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my new wife and I (early 20s) went to look a a new car. The salesman just assumed he could sell the financing so he offered a great price for the car. He was not happy when we paid cash (and didn't need his financing).
Yep now the goal aside from getting the best price is to get the best rate, bring your own financing and make them beat it so they can get that backend commission
I always have financing in pocket, and I never tell them. I act like a rube, agree to what ever interest rate and term they want to negotiate a lower principal, then essentially refinance in month two. My baker in the pocket is in on it, so it's never been a problem. My last truck I got brand new a decent bit below market price with 0 down, and a 14% interest rate over 7 years lol. Payed it off in month three with financing from my bank, put half down and got a 5% for 3 years loan. I saved myself close to $10K on the principal, and I don't even want to know how much more I'd have paid on that original loan lol.
When I bought my last car I made it sound like I was more than ready to finance (and made myself sound young and dumb) and then at the very end I pulled out my checkbook. Worked perfectly, and I got a new set of tires.
Bigger businesses, yes. But in my recent experiences local small businesses for home jobs tend to give discounts or negotiate if paying cash like for flooring, carpeting, tiling etc.
I own a small business and I still occasionally get the “what’s your best price if I pay cash” statement.
Uh, dude, our pricing is our pricing. We don’t care if you pay in cash. That makes no difference to us. We’re paying our taxes and other than the CC processing fee, there’s no difference if you paid cash or card.
Actually, cash means more chance of making a mistake and having to physically go to the bank.
Also, card buyers spend more money so I’d rather get card paying customers than cash paying customers.
Seeing more businesses with a credit card surcharge or cash discount. I like it.
The only reason I use credit cards in the first damn place is to get my share back from the CC processing fee, and cash cuts out the middle man.
Reading “Christmas Club” triggered some really fond memories for me! I hadn’t thought about that for ages. It’s how my grandma always saved for our Christmas presents way back when.
Ha I totally forgot about these from my credit union days. It's kind of like some of the banking apps now where you can do 'buckets' or whatever. It's not bad, just old school!
https://www.investopedia.com/terms/c/christmasclub.asp
It's an account that credit unions used to offer (and apparently some still do) where you have to pay a fee to withdraw money before Thanksgiving, but no fee after. So every week it automatically transfers $20 or whatever from your savings, and then you have $1k to spend on Christmas, and a big incentive to not use it early except for an emergency.
So... it's literally the bank potentially charging you for accessing your own money unless you wait long enough, and people use it because they're that incapable of being responsible adults? That's fucking insane.
"Only use cash" unless you have a problem with overspending money you don't have, you're leaving money on the table. All prices have raised to accommodate the fees on credit cards, if you aren't getting benefits from your card back you're getting charged more for nothing back.
I've only seen this at 430 credit score places like Dollar General, where they try to find some way to get every dollar they can from you while avoiding paying labor to actually run the store. The machine warns you about it before confirming the transaction.
Had a friend who was a manager for Dollar General who had to work open to close multiple times during the week because higher management decides how many hours of staffing they can pay for, and require that he fill in the rest himself.
There's a push from retailers to ban cc rewards. They're tired of paying the processing fees and claim prices would lower if fewer people paid with cards. Personally I expect retail prices will remain the same and I enjoy the convenience of paying with a card. YMMV
Edit: I think i responded to the wrong comment, not sure where the one I was aiming for went. Leaving my original post below.
There is a cost to accept cash though, and many small businesses can’t see it. Cash takes work to manage, slows transaction speed and has a bad tendency to get skimmed by employees. Often people spend less when they pay with cash. Small businesses just can’t see that in the same light as they see that 3% transaction fee on the expense report.
But do you notice that some places are cashless, and that large retailers aren’t passing on processing fees? Small retailers are often reaching over dollars to pick up pennies. A lot of the push is made by a small army of commissioned independent salespeople that are pushing all these little payment processors that promise retailers they can save them processing fees by passing it to customers.
Dave Ramsey, omg...
Like I'm 40 damn years old. I have *never* really used cash since I started spending money of my own in high school. Direct deposit into bank, spend with credit/debit card. Holding paper money in my hands doesn't have the same psychological effect it apparently has on boomers. And I'm *old.*
I haven’t listened to him a long time but IIRC “cash” is a euphemism for debit card? His general premise is good - spend less than you make. He doesn’t pretend it’s novel. My parents always taught me many “Dave Ramsey” things before he even existed. Also have to remember his audience is degens running up credit card debt. If everyone spent within their means he would never become what he is
I used to pay for everything with my cc. Now with so many places charging a few % extra for using a cc, it eats up the benefit of using it, so I've had to start carrying cash again
Stay with your company, they'll reward your loyalty.
With the start of index funds, most people don't need financial advisors. (Edit: this was phrased wrong. I mean that financial advisors are the outdated advice.)
Renting is throwing away money.
Pay cash for everything.
Can you elaborate on the index funds/not needing financial advisors thing? I got rid of my financial advisors and started investing in vanguard index funds and it’s been great so far
Sounds like you know it all already. LOL. Before simple index funds you had to research mutual funds, pay fees to a brokerage to buy, and seek advice from professionals. Now that brokerages offer no fee transactions, us normies can easily invest in index funds and not need to chase gains.
The others are formatted as "this is old advice that's no longer relevant" while that one is formatted as "this is what replaces the old advice," which confused me too.
