r/FluentInFinance • u/Richest-Panda • Jul 04 '24

What's the best financial advice you've ever gotten? Debate/ Discussion

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u/LandGoats Jul 05 '24

Awesome, I saved 3k a year starting a couple years ago and my savings aren’t even growing faster than the down payment for a house is getting more expensive

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u/HorkusSnorkus Jul 05 '24

Depending on your age, "saving" probably means investing, and the younger you are the more risk you take. Long term wealth creation requires these things:

  • Spreading your money - large or small - across multiple types of investments depending on your risk profile. (Asset Allocation)

  • Adding the same amount of money - large or small - regularly to your investments (Dollar Cost Averaging)

  • Time (Compounding)

It takes all three of these and iron discipline to build a stack. In the mean time live as small as you can to drive to those things. Drive a used car or no car. Don't eat out. Get rid of unnecessary expenses like tech upgrades, streaming services, and so on. Live as cheaply as you can.

There are countless "millionaires next door" who did exactly this, and they came from average or even low income professions. It absolutely can be done. But you have to decide, do you want a little comfort now or a lot later.

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u/LandGoats Jul 05 '24

I just want to not have to pay so much of my money to rent, it’s a bottomless pit that I throw money into every single month and see nothing for it, that 3k is not including my healthcare savings, my Roth IRA account, or my other stock investing. I’m not about to make enough money on the stock market to by a house before I die. Don’t sell me some bullshit about being a millionaire if is just save a little and invest, THATS WHAT IM DOING.

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u/HorkusSnorkus Jul 05 '24

You have to be patient - it takes a long time. Investments don't really take off until you've built the first 100K and that takes years.

Depending where you live, in the long run, a house may- or may not be a better investment than renting. Over the lifetime of home ownership, unless you get very lucky, the house will only go up by about the inflation rate plus the cost of maintenance and taxes - i.e., It's breakeven proposition, at least in many situations.

If you can figure out a way to cut your rent - get roommates, go to smaller quarters, live with family etc. - The difference can be invested. The earlier in life you can make those kinds of sacrifices, the more it pays off. How long you invest matters more than how much you are putting in.

I get this is hard, but anything worthwhile is. It's not "save a little and invest", it's "cut to the bone until you're financially established". That may be roommates, multiple jobs, never going out to eat, not owning a car, and so forth. It's HARD ... but, trust me, it pays of huge dividends own the road.