berryjamIs it worth investing if I can only contribute $50 a month?
It’s worth saving - investing (I assume you mean in the stock market/index/mutual fund) probably wouldn’t yield very significant growth but it is worth saving what you can.
Investing accidently helped me save. If I have money in an account, and I need to use it, I will, but by buying stocks and bitcoins, I don’t have that money, I have things that will increase in value that I can sell for money. And there have been a few desperate times that I had to do that, but my brain is far more unlikely to take a hypothetical future loss, than spend all my money today.
That’s what bitcoin really is: a commodity, not a currency.
KingJalopy Truth. Lots of money to be made in crypto but it’s basically gambling outside of eth and BTC. I make decent returns playing with memecoins but you have to watch it for awhile and know when to sell/buy etc… for example, now it’s a good time to throw money into Shiba Inu coin. It’s down a lot, which is normal, but it’ll go back to higher numbers soon, as it always does. Once you get a feel for what a normal low and high are you can just set auto buy/sell at those points and make decent profits.
Of course, when it comes to crypto, Bitcoin and eth are more like commodities and are generally safe. Shit coins are high risk but but $50 in a shit coin could be $150 overnight if you know what to look for.
I am gonna take that as financial advice and dump my life savings in shiba inu, thanks.
Awesome. I’ll take the the standard 10% unless/until, you lose your ass. Then I’ll just pretend I don’t know you.
I remember back s decade ago and using it to buy a coffee. It was slow back then. Can’t think of the time it takes now.
Why would the absolute amount of money matter for investing vs. saving cash? Assuming he finds a broker for which absolute transaction fees are negligible, the only important factors should be time window and risk tolerance, both of which are independent of the absolute saving rate.
OrbituaryYes. I started with 50/month using Autopilot to get in on the Pelosi investment portfolio. I am up 18% for the year.
S&P is like 23% this year, chasing Pelosi has apparently underperformed.
It’s honestly probably better putting that amount of money into trying to get a better job over that time period via education, or taking time off to apply for new positions, or something similar.
$6000 total investment over 10 years even with decent interest on top would be made up in less than 2 years with a $5k raise.
I just put extra money in a 5% high yield savings account. It’s not exciting, but there’s no risk and it will pay off over time
There’s also hardly any reward (comparatively speaking). Yields are crazy high right now on savings accounts, but they’re going to continue to drop, vs investing in the stock market (over the long term) is much more likely to maintain a much higher rate of return. Even at 5%, you’re really only getting about 2% growth since inflation is stuck at 3% right now. That compares to a long term average in the stock market of 7-9% after inflation.
Not to say that OP should do that, necessarily. Especially if they haven’t built their emergency fund which is far more important than investing, until you have a safe amount.
You’re probably right, as I’m not an expert, so thanks for your input. I am still worried of how the stock market will change with the upcoming trainwreck
You gotta remember the time horizon, even with historically bad presidents in office, if you smooth the line of the stock market returns over 10, 20, or 30 years, it ends up looking like a really, really good as an investment opportunity. Especially if you’re into dollar cost averaging.
Basically, if Trump tanks the stock market by going way overboard with things like tariffs, that would (at least looking at historical trends, I’m no financial expert or anything) make for a killer time to buy into the stock market because you’re getting stocks at a “discount.” Then when a different president / legislature comes into office, and if they turn around the economy, your investment would rise faster than otherwise expected.
Again, you gotta do what’s right for you, this isn’t me saying you should absolutely invest or anything, especially if your basic needs aren’t met or your emergency savings aren’t at a good enough level to last 6–12 months unemployed. This is just how it has been for the last ~100 years.
Yes, saving is like a muscle you need to do it to get better with it. It’s far easier to turn 50/months into 200/month as your income grows, than starting at 200/month.
Yeah, OP should find some free ETF saving plan, invest 50 a month and gain some experience in investing. One has to start somewhere.
As much as I hate to send you to Reddit, the r/personalfinance flowchart is hard to beat for most people. I’d recommend you start there to make sure you’re not overlooking something like your emergency fund.