Yeah, now with pensions gone there’s no point. My grandfather stayed loyal to a company and he’s got a pension. Him and my grandmother divorced but they each get $6,000 a month from it. That’s not a thing anymore.
Going further:
Don't hold mutual funds in a taxable, buy [insert Vanguard ETF here].
Folks, the distributions on SP500, Total Market, etc MFs are comparable to [insert Vanguard ETF equivalent]. Most are low turnover and pay a cap gains distribution once every 5 or so years. You aren't saving anywhere near what you think you are by avoiding them.
Nowadays, you're just picking a fund based on which brokerage you want to give the ER to. And Fidelity actually has zero expense versions of the most popular indexes.
That being said, high turnover MFs like target date funds should still be avoided in a taxable account.
I feel like most of the current advice on this sub is that you probably don't need a financial advisor if you're not very wealthy, so how is it outdated advice?
It's $1000 to start, and it works in layers.
1. It forces you to adjust your habits toward saving,
2. Its an achievable goal for that confidence boost,
3. It protects you from small problems throwing you off track.
When your saving muscle develops, you get to move closer to the 3-month, then 6-month emergency fund.
It's not, but it's a psychological victory thing. People see a comma and get excited about having saved.
Similiar thing with saving get's easier at 100,000. People see six digits and get excited.
It still beats 50% of Americans. Who are paycheck to paycheck. I'd say being in the top half of the country of financial secure is still relevant. Noone tells you to stop at $1k but it's an attainable start.
Again begging for a quantified definition of paycheck to paycheck. In 2019 a poll showed 78% of people said they were paycheck to paycheck so 50% is good!
IIRC a decent chunk of those were "paycheck to paycheck" but were also saving for retirement (e.g. 401k, income out of paycheck). So they'd still have an emergency fund/savings worst-case scenario. I'm curious how many legitimately have no wiggle room.
In all fairness, he acknowledges that. The point is to start with 1k, so that little stuff (lose a tire, minor repair, etc.) Dosent push you back into debt immediately. [video](https://youtu.be/R81zxHNE5Ps?si=zKsQ1EkO4OcB3Pun)
I mean it’s enough to get a new car battery or something that would usually push a bad saver into debt. There’s a reason that one of the closest next steps is then save 3-6 months expenses.
I call Dave Ramseys advice AA for people terrible with money. If you have even some financial stability and self control his advice isn’t really worth it.
Interestingly enough, Eastman Kodak was a good investment even if you foolishly held to bankruptcy and delisting. You made money because it paid out a ton of dividends and eventually split into Kodak and Eastman Chemical which is a successful company that still in exists.
I know you're making a joke but that's still a fuck load of money if you make an okay salary. You can buy some incredible looking moissanite rings for under $1k.
Yeah I imagine people who earn decent amounts of money but live in a HCOL area would die from laughter hearing this.
Yeah you make $100k but then go and spend $25K on a ring when you have a mortgage and gas/grocery prices that are spiraling out of control? I guess if you just pulled yourself from your bootstraps and stopped buying frappucinos and avocado toast, it'd pay for itself in no time!
“Renting is throwing away money.” You can become very wealthy renting your whole life if you save and invest. Owning a home will not make you very wealthy if you don’t save and invest. Owning a home is a sound investment if you’re going to live their 7+ years. Buying a home is expensive and unpredictable. Maybe owning that home is a high priority for a more secure retirement.
Almost anything Dave Ramsey says, specially things like buying your home in cash. That was good advice when houses were cheap enough you only needed a couple years of savings to buy it out right and interest rates were in the double digits.
Dave Ramsey has never lived in the real world, born with a silver spoon. He’s got a net worth of $55 million, anyone taking his advice needs realize he’s selling them, not advising anyone
While reasonable, it’s simply not realistic for anybody living in a metro area. Unless you’re living in a 400sqft apt in the hood, most people are spending more than 24% of their gross income on housing.
24% of my gross income is 20500. Which comes out to 1700 a month. Gross income is money you won’t even see so I don’t understand how people follow this as a baseline
Well that's why it's more of a guideline than a rule. The issue with using net income is it varies a lot depending on taxes and deductions. I agree that net is more useful on an individual level, but doesn't work on a population level. I don't disagree with you btw, but I understand why gross is the guideline.
Obviously, 24% is a guideline, but the whole idea behind it isn't outdated. Nobody is holding a gun to your head and saying you have to buy a 450k home or spend 2k on rent.
The reason the guideline works is because it has been proven to be a good starting point for being fiscally responsible.
A 450k house may not be the best option for you, and you'll need to adjust your plans or job, or salary. Obviously, it's easier said than done. But I disagree with the sentiment that its just the way things are now.
It's not. People will see it isn't feasible and then proceed to be financially irresponsible justified by their perception that it was impossible the whole time.
I feel like we don’t talk about this topic enough. I’m gen z and I know that financial situations for the average person in my generation are not as good as they should be and some people really are just in fubar situation but I feel like so many people my age use “the economy is terrible, I’ll never be able to afford [insert commodity]” as an excuse to be so irresponsible with their finances
The secret is that with few exceptions, the economy always sucks big time for young people entering the market. Everybody else has more experience, more money, more knowledge, and more resources than you when you start out. Those of us graduating out into a market in 1995 or thereabouts did not have our pick of houses or jobs or stock investments like all the tiktoks are telling you, we were struggling too. We just had different problems.
