Thanks to everyone for their feedback!
The talk was last night, and it went very well. We went 1/2 hour over schedule, so 2 hours in total. I've pasted the outline below of what we covered -- we got through almost all of it. The crowd was, as expected, about 1/2 grad students with an average age around 27. This included a junior professor, a doctor in residence, a data scientist, a PhD chemist: they were a smart group.
Here's a list of the key learnings for me / interesting questions from the audience:
-They were very engaged and curious, though slightly depressed by my intro about the end of pensions for my generation, and the rising costs of housing, healthcare, and education
-About a 1/3rd of the audience knew, roughly, what their net worth was, and another 1/3rd were using Mint or other sorts of expense tracking. About 1/5th created and maintained a monthly budget.
-As mentioned by a RandomPointer, people really do not know how they are taxed. Most attendees didn't understand how marginal tax brackets work. Once I explained it, they were much more sold on the value of pre-tax investing through IRAs/401(k)s
-Almost no one understood what an IRA/401(k) was, except that it had something to do with retirement.
-One attendee was shopping for a new job and said they never paid attention to the 401(k) and whether there was any matching component, but "that could be a 6% raise!"
-My wife (who has heard me talk about this stuff ad nauseam), said she learned that we should probably increase her contributions to her non-matching 401(k). She's right!
-Everyone got why you don't want everything in stocks unless you're willing to be on the wrong side of the market at a point when you need money.
-Almost no one knew what a bond was. A couple of people knew that you could lend the govt money, but didn't know about lending it to individual companies.
-I didn't get any pushback on the idea of not timing the market, not picking stocks, and high diversity -- this made a lot of sense to everyone
-They did push back on the "don't use a financial adviser" part, for an interesting reason. They wondered if an adviser can help you in a severe downturn to NOT sell out of the market, and whether that would be worth the 1%/yr you're paying.
-The big "saving for the future" topic was buying a house (all but one were renters). They wanted to know how to decide whether it's better to rent or buy (I referred them to the NYT calculator), how your home equity should fit into your overall asset allocation (I didn't have a great answer to this), and how aggressive you should be about paying down mortgage debt (not very, assuming 4% mortgage).
-Someone asked if too many people using an index/passive strategy could "break" the market in some fundamental way. I said that this is an open topic of discussion, but most people think that it just magnifies the effect of the remaining active investors. I also mentioned the monopoly/antitrust side of the argument, where people are concerned as to the impact of (for instance) all of the airlines sharing the same major investors, and how that disincentives competitive behavior.
-People were wondering about robo-advisers like Bettermint. I said it's better than paying someone 1%/yr (they charge 0.3%), but you can do it yourself for nothing.
-No one had heard of a target date fund, but they really liked the idea of having one "automatic" fund.
-"Your Age in Bonds" stuck with people, though I pointed out that this is a very rough rule of thumb.
-Only one attendee had heard of Vanguard, though he went to Harvard Business School and worked at a hedge fund. He was the guy using Bettermint!
-They wanted to know, specifically, how you open an IRA or brokerage account and buy ETFs (which websites, where to click).
-Almost no one had renters insurance!!! This was a major takeaway for everyone: it's cheap and can save you a bundle.
The talk also revealed my own ignorance on a variety topics, which I was happy to admit and kept pointing people to BH for answers. For instance, why do people prefer Roth IRAs vs traditional if the cap gains tax is only 20% vs top marginal income rates of 2X that? What are the tax differences between a 401(k) and an IRA? What are all of the tax benefits from owning a home? How do dividends fit into the "average 7% growth rate / yr" of the stock market, and can you achieve that outside of a tax-advantaged account? Why the heck is there a tax bracket between $416,700 and $418,400???
Here's the talk outline:
-Minimum takeaway: links on board (BH, /r/personalfinance)
-We’re in new era (no pensions, historically high housing, education, and medical costs, flat wages)
-Early action is >> later action. Compound INTEREST!!!
-Better to mess up with small $ than big $$$
Step 1: Audit present situation. Net worth = asset – liabilities
-Where is my money going? Use CCs, Mint. Budgeting. YNAB. Cheap rent/car >> lattes. LIVE BELOW YOUR MEANS
Step 2: What to do with extra $$$? Expanded chart: https://i.imgur.com/CcEVQAV.png
-1 Month Emergency Fund -> medical, car, other
-Employer Match 401(k) - Free money!
-Pay Off High interest debt >10%
-Expand Emergency Fund to 3-6 months
-Max Roth / Traditional IRA. Sidebar into what IRAs are and how marginal vs effective tax brackets work
-Max 401(k) – Non Matching so that you're saving at least 15% of gross income
-Rest in taxable portfolio
Step 3: What to do with invested money?
-Sidebar into the power of compound interest with examples, rule of 72
-Goals with savings: have money when you need it while growing it as much as possible over the long term without too much exposure to market gyrations
-Draw risk/return spectrum for assets losing value within 1 yr (cash low risk, stocks high)
-Draw same spectrum for assets losing value over 20 yr period (cash high risk, stocks low)
-Sidebar into what's a bond
-Rule of thumb: short term money into cash and bonds, long term (10+ yr) money into stocks
-Understand the variables inside and outside of your control. Outside = market movements. Inside = asset allocation, diversity, fees
-How to determine asset allocation and ability/need to take risk. ~Age in bond.
-Which bonds/stocks to buy? ALL OF THEM. You’re average. Other side of an individual stock buy/sell is Goldman or an insider. Don't be a sucker.
-Best you can hope for is to ride the historical increases in the market
-Fees, passive vs. active, typical fees for advisers / mutual funds and what 1% lower growth rate looks like over 40 yr time horizon.
-Math proof = average active < average passive after fees
-VTI, VXUS, and BND as examples. How an index fund works. Why they're important.
Step 4: Putting everything into practice
-How to sign up for an account. Why I like Vanguard and Fidelity (but there are others).
-Final note: get insurance to protect your growing wealth. It's cheaper than you think.