Yeah, I had some pretty involved discussions with my Dad about that; he was much more in the “don’t buy it if you don’t need it, and if you do, then don’t spend any more on it than you have to” mentality.
I, on the other hand, have always looked at money as a tool for enabling my lifestyle, rather than an end in itself, so I tend to walk that line where I save prudently AND I spend reasonably. I’m sure I look ridiculous to someone on either extreme though.
The trick is to recognize that spending is enabling your lifestyle today, whereas (successful) investing is (probably) enabling a bigger lifestyle later.
Both of those lifestyle enhancements are Good Things. To forego either is a mistake if it’s at all possible to avoid that mistake. If you have a shit job (series of jobs more like) with shit prospects you’re going to forego both. Sorry; sux to be you. Better budgeting isn’t the cure for what ails you.
Once you’re out of that muddy financial ditch though, now you face a choice. How much of each? How much do you discount the “(probably)” in the first paragraph? How much do you discount the “(successful)”? Is 20yo you even able to conceive of 65yo you as a real person with real desires who matters to you now?
And of course the other trick is deciding bigger when. I’ve more than half-decided that I will start taking Social Security at the minimum age, despite the penalty. Why? Because I should have no serious need for it - it will just be extra income. Extra income I will quite likely get more enjoyment out of in my early 60’s than my late 60’s. Actuarily I will start losing on that deal sometime in my early to mid-70’s. But in my early to my mid-70’s, if I’m even still alive, I may well be far less mobile/have far less energy and may be less able to do as much with the money.
My mother waited until 70 to pull SS, which absolutely made sense since she needed that extra income to scrape by. But I’ve watched my folks slowly decline (and die in one case) and have long since realized than it isn’t always income that is a barrier to enjoying your retirement. The energy to do stuff plays a big role.
I didn’t take my SS at the absolute earliest, but not far beyond it…for much the same reasoning as yours. My BiL was adamant about waiting until he had to take it. But I’m doing more with the money now than if I waited.
To me SS is my emergency money. I have no other guaranteed pensions, but I have a bunch of assets.
If the stock market does well the next 20 years I’ll die stupid rich, having spent well in early retirement and as hard as I can in later retirement.
Conversely, if the stock market, inflation, etc, totally suck me living large in the first 10+ years of retirement ensures I’ll be broke by age 80.
I see not taking SS as the insurance that permits me to live large now while I can enjoy it. Only by waiting to take SS at age 70 will it pay enough in the out years that I could live on it alone as a decrepit old dude in a decent old fart’s Independent Living home.
Waiting to 70 for SS is what gives me the freedom to spend now. If I took SS at 65, I’d need to hold back a lot more of my assets to make up that difference if/when I live to be 95 and the stock market & US economy are shite.
If most of my retirement income was a private pension, not a 401K/IRA, I would think more like @carrps above. But I don’t have that. SS is the backstop so it needs to be the biggest possible one I can arrange.
I waited until 70, and with my SS and my wife’s, which is half mine, we cover most of our expenses without having to dip into our investments. I just figured I wasn’t going to see another investment with a guaranteed 8% a year return, not counting inflation.
I can’t think of one thing I would have done differently with more money at 65.
Is it “disinterest” or “uninterest”? From your post it seems more like you’re not interested instead of disinterested.
I began to look up the difference, then realized I don’t care. So take your pick. But let’s focus more on the spite…
This thread has demonstrated, I think, that basic financial literacy isn’t just staying out of credit card debt, being able to keep track of your spending and putting away some of your paycheck every month. My sense is that today you have to be truly knowledgeable about various types of investments, parse some pretty arcane details about retirement accounts and maybe real estate transactions… All in service of not just wealth building, but just to have a shot at not being out on the street in one’s old age.
And I don’t think it should be necessary.
My grandfather managed to own a house and get along fine on a factory job and I would argue that he had, in the literal sense, merely basic financial literacy. Not possible to do it that way anymore, for the most part. I don’t think he would have done well transplanted into our world, and that’s a shame. Never mind that his kind of job isn’t really a thing anymore, I think his lack of higher level financial savvy would have doomed him to a much worse life.
Hence my spite. I think I am basically financially literate - I pay my bills on time, I save, and I don’t spend wildly. None of that was worth a rusty f*** on a credit rating, which makes me believe the system is heavily skewed against me. I don’t want to spend my time accruing knowledge to compete in a game that, besides being soul killing and dull to me, I perceive as rigged.