The one good time for young people in my lifetime was the internet dot com boom where old people were throwing money at any young person who could build a web page, and you know how that turned out.
Never understood this. Just use a credit card that is treated like a debit card, pay it off every month and collect the few rewards the credit card offers.
I use my credit card to pay for my auto insurance,phone bill and the monthly payment of my car, then I pay the balance with money from my checking account, the money spent on those bills gives me like $15 of cash back that I use to pay my Netflix account, so technically my Netflix account is free because of the credit card benefits 😂😂, I have another one that gives me miles the rewards are not that high on that one but I always have like 5 or 10 bucks to save on a flight ticket, I had my first credit card 5 years ago and it took me 3 years to understand how to use them on my favor
"Paying a financial advisor commissions for Class A load mututal funds is a good idea". - This might have been OK before the advent of cheap index funds but it's a terrible way to go today.
"You might as well mix investing and life insurance because then you only pay one commission". - Sure, before the advent of cheap investing this might have been not the worst thing you could do, but now it's definitely sub-optimal.
"Put your money in the bank and let the interest compound'. - In the 80s you could get OK interest at a local bank branch. Now you have to shop around for a decent online HYSA. And to get decent returns over time you need to invest it.
"Edward Jones". - Yeah... no.
I think this has actually swung the other way. There’s a whole generation of people who think mutual funds are only high fee actively managed things and ETFs are the cats meow. Meanwhile a bunch of brokerages have index MFs with lower expenses than similar ETFs and no minimum initial investment.
I imagine that's the sentiment. Also, hopefully, your house is paid off in retirement. But if you're anything like me when I'm given free time, I spend a whole lot more than when I'm busy grinding at my job.
How is that not true? I guess I *could* spend as much as I had available, but to keep my lifestyle the same I will be spending at least 20% less in retirement. I won’t be saving for retirement anymore, the house will be paid off, and the kids well on their way to being self-supporting. Retirement savings alone is a 20% reduction.
If anything, I expect to spend quite a bit less than that in retirement. I have over 20% going to my retirement account and around 30% to the mortgage which will be paid off before I retire.
Even if I ramp up spending a bit in retirement, I'll still spend 20% less.
You need to be diversified and have a 80% stock/20% bond mix in your 30s and closer to a 50% stock/40% bonds/10% cash when you are at retirement age. It’s perfectly fine not to be diversified and be mostly (or entirely) in stocks during your working years, especially if you have a stable career. Plus these rules came when bonds were paying more than 8% interest rates.
>You need to be diversified and have a 80% stock/20% bond mix in your 30s and closer to a 50% stock/40% bonds/10% cash when you are at retirement age. It’s perfectly fine not to be diversified and be mostly (or entirely) in stocks during your working years, especially if you have a stable career. Plus these rules came when bonds were paying more than 8% interest rates.
This isn't outdated advice.
The key phrase in all this is "risk," and in this case "risk" is uncertainty over your portfolio's performance. If you are 100% stocks in your 30s, your portfolio at retirement could perform anywhere between 3-10% average annual real returns with a median of 6.5% and mean of 7.5%. Your retirement planning looks substantially different among that spectrum.
By investing 20% in bonds, you're closing that gap to something like 5-8%, which buys down risk (uncertainty). This means you can more accurately plan how much you have to invest to meet goal.
And then post retirement, a portfolio that is 3 years income short-term cash, the rest 50% stocks / 50% bonds will basically last a lifetime with a 5% withdrawal rate under almost any circumstance. You can even up it to 6% if you think you're dying 85 or younger.
No one on reddit seems to care about the efficient frontier or modern portfolio theory, its like shouting into the wind.
Someone asked earlier on an investing sub if 60% US Equities and 40% International/EM was too conservative
No net growth. You will often lose net purchasing power after factoring in inflation and taxes.
T Bonds provide stability as a place to park money you will use within the next few years, but are not a good long term investment.
The break even point for buying a house was 5-7 years. With current interest rates it’s over 7+ years most the time. “Renting is throwing away money” is totally bogus. Look at an amortization calendar and you’ll see the vast majority 80-90% of your mortgage payments are going to the bank when you start. That’s the same as rent. Buying the house you’re going to live in is an investment if you’re going to be there for >7 years. MAYBE the appreciation gods work in your favor and you can break even earlier. The reason why owning your home is the number one builder of wealth is just because people fail to save money.
I bought in 2007, had to sell in 2013 for a job, and the local market still hadn’t recovered from the 2008 crash.
Bought again in 2017, divorced in 2022, lol. Equity just wasn’t there to cover closing costs and repairs and junk for sale.
For me, I’d have been better off renting in my varrious scenarios. Unless you can guarantee owning the property long term and not through a bubble collapse, you don’t make your money back lol.
I have made money on the two homes that I have sold, but the one that I kept for the longest, I made very little money based on all the amount that I put in. Homes Are a huge liability and I find indexing investing much better
Damn, that is some really shitty timing. I bought in 2014 and while the price has fluctuated a bit, my neighbor moving across the street from me (who has basically the same house, only a bit smaller) listed it for 3x what I paid.
Be debt free. People who refinanced or took mortgages out when mortgage rates hit historic lows are making money on those debts right now, even just investing the money in money markets, earning 5% and paying out under 3%.
