being able to run a cron job to automatically pull the data from APIs, calculate gains, and load it into the GnuCash schema will literally save me hundreds of hours per year in accounting overhead. Once it’s done I bet I could easily sell it for $100s to other crypto traders.
I can mention that if you use mint.com and have anything that isn't quite perfectly standard about your financial accounts it won't work well.
for example- My wife and I have a joint brokerage account at Fidelity, and my wife also has a 401k at fidelity. She has a login associated with the brokerage account, and one associated with the 401k. However, via each login, all of her accounts are visible.
mint.com cannot understand that these accounts are duplicated. There are manual overrides to disable certain accounts, but these overrides work on some portions of the site (such as the overview page) and not other portions (such as the net worth tracker over time chart).
I feel that mint has already reached peak revenue per user and is now trying to glide through the rest of its lifecycle with minimal investment in the site, so these problems might not work out ever.
I recently discovered PocketSmith which is a paid product. I found it sort of follows the mint model but it works much better. I tried using double entry accounting methods like YNAB but it just wasn't working for my personal finances.
I draw a big rectangle with a line down the middle. On the left is Assets. On the top right is Liabilities (aka debt, the remaining lease payments for housing, etc). On the bottom right is Equity. This is the number that must compound at an acceptable rate no matter what happens to the market, my income, etc (I'll leave it up to you to decide what rate you want to commit to in the near term). I have found that drawing and redrawing this on paper beats most software approaches. If someone asks, "what if my equity number is negative?" I say take steps to get it to positive. If you get it to 1 dollar, great, your first year ROE is going to be 1000% if you happen to save 10 bucks that year. https://awwapp.com/b/uybcpyttt/
I used Firefly III. It uses double entry bookkeeping. If you don't mind self hosting I recommended checking it out. The docker image is very easy to get going with.
I have a book recommendation: Your Money or Your Life. It was recently updated, mostly to bring the investment advice a bit more up-to-date. But either version will be amazing. It's not an overstatement to say that book changed my life. It gives you some tasks, like tracking your spending (down to the penny), and ultimately strives to make the point that: you trade your finite time on this planet for money, so you should value it and use it wisely.
Everything in excess of £1000 from my monthly salary I move to a separate plain savings account without any bells or whistles, and the £1000 is what I spend on a month's living; rent, bills, food, pleasures. The end.
I use Personal Capital to manage my long term planning.
I invest via Robinhood, Betterment and Vanguard.
I use Ally's High Yield Savings as my long term savings such as a 6 month emergency fund.
I still use my credit union I had in Atlanta even though I am in Nashville. I prefer them because I've been a member there for almost 10 years, so I have a rapport with them. I rarely have cash, and when I do I just spend it. I go to Atlanta a few times a year so if I need anything, I can just pop in one of the branches.
I record my expenses with HelloExpense[1] on Android, and I wrote a small app to analyse the csv export (using Python with Dash[2]).
The code of the analysis app is available on Gitlab[3] and a demo is deployed on heroku at https://expenses-analysis.herokuapp.com/ (note that all work is done server side, so if you use it with your own CSV file, it will be uploaded to the server, so it's definitely better to run it locally)
It suits my needs perfectly, and I find it very useful, but from what I know I'm the only user of my analysis app :-D
Understanding where your money goes is a first good step in managing your finances.
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[ 903 ms ] story [ 3271 ms ] threadThe forecasting strategies mostly came from "I will teach you to be rich"
I have a spreadsheet that has a row for each week. I have it set up so that whenever my wife or I get paid, it adds that to the balance. Whenever a fixed expense is due, it subtracts it. It also subtracts the average costs per week for each week, and accounts for yearly projected bonuses etc.
The spreadsheet also shows any loans/loan payments.
Every few weeks I pay off my credit cards, go and look at my bank account balances, and compare that to the expected values in the spreadsheet. If they don't match, I figure out why and note that on the spreadsheet (i.e., unexpected surgery on dog, unexpected car repair, etc.).
