A weekly thread to discuss financial matters - from personal all the way up to global.
Ground Rules
- Remember that we're all just Internet randos. Don't bet your life savings on a hot tip from this thread.
- Keep culture war in the culture war thread. Yes, global events may impact our personal finances, but that does not mean we have to incessantly harp on culture war aspects here. If you are going to discuss it, please stick to the practical impacts of it on an individual level.
- Be kind. Remember that everyone here comes from different circumstances. We all have different resources available and different risk tolerances.
- Don't let the perfect be the enemy of the good. Better is better. Celebrate people when they take a step up and work to move their finances in the right direction. Don't flame out because they haven't followed what you consider the optimal path. Everybody has to start somewhere.
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Notes -
One common friction point that keeps coming up in these threads is something that I can't clearly name, but seems to be the friction between one person's perceived optimal behavior and another person's risk tolerance. One person will say that they are doing something, and another person will comment that the first poster is Doing It Wrong because they believe there is a more optimal path that they could take. It's a very binary thing that seems common in the Internet in general. I think it comes from a benevolent place, but it seems like it can can people off from the topic entirely as it can educate them.
I've been thinking about that lately because of events in my personal life. My partner is a fairly responsible saver, but she's not really investing. She's in the upper half of her age group for net worth and doesn't have any debt, but I worry that inflation is going to eat those savings over the long term. I've gently tried to get her to consider moving some of that money into funds over the years, but for her, it's entirely too much risk. I've not really pushed on it because what she's doing is better than doing nothing, and nothing is her alternative right now.
For somebody who has that extreme level of risk aversion, what options are there that beat a HYSA? Browbeating her into equities isn't going to fly.
On a similar topic, are there "non optimal" things that you do financially, but you do them anyway?
In all three cases, it's entirely a psychological thing for me, and I recognize this. In the first two in particular, it's still better than not doing anything at all
Yes, my brother-in-law is like your girlfriend. He’s…not young, and every dollar he’s saved is in a savings account. He’d be worth 3, 4, 5x what he is now if he had gone the index fund route, but for some reason that’s not convincing. I think because that doesn’t address the reason he fears risk in the first place.
He also has, so far, refused to get a mortgage, despite the fact all the options they looked at would have resulted in mortgage payments less than their current rent.
The frustration is how much more materially comfortable they could be, right now, if I had been managing their finances for them, or if he’d be willing to bear one iota more risk.
Your point is well-take, and in that same spirit I don’t harass this man about his financial leadership in his family.
There is a happy medium, and I believe it exists. For example I sell options. Right now, I have a notional risk of 7x-8x my taxable portfolio’s actual value. If the market went to zero I’d lose in the market double what my house is worth. That seems insanely irresponsible to the average person, so I’m very shy about it irl, and I am extremely selective about to whom I mention what I’m up to.
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Ibonds? $10k/person/year limit, indexed directly to inflation + a fixed rate, state tax exempt, 30 year term, and 100% safe (well, unless the entire US burns to the ground, in which case nothing would be safe). The only "risk" is that you can't cash them for the initial holding period, and lose the latest 3 months of interest if you cash them within 1-5 years of purchase. Some years, it won't beat an HYSA (current inflation + fixed rate is 4.26%, so if you'd had a 4.5% HYSA earlier this year that would've been higher), but it will always beat inflation by the fixed rate.
I have some very silly auto-invest/auto-transfers set up, just because I like the flow a bit better, and in some cases I've set them up so they can continue for the future instead of just investing the cash on hand now and then setting up the auto-system.
Related, but I tend to use different accounts as "buckets", even if one of them is giving me less of a rate than, say, an MMF would -- or if one MMF is giving a slightly worse rate than another.
Related related, but I use NFCU's savings account (earning dimes) over a different HYSA/MMF. Will I ever need that immediate liquidity? No, but I like having it there all the same.
The other one is that I'll actually keep a few index ETFs (at around $100) in an account that I also have a mutual fund in. I like being able to log in, see what it's at throughout the day without having to look up the ticker. So for instance, if I'm in an international mutual fund, I'll also have ~$100 in VXUS.
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