I think our financial systems and institutions only care about helping people to the extent that it helps them. It serves their purpose to be complex, with arcane rules many people are unlikely to understand.
So. I bought my place, arranged my life such that I never need to concern myself with a credit rating ever again, and essentially opted out of our financial system. I live in a way where the money I make will suit me fine, largely because I have different needs than most (inexpensive home, no family, no costly tastes).
Could this backfire on me? Yes, in a number of ways. And so my spite rears up. I’d rather do it my way, and not play the silly game and take my chances. I say again, f*** these people in the neck, meaning those who design and enable a system where basic financial literacy isn’t enough, and one needs to be an expert. I’m not playing.
Aren’t you glad you asked? 
This is not true. If you have a job with a 401k then sure, there are a few extra things you need to know (mainly: get one) but otherwise these thing you describe are all situational and nothing I would describe as ‘basic’.
Get any credit card, use it for things you were going to buy anyway, pay it off each month. You will build credit. This probably does qualify as basic.
Sounds like your basic literacy is fine. This is a good plan. It may not be ‘optimized’ but ‘optimized’ is not ‘basic’.
And this is the crux of what we’ve been discussing in the thread, really - what do we mean by ‘basic’ literacy?
It could very well be that I’m just a moron when it comes to finance (never mind disinterest and spite), but I don’t see understanding 401ks as basic. There are decisions to make, as has been discussed by others, and to me, fairly arcane rules and details to parse. In my mind, not basic. BYMMV.
Well, that’s exactly what I have done my whole life. But when I began the process to buy my house about 20 years ago, lo and behold, I had a middling credit score at best. I was told this was because I had avoided taking on loans and such.
Maybe things have improved on that front since. Today at least, credit report scores aren’t locked down on double secret probation like they used to be. (For Christ’s sake, I will never understand why simply LOOKING at it was problematic, as I was told during the mortgage process. What a fucking scam.) And maybe people can build credit doing what I’ve always done, but the fact is it didn’t work that way for me.
I don’t think you’re a moron but I think you believe more understanding is necessary than actually is. Those arcane rules and details - if the only one you know is that you can’t withdraw until you are 59.5 without a penalty , you’ll be fine. There are reasons you can withdraw penalty- free earlier - but you will be fine if you don’t know about them. Yes, you have to choose where to invest your money - but most 401K s have a target date fund. There are rules about catch up contributions - but you’ll be fine you don’t know about them. You don’t need to know the contribution limits as you generally won’t be able to exceed them. Really, all you really need to know is to have one and know about when you want to retire - if I want to retire in 2045, I’ll put my money in the 2045 fund.
I am just a layperson regarding finances. But I think that it’s much easier now for an average person to grow wealthy in the long term if they have an OK income (relative to their needs) than it was 50** or more years ago.
Before the advent of mutual funds (especially index funds) it was much harder for an average chump like me to grow their money by investing in stocks.
My working-class parents gave me some good advice (“Work hard, live frugally, don’t bet on horse races”). They also gave me some bad advice (“Never put money in the stock market.”) They saw no distinction between those endpoints. At the time, maybe they were right.
Part of financial literacy is figuring out the early things we learned that are out of date.
**Vanguard (in 1974) was the start of the stockbrokers’ racket crumbling.
My brother (a financial “planner” and “advisor”) still curses John Bogle every day as a traitor to the fraternity.
No, not a moron at all. As I pointed out in post 196, one of the items that was discussed, planning for long term care, is difficult to navigate even for people who are quite comfortable discussing finances. This thread has seemed to demonstrate that posters who have some knowledge in this subject are willing to jump right on and post (at times taking it far beyond basic), while others who don’t know as much are less likely to post; or like you did, just post your frustrations about how difficult this subject is to gain a modicum of expertise in without taking a deeper dive than you would like to take.
The world your grandfather lived in is vanishingly rare. On the other hand, finding information on basic financial literacy is much easier these days with the internet (but also with risk of bad, misleading, or deception information because, well, the internet). But one needs to do the best they can, because the reality is that pensions are disappearing, wages are not keeping up with inflation, and one needs to know how to make the most of what they have. Or at least not make mistakes that are hard to recover from.
Your frustration and discontent with this is clear and understandable. You can continue to rail against this (or at least ignore it) and that’s fine if that’s what you want to do. On the other hand, people here or on other financial forums are willing to do what we can to help.
Could you elaborate on this, at least from the point of view of the fraternity?