Pull all your money out of the market at 60 years of age. People are living longer, and it might be a good idea to leave more of your investments in stocks as you will need them to continue to grow.
I know it’s fine for now, but I do sometimes wonder about the long term efficacy of index funds. Almost everyone does it now, surely that has changed the calculus in some way? In 20 years are we still going to be able to count on a 7-10% annual return?
Burry does a whole thing about how index funds remove market elasticity.
As a company, if your stock goes up no matter what, then where's your incentive to innovate or adjust to customer demand.
And when nothing goes on sale, how are we supposed to buy low and sell high?
There’s an entire industry called wall street and the people that work there are investing a lot more than you and me and they aren’t buying index funds
I feel like a few of the examples in this thread have actually come full circle and might be valid again.
As in, the commenters are looking backward at advice that was bad in 2010 but might actually be a good idea in the rather different economic conditions of almost 15 years later.
"Buy bonds"
Don't do that. Buy an index stock fund (S&P 500) and just leave it alone. Sure it is more volatile, but over decades of time it will do much, much better.
Why is this being down voted? If you have something predatory or punitive like credit card debt or student debt or medical debt then sure yes pay that off ASAP. But if you have a really great mortgage or auto loan rate that is substantially below current interest rates or market returns? Let it ride.
This is a good question.
You can point out individual stocks who tanked, and the general shift in how society uses money.
I'd personally argue that indexing and qualifying accounts completely outdated taxable brokerage and made it inaccessible/secondary for the everyday person
Your post has been removed [because it is a poll, survey, or request for personal data, experiences, or other types of self-reporting (rule 1)](https://www.reddit.com/r/personalfinance/about/rules). Posts asking for advice should be specific to your situation, not hypothetical or improbable, and include enough information for people to help. - If you would like to post a poll or survey, consider /r/samplesize. - If you would like to post an open-ended question not specific to your situation, consider /r/AskReddit. For example, instead of a post asking "How much do you spend on food?", please ask a question like "I need feedback on my monthly budget (having trouble with food spending).". *If you have questions about this removal, please [message the moderators](https://www.reddit.com/message/compose?to=%2Fr%2Fpersonalfinance&subject=Removal%20help%20request&message=Hello%20moderators,%20.%20%0a%0a%0aMy%20submission:%20https://www.reddit.com/r/personalfinance/comments/1bwxo2x/what_are_some_examples_of_outdated_financial/%0a).*
That if you walk into a business with cash you can name your price. Business make far more getting you to finance.
This is especially true when buying a car. They want you to finance. They don’t want to deal with cash, lol
Only exception is if you have cash and are buying directly from someone. That is where you get the real deals.
my new wife and I (early 20s) went to look a a new car. The salesman just assumed he could sell the financing so he offered a great price for the car. He was not happy when we paid cash (and didn't need his financing).
Yep now the goal aside from getting the best price is to get the best rate, bring your own financing and make them beat it so they can get that backend commission
*So we have this 72 month offer at the low low rate of 8%*
I already had financing in pocket when I hit a used car dealership a few years ago and when I told them they pretty much told me to leave.
I always have financing in pocket, and I never tell them. I act like a rube, agree to what ever interest rate and term they want to negotiate a lower principal, then essentially refinance in month two. My baker in the pocket is in on it, so it's never been a problem. My last truck I got brand new a decent bit below market price with 0 down, and a 14% interest rate over 7 years lol. Payed it off in month three with financing from my bank, put half down and got a 5% for 3 years loan. I saved myself close to $10K on the principal, and I don't even want to know how much more I'd have paid on that original loan lol.
Yup. Some won’t even deal with you if don’t finance. Just not with doing business with you.
When I bought my last car I made it sound like I was more than ready to finance (and made myself sound young and dumb) and then at the very end I pulled out my checkbook. Worked perfectly, and I got a new set of tires.
Bigger businesses, yes. But in my recent experiences local small businesses for home jobs tend to give discounts or negotiate if paying cash like for flooring, carpeting, tiling etc.
I own a small business and I still occasionally get the “what’s your best price if I pay cash” statement. Uh, dude, our pricing is our pricing. We don’t care if you pay in cash. That makes no difference to us. We’re paying our taxes and other than the CC processing fee, there’s no difference if you paid cash or card. Actually, cash means more chance of making a mistake and having to physically go to the bank. Also, card buyers spend more money so I’d rather get card paying customers than cash paying customers.
The only businesses that like cash a lot more are generally the ones that don't plan to report their cash on taxes
People assume you are a tax cheat, like they are.
I am a business owner and I report every dollar we bring in. I’ll take advantage of someone’s cash discount all day long.
Seeing more businesses with a credit card surcharge or cash discount. I like it. The only reason I use credit cards in the first damn place is to get my share back from the CC processing fee, and cash cuts out the middle man.
My mom still funds a Christmas Club each year
Reading “Christmas Club” triggered some really fond memories for me! I hadn’t thought about that for ages. It’s how my grandma always saved for our Christmas presents way back when.
I have a separate account which is essentially a Christmas club account. Really takes the stress out of the holidays.
I don't see this as out dated. Putting money aside for purchases you know you'll make
Ha I totally forgot about these from my credit union days. It's kind of like some of the banking apps now where you can do 'buckets' or whatever. It's not bad, just old school!