The spreadsheet has conditional formatting that shows green if my bank balances are above my reserve amount for each week (including in the future), yellow if close, and red if under. I can see what my bank balances should be out through 3037 or so, when all my kids should be in college.
With that kind of a spreadsheet, you can instantly see when any loans you have will be paid off, and whether you can afford any purchase you're thinking of.
The result is a guaranteed growing savings which I periodically invest in various assets while trivially maintaining a buffer for emergencies.
The trick is to live modestly even if you have money. Also, stocks are basically equivalent to savings, since with modern tech liquidating funds and transferring them to your bank in an emergency can take as little as minutes.
There's so much uncertainty in money management that you're probably IMO wasting your time micromanaging. Pick a couple decent assets, or even an index fund, diversify with a little bit of gold or alternative market hedges, and leave the funds alone. There's no reason to overthink money management if you plan everything with a healthy buffer - but that requires self control. Less stress this way though.
You put it all on Pair.
I started keeping track of my budget so I can comfortably spend without the stress.
Say here's just an example (DO NOT QUOTE THIS): Most people don't know how much money they should have for retirement. The FIRE movement suggest Expense * 25 = Your Nest so you can take 4% annually. People don't have to follow the FIRE lifestyle but the calculation itself could give some deadline/goals to keep yourself "sane" because Mathematically it looks "sound" (better than NOBODY KNOWS!).
EDIT: One thing that helped a lot in doing so was to treat any bonuses, whether that is stock, years end bonuses or any variable salary elements, as just that. A bonus. Don't plan with it as part of your salary, put it aside. And only use it for stuff, like, a house. Or true emergencies.
Also, have a separate bank account at different bank. Put every month, even a small sum is enough, on that account. Every month. Every year. And never look at that account, ever. Until the world is to end and you need cash. Until that point, don't even think about that account, never ever. Forget it is there.
Trying to time the market is a bad idea. Picking individual stocks is a bad idea.
This is assuming your main goal is returns on your investment. Picking individual stocks or even 30 stocks is basically gambling.
Really recommend reading "A Random Walk Down Wall Street": https://www.amazon.com/Random-Walk-Down-Wall-Street/dp/03933...
There's just so many variables that go into the price that something that causes the stock to go up/down 20% can be completely unforeseen.
A broad market index won't have these weird fluctuations. Almost every single market strategy underperforms broad market indices in the long run.
Even hedge funds that outperform the S&P in one period perform average in the next period. In other words, past performance of funds has no impact on future performance. On average hedge funds picking individual stocks consistently underperform compared to broad market indices.
Again, if you have no more than 5% of your portfolio in an individual stock then a 20% drawdown on that one stock is not going to significantly hurt you.
People should feel free to decide for themselves if they want to spend the time to actively invest vs throwing everything into an ETF and no one should be shaming them into thinking it's akin to going to a roulette table in Vegas.
As someone in tech, I've done quite well investing in high quality tech companies like Apple, Netflix, Amazon, and Nvidia over the years. I keep my 401K in a broad index fund but enjoy actively investing a part of my wealth.
I feel like I have a number of coworkers who make investments like this, that haven't really been burnt on this because of the bull market. And because they know tech better than most, that's what they focus on, and it becomes a huge sector risk, even though no more than 5 percent is invested in any particular symbol. If five years from now we learn that someone in big tech has been cooking the books (https://en.wikipedia.org/wiki/MCI_Inc.#Accounting_scandals) that could lead to a sector wide dip for a variety of reasons, far worse than a 5 percent drop.
What it comes down to for individual investors is that diversification is at odds with well researched investing. You just don't have the time to pour over 100 quarterly 10-Qs, build sales forecasts, or predict next year's return on the 10y treasury bond. It can be a fascinating hobby, and while I have a small trading account with the IEM, all my real money goes into VOO/AGG.
Again, I just thinking screaming “anything except index funds is stupid gambling and irresponsible” is untrue. I also think those who become truly wealthy in life necessarily have to do things that the average person is unwilling to do, like invest understanding there’s a risk involved.