Link is broken for me over on infosec.pub.
Altima NEOLink is broken for me when I try opening it in a new tab. Something is up with imgur.
Is there a reason to focus on 401k (beyond the employer match) before HSA? Isn’t HSA more tax savings advantageous, even if just limited to health care expenses?
Can’t retire on it I guess
Not really if you exclude the employer match from consideration.
I’m not certain why they have HSA after 401k and IRA, but some possible things I can think of:
- HSAs can be harder to take advantage of of the triple tax benefit if you’re retiring early (that is, still younger and healthier)
- HSAs probably have worse investment options than an IRA
- Allowing the user to optimize their Roth vs Traditional mix
Again, I don’t really know because you’re right about the HSA triple tax advantage making it seem better than IRA or 401k, but I’m sure there was a reason given if you care to trawl the subreddit.
hard to beat for most people.
*Utterly irrelevant for most people
Sorted that for you. What the hell is 401k, Roth, medical debt?
Financial advice will always be intrinsically linked to fiscal advice, and that will vary with jurisdiction. Where I live we have no 401k or medical debt, but we have other debt and investment instruments with preferential tax treatment.
The main line of the flow chart is sound.
Hey… hey there, I’d let you know that there are 340M Americans and 8.2B people in the World so… that’s like 4% OK… it’s… definitely “most people” because we are number 1 OK! USA, USA… /s
This is awesome! Would love to see a version for EU too!
For the most part you can follow it. Pay down debts, save what you can, make a budget but it gets wonky when you hit 401K, IRA and healthcare
Problem is each country in the EU is different. What works for Germany may not work for the Netherlands or Denmark.
As an Aussie I substituted it’s and 401K with our pension equivalent called Superannuation. The healthcare is different in AU. Here in Europe it isn’t too different to AU, replace 401K and IRA are private pension or one offered through an employer.
I looked around a bit, and while I couldn’t find a drawn flowchart for the EU, r/EUpersonalfinance has a page on their wiki inspired by(links to it too) the US flowchart and accompanying text. I hate to plug reddit as well, but here is the link.
spoilerDo you have emergency money?
First start emergency fund, then take care of debt. Then build a savings for emergency fund, then invest.
Emergency fund money should be in a HYSA at least if not index funds.
Terrible advice.
Emergency money literally must be liquid or it is not, by definition, emergency money.
HYSA is liquid. Index is one step away from liquid
Not at minimum keeping it in a HYSA is losing 5% per year
The issue with keeping your emergency fund in an index fund is that the odds of your own personal crisis coinciding with a more widespread crisis is high.
I got furloughed in April 2020. Had my emergency fund been in index funds, I would have had to realize all those market losses in order to use my emergency fund, which would have meant my emergency fund would have been a fraction of what it actually was since it was in a savings account.
For anyone with stable income, only debt who’s interest rate is at or above the potential interest you would earn investments should be paid down first. Any debt at a rate lower than you stand to earn, should be paid over time. Any debt lower than the rate of inflation should be paid as slow as the terms allow without penalty. So my order of priority is: high interest debt>emergency fund>tax deferred investing>ira and investing>low interest debt>even more cash holding>debt below inflation.
Not everyone has stable income. And for them, attacking debt isn’t always possible, especially after they go to get their car inspected and have a $1000 bill to settle in order to get to work for their unstable income. That’s starting your emergency fund goes first.
You need your initial emergency fund to reasonably cover “a bump in the road”. You then get stable, attack debt, and build emergency fund to be 3-6months expenditures, in case of a serious emergency.
Only then do we begin gambling in the investment markets.
High interest debt is an emergency. Anything in the emergency category gets paid first. High interest debt is a trap, you can’t hope to meet any other goal in life if you don’t take care of that first.
That’s 600/yr and a long enough horizon that most diverse portfolios are likely to be net positive (I’m seeing about 5,000 gained with 8% growth in a basic savings calculator)
I’d spend those 10 years trying to free up cash flow but time’s a powerful weapon regardless
jagged_circle8%? Thats 0 gains with inflation, right?