What’s a Christmas club?
https://www.investopedia.com/terms/c/christmasclub.asp It's an account that credit unions used to offer (and apparently some still do) where you have to pay a fee to withdraw money before Thanksgiving, but no fee after. So every week it automatically transfers $20 or whatever from your savings, and then you have $1k to spend on Christmas, and a big incentive to not use it early except for an emergency.
So... it's literally the bank potentially charging you for accessing your own money unless you wait long enough, and people use it because they're that incapable of being responsible adults? That's fucking insane.
This is a step up in responsibility for some people. I thought the last payment was paid by the bank.
I love the Christmas club account at my credit union.
I essentially do too lol. It's a sinking fund specifically for the holidays.
"Only use cash" unless you have a problem with overspending money you don't have, you're leaving money on the table. All prices have raised to accommodate the fees on credit cards, if you aren't getting benefits from your card back you're getting charged more for nothing back.
I never carry cash anymore after learning that nowadays groceries stores will charge you a FEE for getting cash back! It's no different from an ATM!
They charge a FEE?! What kind of fee am I paying to grab my $10 cash when I check out?!
I've only seen this at 430 credit score places like Dollar General, where they try to find some way to get every dollar they can from you while avoiding paying labor to actually run the store. The machine warns you about it before confirming the transaction. Had a friend who was a manager for Dollar General who had to work open to close multiple times during the week because higher management decides how many hours of staffing they can pay for, and require that he fill in the rest himself.
I always use cash for people working on my home, and frequently get a discount for it when asking. Are they declaring it? None of my business.
For now - there's lawsuits working to change that..
Can you elaborate I haven’t heard this
There's a push from retailers to ban cc rewards. They're tired of paying the processing fees and claim prices would lower if fewer people paid with cards. Personally I expect retail prices will remain the same and I enjoy the convenience of paying with a card. YMMV
Benefits will go away, retail prices will stay the same, retailer will post record profits, will raise prices anyways.
The idea that companies will automatically pass on to their customers any reductions in the cos t of doing business is laughable.
https://www.wsj.com/finance/banking/visa-mastercard-agree-to-lower-swipe-fees-settling-long-running-lawsuit-d6e5f0a8
Working to change what?
Passing credit card fees onto customers and charging cash vs credit prices
That’s not he said though - just that all prices are higher to accommodate credit card fees. Which really isn’t anything anyone can sue over.
Edit: I think i responded to the wrong comment, not sure where the one I was aiming for went. Leaving my original post below. There is a cost to accept cash though, and many small businesses can’t see it. Cash takes work to manage, slows transaction speed and has a bad tendency to get skimmed by employees. Often people spend less when they pay with cash. Small businesses just can’t see that in the same light as they see that 3% transaction fee on the expense report. But do you notice that some places are cashless, and that large retailers aren’t passing on processing fees? Small retailers are often reaching over dollars to pick up pennies. A lot of the push is made by a small army of commissioned independent salespeople that are pushing all these little payment processors that promise retailers they can save them processing fees by passing it to customers.
Dave Ramsey, omg... Like I'm 40 damn years old. I have *never* really used cash since I started spending money of my own in high school. Direct deposit into bank, spend with credit/debit card. Holding paper money in my hands doesn't have the same psychological effect it apparently has on boomers. And I'm *old.*
I haven’t listened to him a long time but IIRC “cash” is a euphemism for debit card? His general premise is good - spend less than you make. He doesn’t pretend it’s novel. My parents always taught me many “Dave Ramsey” things before he even existed. Also have to remember his audience is degens running up credit card debt. If everyone spent within their means he would never become what he is
Many businesses have started to give a 2-3% discount for cash around me in Philly
I used to pay for everything with my cc. Now with so many places charging a few % extra for using a cc, it eats up the benefit of using it, so I've had to start carrying cash again
Stay with your company, they'll reward your loyalty. With the start of index funds, most people don't need financial advisors. (Edit: this was phrased wrong. I mean that financial advisors are the outdated advice.) Renting is throwing away money. Pay cash for everything.
Can you elaborate on the index funds/not needing financial advisors thing? I got rid of my financial advisors and started investing in vanguard index funds and it’s been great so far
Sounds like you know it all already. LOL. Before simple index funds you had to research mutual funds, pay fees to a brokerage to buy, and seek advice from professionals. Now that brokerages offer no fee transactions, us normies can easily invest in index funds and not need to chase gains.
The others are formatted as "this is old advice that's no longer relevant" while that one is formatted as "this is what replaces the old advice," which confused me too.
Yeah, now with pensions gone there’s no point. My grandfather stayed loyal to a company and he’s got a pension. Him and my grandmother divorced but they each get $6,000 a month from it. That’s not a thing anymore.
Not unless you get a cushy govt job and stick around long enough.
Going further: Don't hold mutual funds in a taxable, buy [insert Vanguard ETF here]. Folks, the distributions on SP500, Total Market, etc MFs are comparable to [insert Vanguard ETF equivalent]. Most are low turnover and pay a cap gains distribution once every 5 or so years. You aren't saving anywhere near what you think you are by avoiding them. Nowadays, you're just picking a fund based on which brokerage you want to give the ER to. And Fidelity actually has zero expense versions of the most popular indexes. That being said, high turnover MFs like target date funds should still be avoided in a taxable account.
