What financial information do you wish was more commonly known?

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Chrono Triggered
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What financial information do you wish was more commonly known?

Post by Chrono Triggered » Tue Jun 11, 2019 9:09 pm

With personal finance and investing information (index over active, fees matter, etc) becoming more widespread, what are some areas in finance that you wish more people knew about or paid attention to?

Tdubs
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Re: What financial information do you wish was more commonly known?

Post by Tdubs » Tue Jun 11, 2019 9:25 pm

For the average household--ones that think hardly at all about investing--online banks would do them more good and are easier to grasp than anything else.

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arcticpineapplecorp.
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Re: What financial information do you wish was more commonly known?

Post by arcticpineapplecorp. » Tue Jun 11, 2019 9:32 pm

the power of compounding interest. It's been said that those that understand it earn it, but those that do not, pay it.

also how buying stuff doesn't make you happy. it's fleeting. It's the anticipation, not the acquisition that fires up the old neurons in the brain.

everybody's selling something. Be wary of what you see on t.v. Everyone's got an angle.

emergency savings is a necessity. emergencies don't just happen to others.

the difference between a want and a need.
"May you live as long as you want and never want as long as you live" -- Irish Blessing | "Invest we must" -- Jack Bogle

mortfree
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Re: What financial information do you wish was more commonly known?

Post by mortfree » Tue Jun 11, 2019 9:39 pm

The so-called experts at the financial institutions aren’t helping you with your money.

They are helping themselves to your money.

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Re: What financial information do you wish was more commonly known?

Post by jbranx » Tue Jun 11, 2019 10:15 pm

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bhsince87
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Re: What financial information do you wish was more commonly known?

Post by bhsince87 » Tue Jun 11, 2019 10:18 pm

That amount of saving is more important than where/what/how one invests.
Retirement: When you reach a point where you have enough. Or when you've had enough.

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willthrill81
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Re: What financial information do you wish was more commonly known?

Post by willthrill81 » Tue Jun 11, 2019 10:19 pm

The power of your savings rate. Especially at Americans' typically abysmally low savings rate, increasing it will likely have a bigger impact on your financial future than anything else.
bhsince87 wrote:
Tue Jun 11, 2019 10:18 pm
That amount of saving is more important than where/what/how one invests.
:thumbsup
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

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Re: What financial information do you wish was more commonly known?

Post by Grt2bOutdoors » Tue Jun 11, 2019 10:20 pm

How costly it is to self fund your own retirement? By the time the lightbulb goes on for many, it’s too late.
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions

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FrugalInvestor
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Re: What financial information do you wish was more commonly known?

Post by FrugalInvestor » Tue Jun 11, 2019 10:26 pm

The importance of starting to save and invest early.
IGNORE the noise! | Our life is frittered away by detail... simplify, simplify. - Henry David Thoreau

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9-5 Suited
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Re: What financial information do you wish was more commonly known?

Post by 9-5 Suited » Tue Jun 11, 2019 10:37 pm

That setting budgets is a very useful activity and isn’t just about frugality. For us, it actually made us feel better about spending money and helped us spend more on the things we like. I know we will end the year with a 40% savings rate, so I don’t bother my wife about any individual purchases anymore.

Also that debt isn’t something to be cavalier about. A lot of people just assume all cars are bought with loans and take out all manner of loans without concern for ROI. Once the debt piles up, somehow they don’t view it as an emergency to solve. Just something to complain about while spending as if they weren’t implicitly financing their restaurant and Target bills. Have to think in terms of balance sheet!!

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Re: What financial information do you wish was more commonly known?

Post by HomeStretch » Tue Jun 11, 2019 10:40 pm

Keeping investing fees low can add significantly to invested balances.

heyyou
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Re: What financial information do you wish was more commonly known?

Post by heyyou » Wed Jun 12, 2019 4:41 am

As noted by several posters above:
Saving is paramount, and investing a majority of the savings in stock mutual funds is necessary. Learn to accept those inevitable price fluctuations.

The lure of optimal returns from precise stock fund investing is just greed, and is profitable for Wall Street fund providers, but does not benefit Main Street savers.

