Assuming I have a time horizon >10 years.
Edit: thanks for all the replies!!
Yes. So much yes.
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.
The 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.
https://en.wikipedia.org/wiki/Environmental,_social,_and_governance
Other terms in their fund names: fossil-free, climate, forest, sustainable agriculture.
Their claims about them:
in Finnish:
https://www.s-pankki.fi/fi/private-banking-ja-varainhoito/vastuullisuus-ja-vaikuttavuus/vastuullisuus-sijoittamisessa/
in Swedish:
https://www.s-pankki.fi/sv/private-banking-och-kapitalforvaltning/ansvarsfullhet-och-paverkan/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.
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.
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 https://en.wikipedia.org/wiki/Ethics_in_mathematics showing that even in the most abstract field, there are ALSO ethical requirements. Nobody can avoid that.
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
7-8% 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).
See https://www.investor.gov/financial-tools-calculators/calculators/compound-interest-calculator
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.
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.
(I’m not near a desktop, so can’t really copy and paste the info here with functional hyperlinks.)
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?
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.
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 much tougher decision.
I blew a lot of my money when i was younger, something I don’t regret spending lots of money on is decent tools, they can last a lifetime if taken care of and can save you money in the long run if you learn to do your own work. Sometimes stuff now is a better investment but it can be super specific depending on your situation.
I absolutely agree. I used to have no choice but to buy budget and have to deal with it when stuff inevitably failed and broke. But now I’m much more financially stable, I made a commitment to buy quality when I can, the old “buy once, cry once” mantra.
With clothes I’m in the best of both worlds. I’m a proper hawk for charity shops and if you’re patient you can get both budget and quality. I bought a £100 shirt for £3 the other day and it looked like it had never even been worn, there’s no reason it won’t last me decades if I look after it. Good riddance to TK MAXX and fast fashion. Charity shops are especially good for suits and smart shirts as a lot of men only get them out for interviews and weddings, meaning they are usually in great condition and can be bought at a tiny fraction of the original price, you just have to be patient waiting for ones that are the correct size for you.
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.