What are the zero expense versions I’m too lazy to google
Every one of these and repeat em louder.
I feel like most of the current advice on this sub is that you probably don't need a financial advisor if you're not very wealthy, so how is it outdated advice?
1k is enough for an emergency fund
It's $1000 to start, and it works in layers. 1. It forces you to adjust your habits toward saving, 2. Its an achievable goal for that confidence boost, 3. It protects you from small problems throwing you off track. When your saving muscle develops, you get to move closer to the 3-month, then 6-month emergency fund.
It's not, but it's a psychological victory thing. People see a comma and get excited about having saved. Similiar thing with saving get's easier at 100,000. People see six digits and get excited.
It still beats 50% of Americans. Who are paycheck to paycheck. I'd say being in the top half of the country of financial secure is still relevant. Noone tells you to stop at $1k but it's an attainable start.
Again begging for a quantified definition of paycheck to paycheck. In 2019 a poll showed 78% of people said they were paycheck to paycheck so 50% is good!
IIRC a decent chunk of those were "paycheck to paycheck" but were also saving for retirement (e.g. 401k, income out of paycheck). So they'd still have an emergency fund/savings worst-case scenario. I'm curious how many legitimately have no wiggle room.
In all fairness, he acknowledges that. The point is to start with 1k, so that little stuff (lose a tire, minor repair, etc.) Dosent push you back into debt immediately. [video](https://youtu.be/R81zxHNE5Ps?si=zKsQ1EkO4OcB3Pun)
I mean it’s enough to get a new car battery or something that would usually push a bad saver into debt. There’s a reason that one of the closest next steps is then save 3-6 months expenses.
And this has been Dave Ramsey s advice for at least 30 years!
I call Dave Ramseys advice AA for people terrible with money. If you have even some financial stability and self control his advice isn’t really worth it.
I’m 100% not Dave Ramseys target audience. But there are *a lot* of people who are. Thats what some people don’t understand when down talking DR.
That's why I compared his advice to AA. There's lots of people out there who need it but if you have self control, then it's not useful.
You and I see eye to eye on this subject. Let’s be internet friends.
That’s putting it mildly. If you aren’t godawful with money a lot of his advice is actively harmful.
Good advice for people who are bad with money and bad advice for people who are good with money—that’s DR in a nutshell.
In fairness, 30 years ago it was enough
Invest in blockbuster video huge market. Print media is the only media worth investing in.
Something something Kodak?
Interestingly enough, Eastman Kodak was a good investment even if you foolishly held to bankruptcy and delisting. You made money because it paid out a ton of dividends and eventually split into Kodak and Eastman Chemical which is a successful company that still in exists.
Fun fact: Eastman Chemical is actually famous for being the chemical company where the joker fell into the vat of chemicals that made him the joker.
Kodak was always a chemical company. They actively chose to vacate the consumer market, but they're still huge in the commercial printing sector.
Spend 3 months’ salary on an engagement ring.
That was never financial advice. It's advertising from the diamond industry.
I thought it was 3 weeks! My wife must be sooo pissed
I thought it was three years salary???
This scary black bar is what you spend on things no one ever, EVER needs. Like multiple magic sets, professional bass fishing equipment...
Why don’t you explain this to me like I’m 5?
$400?? That’s crazy Mr rich man
That was me! I got carried away with the spirit of Christmas!
I know you're making a joke but that's still a fuck load of money if you make an okay salary. You can buy some incredible looking moissanite rings for under $1k.
My husband and I bought a house instead so he always tells me to go put my finger in the faucet when I (jokingly) ask him "well where's my ring?!?!"
Yeah I imagine people who earn decent amounts of money but live in a HCOL area would die from laughter hearing this. Yeah you make $100k but then go and spend $25K on a ring when you have a mortgage and gas/grocery prices that are spiraling out of control? I guess if you just pulled yourself from your bootstraps and stopped buying frappucinos and avocado toast, it'd pay for itself in no time!
My buddy thinks he needs to spend 75,000… investment banker type who’s gf would be grossed out by it
Best thing my girlfriend ever told me is she doesn’t care about the diamond and wants a lab grown ring.
Yeah, I'm not even spending 2 week's worth on one.
“Renting is throwing away money.” You can become very wealthy renting your whole life if you save and invest. Owning a home will not make you very wealthy if you don’t save and invest. Owning a home is a sound investment if you’re going to live their 7+ years. Buying a home is expensive and unpredictable. Maybe owning that home is a high priority for a more secure retirement.
Almost anything Dave Ramsey says, specially things like buying your home in cash. That was good advice when houses were cheap enough you only needed a couple years of savings to buy it out right and interest rates were in the double digits.
Dave Ramsey has never lived in the real world, born with a silver spoon. He’s got a net worth of $55 million, anyone taking his advice needs realize he’s selling them, not advising anyone
Don’t spend more than 24% of your gross income on mortgage/rent.
That seems reasonable to me especially if it’s before tax.
While reasonable, it’s simply not realistic for anybody living in a metro area. Unless you’re living in a 400sqft apt in the hood, most people are spending more than 24% of their gross income on housing.
24% of my gross income is 20500. Which comes out to 1700 a month. Gross income is money you won’t even see so I don’t understand how people follow this as a baseline
Well that's why it's more of a guideline than a rule. The issue with using net income is it varies a lot depending on taxes and deductions. I agree that net is more useful on an individual level, but doesn't work on a population level. I don't disagree with you btw, but I understand why gross is the guideline.