Preflight_Tomato7-8% is the standard value used after taking inflation into account. It’s really 10%, but inflation eats 3% yearly, on average. Using the metric this way also conveniently means that the value you calculate for the end of compounding (in 35 years) is interpretable in todays dollars.
So 7% interest on 50$ monthly for 35 years means total principal of 21k$ and total of 83k$ (todays value).
Yes. Investing is always worth it unless you have credit card debit.
Set it up to automatically invest into the lowest fee index fund your broker offers.
TehdastehdasThe lowest fee ETHICAL index fund. Careless investing is how we got evil corporations.
Unfortunately, there aren’t many ethics in the world when it comes to money.
Several funds in my bank have ESG in the name. en.wikipedia.org/…/Environmental,_social,_and_gov…
Other terms in their fund names: fossil-free, climate, forest, sustainable agriculture.
Their claims about them:
(in Finnish) www.s-pankki.fi/…/vastuullisuus-sijoittamisessa/
(in Swedish) www.s-pankki.fi/sv/…/ansvarsfulla-investeringar/
For machine translation, probably better use Swedish as the source because it shares the Indo-European language family with many of you readers’ target languages, and has more speakers so maybe better translation engine training too.
I wasn’t trying to say that ethical funds don’t exist, I’m well aware of them. I was saying that when money is on the line, loyalty and ethics often end up second place.
I’m in the sidelines and I didn’t know they existed and wanted to know more so I’m glad they posted it anyway
These are pretty cool and I didn’t know about them! I’m pretty me to investing, do you just look up ESGs or something?
ESG in the name
Place to start but once you dig into it, it’s not great either. A lot of the evaluations basically boil down to negative externalities, namely making sure that somehow whatever is problematic is NOT accounted for. That’s how plenty of ESGs end up with … other banks as stocks. They “abstracted themselves away” from problems whereas in reality they are funding the problems.
The post didn’t ask for ethical requirements to be included in the advice.
Appending additional personal requirements turns the conversation towards one’s personal soapbox.
Not funding companies that destroy the planet and kill people is basic decency, not personal taste.
The post didn’t ask for ethical requirements to be included in the advice.
Right… everything does have ethical requirements though. As soon as a member of a society does make something that impacts themselves and others it has ethical requirements. Some examples :
- voting (obviously)
- buying a Xmas (avoiding slave labor)
- selecting toilet paper (limiting pollution)
- buying a coffee (fair trade)
- paying an electricity bill (source of the energy)
- posting on Lemmy (avoiding centralization)
Everything, literally everything we do, has ethical requirements. We don’t have to say it because it’s implied.
Now… if you are genuinely curious about the topic I can only recommend en.wikipedia.org/wiki/Ethics_in_mathematics showing that even in the most abstract field, there are ALSO ethical requirements. Nobody can avoid that.
Can you recommend a single ethical index fund? I’ve been searching for the past decade
Yes. If you can afford it, dumping that money into an ETF like VT, VTI, or VOO every month for the next 10 years is very likely to result in you turning a profit. Start with a Roth IRA and don’t bother with a standard brokerage account until you’re able to max out the contribution limit. If you want to do anything more complicated than buy big low cost ETFs study up first and go slow.
Yes, in 35 years with compound interest that would end up between 35-85k ;) sounds great to me
$50 per month for thirty five years saved with no interest at all is $21k, so I can absolutely understand the point of view that it’s not worth it if you’re currently struggling to scrape by to wait 35 years for what might be just an extra $14k
If that $50 has literally no other use to you, then great, if that $50 can provide fair value for you now, it’s a tougher decision.
Taking a step further, if the last thirty five years are any indication, that future $21k would be worth less than today’s $10k.
Besides, to overcome inflation, you’d need to average double digit returns on your investment every year for half a lifetime.
Like you say, it’s a tough decision if there’s anything that can provide you value now. Not to argue against savings, but expecting it to grow exponentially with no effort is folly.
To overcome inflation you need returns higher than inflation. That’s it. Historically the markets outperform inflation. You’re saying things out of fear and not reality.