A good method for retirees to maintain portfolio longevity is annual spending based on their remaining asset value. Keep necessary spending reasonable to tolerate the variable income. It is just living within your means, carried into retirement.

Trying to impress others by purchasing costly products, is not wise.

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DWesterb2iz2
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Re: What financial information do you wish was more commonly known?

Post by DWesterb2iz2 » Wed Jun 12, 2019 4:50 am

I get information from Schwab and hear on Morningstar podcasts that everyone with “a high deductible plan” should use an HSA. That isn’t currently possible.

Health savings accounts are great, and everyone with a qualified plan should use one. But lots of high-deductible, ACA-compliant health insurance plans are not qualified to use an HSA because the annual max out-of-pocket is too high. This is a quirk in the law that disqualifies many plans and customers who would benefit most from HSA accounts.

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Re: What financial information do you wish was more commonly known?

Post by TheOscarGuy » Wed Jun 12, 2019 5:55 am

Chrono Triggered wrote:
Tue Jun 11, 2019 9:09 pm
With personal finance and investing information (index over active, fees matter, etc) becoming more widespread, what are some areas in finance that you wish more people knew about or paid attention to?
1. You don't have to spend every dollar you earn. In fact you ought not to.
2. Assume there are no government programs that will take care of you in your old age and save now.
3. Compounding! Seriously, I don't think people know about it.
4. boglehead forums :D

Rus In Urbe
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Re: What financial information do you wish was more commonly known?

Post by Rus In Urbe » Wed Jun 12, 2019 6:24 am

bhsince87
That amount of saving is more important than where/what/how one invests.
:thumbsup :thumbsup :thumbsup

Oh yeah. Even on this board (especially the first-time posters....so many figure there's just got to be some secret sauce that has allowed the rest of us to accumulate a stash. Nah. It's earning/saving/investing, over and over again).

My beef is with the lack of knowledge about the True Costs of Paying Interest. Including even (heresy!) mortgages! Oh my gosh. I wish there was more attention paid how paying interests adds to the cost of anything, how being in debt means you are paying two and three and four times as much for everything you buy.....no wonder so many people are broke. Yeah, I know, I've heard all the arguments about borrowing the money and then keeping your investments earning and making it back on the spread----well, that kinda works until you add in taxes on selling appreciated stock and the psychological effect of borrowed money being easier to spend than earned money. Debt. Ugh. The whole idea gives me the willies.
I'd like to live as a poor man with lots of money. ~Pablo Picasso

Lindyhopper
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Re: What financial information do you wish was more commonly known?

Post by Lindyhopper » Wed Jun 12, 2019 6:45 am

To add onto other's comments
- Time spent watching your spending (including taxes) is worth more than time spent on investing

- that you pay for (service) debt with after tax dollars - so to pay off $1 in debt you actually have to earn $1.40
- but cutting your spending goes right to the bottom line.

“Annual income twenty pounds, annual expenditure nineteen six, result happiness. Annual income twenty pounds, annual expenditure twenty pound ought and six, result misery.” - Charles Dickens

Investing is easy - automatically push your savings into VTSAX (or something similar) every month, and then wait.

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Re: What financial information do you wish was more commonly known?

Post by MotoTrojan » Wed Jun 12, 2019 6:51 am

arcticpineapplecorp. wrote:
Tue Jun 11, 2019 9:32 pm
the power of compounding interest. It's been said that those that understand it earn it, but those that do not, pay it.

also how buying stuff doesn't make you happy. it's fleeting. It's the anticipation, not the acquisition that fires up the old neurons in the brain.

everybody's selling something. Be wary of what you see on t.v. Everyone's got an angle.

emergency savings is a necessity. emergencies don't just happen to others.

the difference between a want and a need.
If everybody bought less stuff then you’d earn less compound interest.

saintsfan342000
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Re: What financial information do you wish was more commonly known?

Post by saintsfan342000 » Wed Jun 12, 2019 6:56 am

How easy it is to invest when you invest in index mutual funds. The word "investing" is so heavily connected to "stock picking" that it intimidates a lot of people from every bothering (myself included for much of my early 20s).