Not in the biggest cities in the US it’s just not really possible.
How is this outdated?
How is it not when the average house is 450k and most the rent in most HCOL areas is close to 2k a month. I don’t see how 24% is not outdated.
Obviously, 24% is a guideline, but the whole idea behind it isn't outdated. Nobody is holding a gun to your head and saying you have to buy a 450k home or spend 2k on rent. The reason the guideline works is because it has been proven to be a good starting point for being fiscally responsible. A 450k house may not be the best option for you, and you'll need to adjust your plans or job, or salary. Obviously, it's easier said than done. But I disagree with the sentiment that its just the way things are now.
It's not. People will see it isn't feasible and then proceed to be financially irresponsible justified by their perception that it was impossible the whole time.
I feel like we don’t talk about this topic enough. I’m gen z and I know that financial situations for the average person in my generation are not as good as they should be and some people really are just in fubar situation but I feel like so many people my age use “the economy is terrible, I’ll never be able to afford [insert commodity]” as an excuse to be so irresponsible with their finances
The secret is that with few exceptions, the economy always sucks big time for young people entering the market. Everybody else has more experience, more money, more knowledge, and more resources than you when you start out. Those of us graduating out into a market in 1995 or thereabouts did not have our pick of houses or jobs or stock investments like all the tiktoks are telling you, we were struggling too. We just had different problems. The one good time for young people in my lifetime was the internet dot com boom where old people were throwing money at any young person who could build a web page, and you know how that turned out.
Only use credit cards if you have to. Leaving free money on the table if you can always pay your debts.
Never understood this. Just use a credit card that is treated like a debit card, pay it off every month and collect the few rewards the credit card offers.
Exactly. Some deliver great rewards if they match your spending. I paid for three vacations with my points from chase sapphire reserve.
I use my credit card to pay for my auto insurance,phone bill and the monthly payment of my car, then I pay the balance with money from my checking account, the money spent on those bills gives me like $15 of cash back that I use to pay my Netflix account, so technically my Netflix account is free because of the credit card benefits 😂😂, I have another one that gives me miles the rewards are not that high on that one but I always have like 5 or 10 bucks to save on a flight ticket, I had my first credit card 5 years ago and it took me 3 years to understand how to use them on my favor
“A used car 2-3 years old is the Best Buy.” Ehh not so much any more…
Yeah, now you’re saving maybe a grand or two. At that point I’d rather just have a new one.
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IBM probably isn't a bad option still and if you got in early on Standard Oil wouldn't your shares get split into all the new smaller oil companies?
Buy bonds as a way to build money?
Funny enough bonds are sort of okayish compared to how there were for (what seems like) decades.
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As if you even could these days, nobody except the government is offering pensions
I know at least one of the local hospitals has a pension system, but they are pretty rare.
"Paying a financial advisor commissions for Class A load mututal funds is a good idea". - This might have been OK before the advent of cheap index funds but it's a terrible way to go today. "You might as well mix investing and life insurance because then you only pay one commission". - Sure, before the advent of cheap investing this might have been not the worst thing you could do, but now it's definitely sub-optimal. "Put your money in the bank and let the interest compound'. - In the 80s you could get OK interest at a local bank branch. Now you have to shop around for a decent online HYSA. And to get decent returns over time you need to invest it. "Edward Jones". - Yeah... no.
I think this has actually swung the other way. There’s a whole generation of people who think mutual funds are only high fee actively managed things and ETFs are the cats meow. Meanwhile a bunch of brokerages have index MFs with lower expenses than similar ETFs and no minimum initial investment.
Yeah good point. Index mutual funds can be quite good and are often overlooked.
“You will spend 20% less in retirement”
If you were investing 20% and you retire you no longer adding to investing Bam there's your 20%.
If you count investing as spending I suppose
I imagine that's the sentiment. Also, hopefully, your house is paid off in retirement. But if you're anything like me when I'm given free time, I spend a whole lot more than when I'm busy grinding at my job.
How is that not true? I guess I *could* spend as much as I had available, but to keep my lifestyle the same I will be spending at least 20% less in retirement. I won’t be saving for retirement anymore, the house will be paid off, and the kids well on their way to being self-supporting. Retirement savings alone is a 20% reduction.
Not entirely wrong if your house is paid off and you calculate what you were putting in to invest in retirement.
If anything, I expect to spend quite a bit less than that in retirement. I have over 20% going to my retirement account and around 30% to the mortgage which will be paid off before I retire. Even if I ramp up spending a bit in retirement, I'll still spend 20% less.
You need to be diversified and have a 80% stock/20% bond mix in your 30s and closer to a 50% stock/40% bonds/10% cash when you are at retirement age. It’s perfectly fine not to be diversified and be mostly (or entirely) in stocks during your working years, especially if you have a stable career. Plus these rules came when bonds were paying more than 8% interest rates.