Then how do you know you aren't over paying for stocks? Your plan is to buy high and sell higher?
> it’s worked out well for me
My unvested RSUs have more than doubled in value over the past year, and ESPP has done just as well lately. The market has worked out great for everyone, especially those of us in high tech.
> if I need to derisk I will make that decision at a later time.
To me this reads as 'I will sell when the market drops hard enough to make me anxious.' A ton of institutional investors (think pension funds and university endowments) did exactly that, and it made them worse off in the long run. David Swensen calls that institutional strategy out as 'buy high and sell low.' IMO, buying into a down market is the real step the average person is unwilling to do, even though it's incredibly easy implement: sell off your winners and buy more of your losers.
If you have something more complicated in mind, I just am not ready to believe someone unwilling to bother calculating the present value of forecasted future earnings is bothering with looking at their Sharpe ratio and deciding 'welp, time to buy some VIX to offset this risk.'
> Again, I just thinking screaming “anything except index funds is stupid gambling and irresponsible” is untrue.
Even if you don't accept the premise (I don't[1]), doesn't mean active investors are a priori smart. I have yet to speak with anyone upset by the index investing philosophy I consider prepared.
[1]: There are clearly people who make a living doing this who dig far beyond financial statements. Random example I know of from a lecture given at Yale by a trader (https://www.youtube.com/watch?v=DMbhgSBIUfk&t=3875s if you can stomach the umms and ahs) reading Bond contracts ("indentures") and looking for companies that were likely to delay financial statements and owed bondholders par immediately. One such notable source of delayed financials was backdated options, and this exact accounting irregularities even affected the tech giant you mentioned, back in 2007. You may recall another facet of this story from HN favorite 'Why I did not go to jail' (https://a16z.com/2014/02/06/why-i-did-not-go-to-jail/) as this was widely practiced at the time.
I consider active investing to be a hobby. I get a kick out of seeing earnings reports come in from companies I'm invested in. Again, I've dramatically outperformed SPY over 10 years and the gains have nearly secured my retirement as someone in his early 30s.
I occasionally hedge with SPY puts or gold calls if I think we are in an actual correction. If it's sustained I would do that over selling.
And then your gains are cut by transaction costs, opportunity costs and short term gains.
The Dow does not take into account market cap or float, and when a security comes off of it at $5 a share and a new one goes in at $105 per share, then the index jumps $100 in value.
The S&P is better, but managed funds are usually better.
https://www.cnbc.com/2019/03/15/active-fund-managers-trail-t...
Does anyone have specific data on this? Does anyone
Every index has a divisor, which acts to preserve the return. The general calculation for an index level is Level=MCAP/Divisor. With the Dow, the MCAP is simply the sum of the prices instead of the sum of all MCAPS for the individual securities. When you drop one security and add another, the divisor is calculated such that it offsets the change in MCAP. In this way, when the index opens the next day it opens at the exact same level as the previous close and then the real time feeds kick in and update based on the gap up/down of each security in the Dow. The same basic logic applies to all top level indices. The calc changes for gross/net returns, currency variants, hedge calcs, etc. But the same principal applies that there must be a way to preserve the day over day return so that adding and removing securities doesn't throw off the actual index levels and returns.
Your 401k and other investment accounts that report performance do the same thing behind the scenes - particularly 401k. With a 401k you are consistently adding money to your investment pool and placing small trades to obtain more shares of a pool of securities. This influx of money doesn't artificially inflate your personal return for the year because the way the calculation is done is very similar under the hood to how an index is calculated.
I try to keep as little in my checking account as possible. I have enough in a high yield savings account to probably last me a year. I max out my 401k. I have some money in six month treasury bills that gets reinvested whenever they mature. I have a recurring monthly transfer into a brokerage account that I put in a high dividend index fund. The only debt I carry is a mortgage that I overpay on. Anything leftover at the end of the month I throw into a Betterment account.
I'm curious why you've made this choice.