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Re: What financial information do you wish was more commonly known?

Post by Fallible » Wed Jun 12, 2019 7:10 am

How to balance saving and spending. Throughout life, it's the balance that is important - and often hardest - to achieve. Save as early and often as you can to take advantage of the magic of compounding, but don't save to the point of denying yourself worthwhile pleasures that can bring lasting happiness. And when it's time to spend on those pleasures, spend carefully and wisely.

Other financial information that should be more available, especially as part of financial literacy classes, is behavioral - how we make decisions, how to understand emotions and biases to achieve discipline when managing our money.
"John Bogle has changed a basic industry in the optimal direction. Of very few can this be said." ~Paul A. Samuelson

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Re: What financial information do you wish was more commonly known?

Post by Quirkz » Wed Jun 12, 2019 11:15 am

Tax brackets, tax credits versus deductions, how itemization works and when it doesn't work, and the ability to weigh tax benefits against the tradeoffs for getting that benefit.

Goal33
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Re: What financial information do you wish was more commonly known?

Post by Goal33 » Wed Jun 12, 2019 11:17 am

That there's no special "bonus tax rate" ...
A man with one watch always knows what time it is; a man with two watches is never sure.

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Re: What financial information do you wish was more commonly known?

Post by mrspock » Wed Jun 12, 2019 11:35 am

When your RSUs vest, there is no magical tax break for holding them a year. The long term capital gains tax rate is completely unrelated to RSUs, and applies to all equities. If your intent is to sell the RSUs, sell them immediately and buy what you really want for your AA (e.g. an index fund).

I work with some brilliant people, but this simple thing they can’t seem to understand. Blows my mind...

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Tycoon
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Re: What financial information do you wish was more commonly known?

Post by Tycoon » Wed Jun 12, 2019 11:55 am

Leverage can get one into big trouble.
“To know what you know and what you do not know, that is true knowledge.” Confucius

CommitmentDevice
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Re: What financial information do you wish was more commonly known?

Post by CommitmentDevice » Wed Jun 12, 2019 12:02 pm

I wish that my parents' generation knew about indexing. My uncle recently told me about a hot individual stock he'd invested in. I cringed inside. He's working class and I bet he'd be materially more financially secure at this point in his life if he'd been indexing.

CommitmentDevice
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Re: What financial information do you wish was more commonly known?

Post by CommitmentDevice » Wed Jun 12, 2019 12:04 pm

I've also really valued the replies others have made on this thread, especially the importance of a high savings rate.

MotoTrojan
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Re: What financial information do you wish was more commonly known?

Post by MotoTrojan » Wed Jun 12, 2019 12:11 pm

Goal33 wrote:
Wed Jun 12, 2019 11:17 am
That there's no special "bonus tax rate" ...
Good one. Similar token to people thinking they will have less take-home pay if they simply bump into a new tax-bracket.

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Re: What financial information do you wish was more commonly known?

Post by MotoTrojan » Wed Jun 12, 2019 12:12 pm

mrspock wrote:
Wed Jun 12, 2019 11:35 am
When your RSUs vest, there is no magical tax break for holding them a year. The long term capital gains tax rate is completely unrelated to RSUs, and applies to all equities. If your intent is to sell the RSUs, sell them immediately and buy what you really want for your AA (e.g. an index fund).

I work with some brilliant people, but this simple thing they can’t seem to understand. Blows my mind...
Another great one. Very funny how people get anchored into holding the stock because they got it in stock form, but would never consider buying it if given a cash bonus.

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Re: What financial information do you wish was more commonly known?

Post by mrspock » Wed Jun 12, 2019 12:57 pm

TheOscarGuy wrote:
Wed Jun 12, 2019 5:55 am
4. boglehead forums :D
Honestly ... this.

I’ll pretty much owe 15 or so years of my retirement to this forum. Before this forum I didn’t know how to invest my high savings rate in a way which allowed me to sleep at night. I also didn’t understand how to figure out how much I needed to retire, when I could retire with a margin of safety, and then connecting all this back to creating an AA which took only as much risk as I actually needed to take.