While I can understand stepping out in this situation, I would prefer explanations or recommendations for self-learning.
And there’s another thing. When and if I move back to the U.S., my credit score is basically in the basement. We did have a U.S. credit card, but got dropped due to inactivity.
My brother-in-law used to go to the ATM all the time, and made frequent, but small, withdrawals. For me, this was unwise, due to 1) lack of planning for cash payments and 2) having to spend time (and gas) getting to a ATM, because he needed cash. He did start to learn that he needed to plan his spending better, but I don’t think he did it early enough - he reached 65 and has no plan to retire. As he spent his first 20 working years in jobs without a pension, 401K or any such benefits, he doesn’t have much financial cushion. Fortunately his wife’s more than a decade younger, and hopefully has a bit more financial wisdom.
In the past, buying shares of a stock invariably required you to go through a much more monopolistic system involving a brokerage, which took a hefty commission. You had basically lost money as soon as you’d bought in.
Also, accurate information about the stock was much harder to come by than it is now. People with connections were more likely to have it.
Mutual funds had existed for a while, but they were invariably actively-managed. You had to pay for the services of financial whiz kids who bought and sold stocks that made up the fund. The catch was: there was basically no way for a layperson to determine whether these whiz kids were doing any better than randomly-picked stocks. But you paid for their services, whether they did or not.
Bogle’s vision was that it was a better long-term bet to invest in a mutual fund that was not actively managed, and hold onto it. History has proven him right.
The fraternity of stock brokers and whiz-kid fund managers hate him because he cut them out of the loop.
Speaking of truly basic financial literacy, I count myself as someone who is hardly literate at all (I joke that they didn’t teach math or finances at my art school), but I guess I’m literate enough to know that I need to be on the aggressive side in my retirement planning (I’m behind). And so I’m claiming the max exemptions on my W-4 to get more net pay up front, contributing the max match amount to my 401(k), throwing a packet of savings every month into an investment account, maxing my HSA contributions (and I know some part of that is invested, but I don’t really know enough about that to speak cogently on it), and not getting a refund at tax time.
It galls me to know that until I hit a certain threshold of investments, I won’t have access to one-on-one guidance and expertise from the investment firm like all the richy-riches do (I mean, aren’t we little people the ones who need guidance the most?). So I’m using my sister’s guidance (she seems to have done very well) to find a variety of index funds, ETFs, etc. with good morningstar ratings which have good long-term performance but are maybe selling at a little less at the moment (within the range of their low-to-high price histories), and purchasing those as opposed to investments that are good long term but selling higher at the moment—she calls this garage sale investing.
It’s easy to want to get mad/give up because it’s not easy or comfortable for me, but I’m still trying my best.
On the personal budgeting side, my other sister turned me on to an online tool a few years ago called YNAB (You Need A Budget). It’s one of the reasons I realized I’m actually able to save such a big packet of money every month for investment. The premise is that you “give every dollar a job”— @Voyager reminded me of it when they mentioned “buckets” because that’s basically how YNAB works: you either use their template or create your own categories (buckets), and then you “assign” your income to those buckets, and however much or little is leftover goes toward any other buckets you have, and if you don’t spend all of one bucket, then you can move that overage to another bucket (or “borrow” from one if you come up short one month), and before you know it, you may have a vacation bucket filled up, or a new coffee maker bucket filled up, or a credit card bucket paid down. It’s kind of neat the way it works, and it’s all linked to your actual bank account/credit card balances, which keeps things accurate. As someone who happens to be debt-free I find that it’s a helpful tool to realize my savings potential. By “giving every dollar a job“ you’re being mindful of all the little ways you need to/want to spend (or save) money in your life—by basically gamifying the experience—and it really nickel-dimes you in the good way.
That’s a feature, not a bug. Those firms don’t work for free, and you don’t really need the drag their fees have on your account (especially over time).
And I don’t think you need them if you are willing to take a minimum amount of effort trying to learn like you are doing.
I think a lot of people don’t realize this until they’ve been working for some time, which means they have to catch up.
I need to put in more effort in managing my finances, especially the retirement. It’s one of those things like going to the gym - just gotta do it.
I don’t know, I was interested in buying a house just a few years out of college and I had never borrowed a dime. When I started looking into mortgages banks were begging to give me loans for vastly larger amounts of money than I ever would have wanted to spend. Years later, married: same situation. Why do banks want to loan me so much money?
Maybe my experience is atypical, but I only ever had a credit card paid off every month and a cell phone bill paid regularly.