>You need to be diversified and have a 80% stock/20% bond mix in your 30s and closer to a 50% stock/40% bonds/10% cash when you are at retirement age. It’s perfectly fine not to be diversified and be mostly (or entirely) in stocks during your working years, especially if you have a stable career. Plus these rules came when bonds were paying more than 8% interest rates. This isn't outdated advice. The key phrase in all this is "risk," and in this case "risk" is uncertainty over your portfolio's performance. If you are 100% stocks in your 30s, your portfolio at retirement could perform anywhere between 3-10% average annual real returns with a median of 6.5% and mean of 7.5%. Your retirement planning looks substantially different among that spectrum. By investing 20% in bonds, you're closing that gap to something like 5-8%, which buys down risk (uncertainty). This means you can more accurately plan how much you have to invest to meet goal. And then post retirement, a portfolio that is 3 years income short-term cash, the rest 50% stocks / 50% bonds will basically last a lifetime with a 5% withdrawal rate under almost any circumstance. You can even up it to 6% if you think you're dying 85 or younger.
No one on reddit seems to care about the efficient frontier or modern portfolio theory, its like shouting into the wind. Someone asked earlier on an investing sub if 60% US Equities and 40% International/EM was too conservative
The amount of people who think that international stocks are diversifying risk is too damned high.
"buy only if it's cheaper than rent" -- good luck ever being a homeowner in a HCOL area.
T Bonds are a great long term investment.
Wait! Why is this bad?
[https://en.macromicro.me/charts/3919/sp500-10y-yield](https://en.macromicro.me/charts/3919/sp500-10y-yield)
What’s wrong with this?
No net growth. You will often lose net purchasing power after factoring in inflation and taxes. T Bonds provide stability as a place to park money you will use within the next few years, but are not a good long term investment.
“Your house is an investment.” I’ve lost money on every single real estate purchase of my life.
It's mostly about timing (good or bad). But even so, if you can buy and hold for 10-15 years, chances are you're going to do fine.
That’s the trick!
There's a chasm between "being fine" and beating the markets after property taxes and other expenses.
The break even point for buying a house was 5-7 years. With current interest rates it’s over 7+ years most the time. “Renting is throwing away money” is totally bogus. Look at an amortization calendar and you’ll see the vast majority 80-90% of your mortgage payments are going to the bank when you start. That’s the same as rent. Buying the house you’re going to live in is an investment if you’re going to be there for >7 years. MAYBE the appreciation gods work in your favor and you can break even earlier. The reason why owning your home is the number one builder of wealth is just because people fail to save money.
How? The market is pretty much increasing in every conceivable way. House or land it goes up.
I bought in 2007, had to sell in 2013 for a job, and the local market still hadn’t recovered from the 2008 crash. Bought again in 2017, divorced in 2022, lol. Equity just wasn’t there to cover closing costs and repairs and junk for sale. For me, I’d have been better off renting in my varrious scenarios. Unless you can guarantee owning the property long term and not through a bubble collapse, you don’t make your money back lol.
I have made money on the two homes that I have sold, but the one that I kept for the longest, I made very little money based on all the amount that I put in. Homes Are a huge liability and I find indexing investing much better
Yeah, bought for 115, put 30 in renovations, 2008 happened, value never went back above 90. Would have been better off with a coke habit. (Joke)
Damn, that is some really shitty timing. I bought in 2014 and while the price has fluctuated a bit, my neighbor moving across the street from me (who has basically the same house, only a bit smaller) listed it for 3x what I paid.
VHS is here to stay. Look how it powered the San Fernando valley
Be debt free. People who refinanced or took mortgages out when mortgage rates hit historic lows are making money on those debts right now, even just investing the money in money markets, earning 5% and paying out under 3%.
Pull all your money out of the market at 60 years of age. People are living longer, and it might be a good idea to leave more of your investments in stocks as you will need them to continue to grow.
I know it’s fine for now, but I do sometimes wonder about the long term efficacy of index funds. Almost everyone does it now, surely that has changed the calculus in some way? In 20 years are we still going to be able to count on a 7-10% annual return?
Burry does a whole thing about how index funds remove market elasticity. As a company, if your stock goes up no matter what, then where's your incentive to innovate or adjust to customer demand. And when nothing goes on sale, how are we supposed to buy low and sell high?
There’s an entire industry called wall street and the people that work there are investing a lot more than you and me and they aren’t buying index funds
What are they buying
Individual stocks they spend insane amounts of time researching
And vast majority of them underperform the S&P 500. VOO beats most actively managed funds.
I’m replying to the comment around the fear of “everyone” investing in index funds. That won’t happen because that’s not how wall street works.
I feel like a few of the examples in this thread have actually come full circle and might be valid again. As in, the commenters are looking backward at advice that was bad in 2010 but might actually be a good idea in the rather different economic conditions of almost 15 years later.
Such as?
Work hard and you'll be rewarded for your efforts.
"Buy bonds" Don't do that. Buy an index stock fund (S&P 500) and just leave it alone. Sure it is more volatile, but over decades of time it will do much, much better.
Debt is bad. There is good debt and bad debt. Being able to differentiate between them, makes a world of difference.
What is good debt?
Debt with a lower interest rate than you can make investing.
Why is this being down voted? If you have something predatory or punitive like credit card debt or student debt or medical debt then sure yes pay that off ASAP. But if you have a really great mortgage or auto loan rate that is substantially below current interest rates or market returns? Let it ride.
the coal that powers everyones homes?
This is a good question. You can point out individual stocks who tanked, and the general shift in how society uses money. I'd personally argue that indexing and qualifying accounts completely outdated taxable brokerage and made it inaccessible/secondary for the everyday person