I would have worked into my 50s, probably blown a ton of money on stock picking, taxes, and stressed a ton more about money.

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Re: What financial information do you wish was more commonly known?

Post by Presintense » Wed Jun 12, 2019 1:01 pm

Chrono Triggered wrote:
Tue Jun 11, 2019 9:09 pm
With personal finance and investing information (index over active, fees matter, etc) becoming more widespread, what are some areas in finance that you wish more people knew about or paid attention to?
Low cost index investing is one of the only ways in life to get what you don't pay for.
Performance = Potential - Distraction

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arcticpineapplecorp.
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Re: What financial information do you wish was more commonly known?

Post by arcticpineapplecorp. » Wed Jun 12, 2019 4:48 pm

MotoTrojan wrote:
Wed Jun 12, 2019 6:51 am
arcticpineapplecorp. wrote:
Tue Jun 11, 2019 9:32 pm
the power of compounding interest. It's been said that those that understand it earn it, but those that do not, pay it.

also how buying stuff doesn't make you happy. it's fleeting. It's the anticipation, not the acquisition that fires up the old neurons in the brain.

everybody's selling something. Be wary of what you see on t.v. Everyone's got an angle.

emergency savings is a necessity. emergencies don't just happen to others.

the difference between a want and a need.
If everybody bought less stuff then you’d earn less compound interest.
you sure about that?

I'm pretty sure they bought less stuff in 1871 than we do today. And yet, somehow the market went up 15.64% in 1871.

and 11.16% in 1872.
16.29% in 1878
49.37% in 1879
26.63% in 1880

and so on:

http://www.moneychimp.com/features/market_cagr.htm
"May you live as long as you want and never want as long as you live" -- Irish Blessing | "Invest we must" -- Jack Bogle

srt7
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Re: What financial information do you wish was more commonly known?

Post by srt7 » Wed Jun 12, 2019 4:56 pm

Investing isn't glamorous. It is like brushing your teeth. It is a necessary investment.
I can't think of anything more luxurious than owning my time. - remomnyc

MotoTrojan
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Re: What financial information do you wish was more commonly known?

Post by MotoTrojan » Wed Jun 12, 2019 5:02 pm

arcticpineapplecorp. wrote:
Wed Jun 12, 2019 4:48 pm
MotoTrojan wrote:
Wed Jun 12, 2019 6:51 am
arcticpineapplecorp. wrote:
Tue Jun 11, 2019 9:32 pm
the power of compounding interest. It's been said that those that understand it earn it, but those that do not, pay it.

also how buying stuff doesn't make you happy. it's fleeting. It's the anticipation, not the acquisition that fires up the old neurons in the brain.

everybody's selling something. Be wary of what you see on t.v. Everyone's got an angle.

emergency savings is a necessity. emergencies don't just happen to others.

the difference between a want and a need.
If everybody bought less stuff then you’d earn less compound interest.
you sure about that?

I'm pretty sure they bought less stuff in 1871 than we do today. And yet, somehow the market went up 15.64% in 1871.

and 11.16% in 1872.
16.29% in 1878
49.37% in 1879
26.63% in 1880

and so on:

http://www.moneychimp.com/features/market_cagr.htm
Did they buy less stuff relative to GDP (how much stuff there was)?

NotWhoYouThink
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Re: What financial information do you wish was more commonly known?

Post by NotWhoYouThink » Wed Jun 12, 2019 5:04 pm

Your federal tax is the combination of what you pay throughout the year and what you pay (or get back) after you file your return. It isn't just the April bill or refund.

Cody6136
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Re: What financial information do you wish was more commonly known?

Post by Cody6136 » Wed Jun 12, 2019 5:07 pm

mortfree wrote:
Tue Jun 11, 2019 9:39 pm
The so-called experts at the financial institutions aren’t helping you with your money.

They are helping themselves to your money.
+1. I like the way you put this!

Gleops2
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Re: What financial information do you wish was more commonly known?

Post by Gleops2 » Wed Jun 12, 2019 5:20 pm

Stop Buying Crap.

And it's ALL crap.


And stop trying to impress strangers and anyone else who will NOT be paying the bill.