There are plenty of other social things you can do in life, but I've noticed that there is a crowd where none of them count. Either you sit in your favorite bar and talk, or you don't socialize. My time spent camping with friends is interesting, but it doesn't count even though we spent plenty of time around the campfire (just to name one activity I do)
- YNAB (You Need A Budget) - budgeting/tracking app, plus lots of great content on how to use the software and generally manage your budget/expenses
- /r/personalfinance subreddit - checkout their wiki [1] and flowchart [2] in particular for a really helpful overview
- For investments I use spreadsheets to track allocation, targets, etc.
- Bogleheads wiki - investing, heavy on index funds, low fees, etc.
- Whitecoat investor - a lot of good content, mostly aimed at high income earners plus some content specific to medical doctors [3]
- A variety of books - there are a lot of good ones out there
1. https://www.reddit.com/r/personalfinance/wiki/commontopics
2. https://www.reddit.com/r/personalfinance/wiki/commontopics#w...
3. https://www.whitecoatinvestor.com/new-to-the-blog-start-here...
https://www.bogleheads.org/wiki/Bogleheads%C2%AE_personal_fi...
* If you run out of money before getting to the employer retirement match, you are living beyond your means and you need to rectify that ASAP.
* Avoid credit card debt especially; the interest rates are not in your favor.
* If you're making tech sector salary, it's probably best to maximize Roth IRA early and hard--you're likely to hit the salary cap on Roth IRA before too long in your career ($120K is when the contribution is reduced; $137K is when it disappears entirely--although note that 401(k) contributions are excluded).
I don’t have any debt at a rate that makes me feel like I’m in any hurry to pay it off.
The key thing is the way all my accounts are set up. All money flows into the checking account, and then automatic deductions take the savings into different accounts for short term and long term. Money does not sit in the checking account for long (except for a small-ish cushion.) All spending is done on credit cards, which I pay off in full with automatic payments from the checking account. This way, I know when I'm over-spending, because I have to transfer money back into the checking account. This is key, because it means as long it's planned (for a vacation, for example), it's fine. But if it's unplanned, I know I need to be more careful.
https://ynab.com/referral/?ref=ASH303nViLPCKyr-&utm_source=c...
I started using the various tools the country I live in has for personal finance (it's France): Assurance Vie, PEA, Livret A, …
This works good for us. Pretty manual, but works out well.
The learning curve is a bit steep if like me you have to learn both the software and the concepts of double entry accounting. It took me a few iterations to get it right but now that it's rolling I couldn't be happier.
Since my girlfriend and I share some of our common expenses I developed a web app à la Splitwise/Tricount that can export transactions to GnuCash. It works very well but I never polished the thing, I wonder if it could be useful to other GnuCash users.
for example- My wife and I have a joint brokerage account at Fidelity, and my wife also has a 401k at fidelity. She has a login associated with the brokerage account, and one associated with the 401k. However, via each login, all of her accounts are visible.
mint.com cannot understand that these accounts are duplicated. There are manual overrides to disable certain accounts, but these overrides work on some portions of the site (such as the overview page) and not other portions (such as the net worth tracker over time chart).
I feel that mint has already reached peak revenue per user and is now trying to glide through the rest of its lifecycle with minimal investment in the site, so these problems might not work out ever.
http://furius.ca/beancount/
I use Personal Capital to manage my long term planning.
I invest via Robinhood, Betterment and Vanguard.
I use Ally's High Yield Savings as my long term savings such as a 6 month emergency fund.
I still use my credit union I had in Atlanta even though I am in Nashville. I prefer them because I've been a member there for almost 10 years, so I have a rapport with them. I rarely have cash, and when I do I just spend it. I go to Atlanta a few times a year so if I need anything, I can just pop in one of the branches.
That's really it.
It suits my needs perfectly, and I find it very useful, but from what I know I'm the only user of my analysis app :-D
Understanding where your money goes is a first good step in managing your finances.
[1] https://play.google.com/store/apps/details?id=com.helloexpen... [2] https://plot.ly/dash/ [3] https://gitlab.com/rbauduin/dash-expenses-analysis