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Re: What financial information do you wish was more commonly known?

Post by FoolStreet » Wed Jun 12, 2019 5:28 pm

Chrono Triggered wrote:
Tue Jun 11, 2019 9:09 pm
With personal finance and investing information (index over active, fees matter, etc) becoming more widespread, what are some areas in finance that you wish more people knew about or paid attention to?
So many (smart) people don't understand the basics of calculating their portfolio asset allocation, actual and desired. And then apply the 3-funds across their entire folio as a whole.

They either think of an index fund the same way they think of a hot stock tip. Or they try to apply an allocation to each account in isolation.

The concept of the asset allocation is the foundation.

Luckywon
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Re: What financial information do you wish was more commonly known?

Post by Luckywon » Wed Jun 12, 2019 6:00 pm

Investing has nothing to do with picking stocks or having insights about the future.

esteen
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Re: What financial information do you wish was more commonly known?

Post by esteen » Wed Jun 12, 2019 6:09 pm

willthrill81 wrote:
Tue Jun 11, 2019 10:19 pm
The power of your savings rate. Especially at Americans' typically abysmally low savings rate, increasing it will likely have a bigger impact on your financial future than anything else.
bhsince87 wrote:
Tue Jun 11, 2019 10:18 pm
That amount of saving is more important than where/what/how one invests.
:thumbsup
:thumbsup :thumbsup

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arcticpineapplecorp.
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Re: What financial information do you wish was more commonly known?

Post by arcticpineapplecorp. » Wed Jun 12, 2019 8:11 pm

MotoTrojan wrote:
Wed Jun 12, 2019 5:02 pm
arcticpineapplecorp. wrote:
Wed Jun 12, 2019 4:48 pm
MotoTrojan wrote:
Wed Jun 12, 2019 6:51 am
arcticpineapplecorp. wrote:
Tue Jun 11, 2019 9:32 pm
the power of compounding interest. It's been said that those that understand it earn it, but those that do not, pay it.

also how buying stuff doesn't make you happy. it's fleeting. It's the anticipation, not the acquisition that fires up the old neurons in the brain.

everybody's selling something. Be wary of what you see on t.v. Everyone's got an angle.

emergency savings is a necessity. emergencies don't just happen to others.

the difference between a want and a need.
If everybody bought less stuff then you’d earn less compound interest.
you sure about that?

I'm pretty sure they bought less stuff in 1871 than we do today. And yet, somehow the market went up 15.64% in 1871.

and 11.16% in 1872.
16.29% in 1878
49.37% in 1879
26.63% in 1880

and so on:

http://www.moneychimp.com/features/market_cagr.htm
Did they buy less stuff relative to GDP (how much stuff there was)?
here's what I found to answer your question (back to 1929 only):
As you will see in the following chart, as a percentage of total GDP, consumer spending is the largest component. Over the years, it has fluctuated from a high of 83.0% in 1932 to a low of 49.5% in 1944. At the same time consumer spending was at its lowest, government spending was at its peak due to expenditures related to WWII. In the post WWII era, consumer spending has been greater than 60% of total GDP each year. Specifically, from 1946 to the end of 1980, consumer spending averaged 62.7%. From 1981 to 2011, it rose steadily, averaging 67.4% each year. Since 2003, however, it has averaged 70.1%. Having such a large percentage of the U.S. economy so dependent on consumer spending can be problematic. If consumer spending wanes, the economy will suffer.

Image

source: https://www.forbes.com/sites/mikepatton ... 6a455f7a6d
and yet while consumer spending dropped the most dramatically starting after 1932's high and ending with the low point of consumption 1944 (1933-1944) the stock market from 1933-1944:

Image

source: http://www.moneychimp.com/features/market_cagr.htm

annual return was positive over that time (8.53% per year) during a time of decreasing personal consumption.
"May you live as long as you want and never want as long as you live" -- Irish Blessing | "Invest we must" -- Jack Bogle

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MNGopher
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Re: What financial information do you wish was more commonly known?

Post by MNGopher » Wed Jun 12, 2019 8:39 pm

I wish that my co-workers didn't think that variable annuities were the best way to invest for retirement.

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Re: What financial information do you wish was more commonly known?

Post by TheNightsToCome » Wed Jun 12, 2019 9:11 pm

arcticpineapplecorp. wrote:
Tue Jun 11, 2019 9:32 pm
the power of compounding interest. It's been said that those that understand it earn it, but those that do not, pay it.

also how buying stuff doesn't make you happy. it's fleeting. It's the anticipation, not the acquisition that fires up the old neurons in the brain.

everybody's selling something. Be wary of what you see on t.v. Everyone's got an angle.

emergency savings is a necessity. emergencies don't just happen to others.

the difference between a want and a need.
"also how buying stuff doesn't make you happy. it's fleeting."

This is now the accepted conventional wisdom, but it just isn't true, at least for me.

I've always been a saver (> 60% of gross income last year, and so far this year), but I purchased an expensive sports car as soon as I paid off my student loans. Loved that thing, every time I looked at it and every time I hit the accelerator (just not when it snowed :D ). I also spent a lot of money on clothes in those days, including custom clothes -- really enjoyed the clothes back then.

I don't spend much on cars or clothes these days because I'm no longer very interested in them. However, I spent plenty of money renovating my last house and the finished product gave me a lot of pleasure every day.

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Re: What financial information do you wish was more commonly known?

Post by Ari » Thu Jun 13, 2019 10:48 am

That good companies are not necessarily good investments.
That fast-growing countries are not necessarily fast-growing investments.

Aslo, over here (Sweden), I wish more people knew that you can actually invest your money in the stock market and they will grow. And you can actually then withdraw that money and live off it. I was 30 years old before I learned that. I didn't know there was an alternative to just retiring whenever the government says you can retire! The concept of "early retirement" was not something I had come across. I'd never heard of anyone who had done it. And when I have these discussions with people, their assumption is often that in order to be able to live off your money, you need enough money to cover all of your future expenses with 0% nominal growth. A colleague of mine though that the Swedish stock market (one of the best performing in the world) had actually lost money since the 80's!
All in, all the time.

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Re: What financial information do you wish was more commonly known?

Post by arcticpineapplecorp. » Thu Jun 13, 2019 4:58 pm

MNGopher wrote:
Wed Jun 12, 2019 8:39 pm
I wish that my co-workers didn't think that variable annuities were the best way to invest for retirement.
even better...all the people who believe you can get the return of the stock market with none of the risk (equity-indexed annuities).
"May you live as long as you want and never want as long as you live" -- Irish Blessing | "Invest we must" -- Jack Bogle

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Re: What financial information do you wish was more commonly known?

Post by confusedinvestor » Fri Jun 14, 2019 1:36 am

:sharebeer

I say - You have 2 friends in Life who will always pay you - Your Time and SnP500 dividends
FrugalInvestor wrote:
Tue Jun 11, 2019 10:26 pm
The importance of starting to save and invest early.

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Re: What financial information do you wish was more commonly known?

Post by unclescrooge » Fri Jun 14, 2019 3:32 am

arcticpineapplecorp. wrote:
Thu Jun 13, 2019 4:58 pm
MNGopher wrote:
Wed Jun 12, 2019 8:39 pm
I wish that my co-workers didn't think that variable annuities were the best way to invest for retirement.
even better...all the people who believe you can get the return of the stock market with none of the risk (equity-indexed annuities).
I actually calculated the past 10 years for a wife's colleague. Her CPA/advisor put her IRA money in it. Based on the cap and his 1% fee it returned less than the aggregate bond index fund during that time.
He also made a 7% commission on it, and is now trying to get her to such into another fund. :annoyed
I showed her the math, she was upset, but I think she's going to follow his advice anyway.

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Re: What financial information do you wish was more commonly known?

Post by Wricha » Fri Jun 14, 2019 3:36 am

Even on this forum. The importance/value of cash flow vs net worth.

Swimmer
Posts: 283
Joined: Tue Dec 29, 2015 4:24 pm

Re: What financial information do you wish was more commonly known?

Post by Swimmer » Fri Jun 14, 2019 5:39 am

Great thread! So much good advice.

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