Has anyone mentioned the other debt traps on national level?
The federal reserve?
The wars?
Continual increase of debt ceiling?
The federal reserve?
The wars?
Continual increase of debt ceiling?
Basic financial literacy 101 - Or things I wish I knew 15 years ago.
- Thread starter mindlessobserver
- Start date
Ugandan discussions
kiwifarms.net
I don't think they're particularly features of basic financial literacy 101? If you're in a position to be able to make financial decisions that take into account macroeconomic factors, you probably need to be taking a more advanced class.
It's the advanced clas where you learn all the nonsense about why you need debt.
FlappyBat
kiwifarms.net
I haven't seen 401k's mentioned in this thread yet. If your company has one and you plan on living to the point where you retire, you should probably take advantage of that. Especially if they match a certain percent of your contribution.
What a lot of people might not know about are mega back door Roth accounts. In some circumstances you can take your after tax 401k (separate from your traditional or Roth 401k) and convert it into an additional Roth 401k. This allows you to save an additional 25k per year in a Roth account over what you otherwise could.
www.nerdwallet.com
What a lot of people might not know about are mega back door Roth accounts. In some circumstances you can take your after tax 401k (separate from your traditional or Roth 401k) and convert it into an additional Roth 401k. This allows you to save an additional 25k per year in a Roth account over what you otherwise could.
Mega Backdoor Roths: How They Work in 2021 - NerdWallet
A mega backdoor Roth lets people save as much as $38,500 in a Roth IRA or Roth 401(k) in 2021. But not all 401(k) plans allow them.
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Ugandan discussions
kiwifarms.net
In summary for the uninitiated (given this is a basic thread)... As soon as you can, invest as much money as you can reasonably afford in a pension plan.I haven't seen 401k's mentioned in this thread yet. If your company has one and you plan on living to the point where you retire, you should probably take advantage of that. Especially if they match a certain percent of your contribution.
What a lot of people might not know about are mega back door Roth accounts. In some circumstances you can take your after tax 401k (separate from your traditional or Roth 401k) and convert it into an additional Roth 401k. This allows you to save an additional 25k per year in a Roth account over what you otherwise could.
Mega Backdoor Roths: How They Work in 2021 - NerdWallet
A mega backdoor Roth lets people save as much as $38,500 in a Roth IRA or Roth 401(k) in 2021. But not all 401(k) plans allow them.
If you're employed, in many places your employer provides a plan and will contribute a proportion of salary (in the UK, the minimum is 7%: 4% from you, and 3% from your employer, though many do more). Money invested in a pension is tax efficient, because it isn't subject to either income tax when you receive it or capital gains tax when you sell your investments. More to the point, the earlier you start the more you build up; as a broad rule of thumb, by the time you hit retirement age, the money you invested in a pension at 30 will worth twice as much as that invested at 40, and so on.
Again in a UK context, there are essentially three types of pension. The first of these, typically in the public sector, are defined benefit schemes where the pension pays a proportion of your final salary (uprated to take account of inflation). If you have the opportunity to join s scheme of this nature, do it now! These are the gold standard and will normally provide the highest retirement income, though they will cost more in contributions.
The second type of employer pension is known as a defined contribution scheme. In this case, the pot of money built up through your contributions and those of your employer is given to you at retirement to use as appropriate; normally, used to buy an annuity (an investment that pays you a regular amount until you die) but a few years ago the government relaxed the rules and bow it can be drawn down in other ways.
The third type of pension is a private pension. Basically a long term investment plan these typically benefit those who are self employed or who want to make additional retirement savings. There are various structures for these through a range of providers, and they are heavily regulated.
Many people make other investments with the intention of providing a cash sum or generating income (other savings vehicles, property, etc). However, these can be a lot more risky as you're essentially on your own and at the mercy of the market.
FlappyBat
kiwifarms.net
Following up with a more US perspective. Most things in the US called pensions are defined benefit plans. Almost no company offers them and you usually need to be a lifer at the company to get them. Think of like collecting retirement as a cop or the military.
For the rest of the post I'll focus on US tax advantaged retirement saving accounts. Accounts typically fall into either being an Individual Retirement Accounts (IRA's) or 401k (government jobs have something similar with a different name). Additionally both of these types of accounts can be either traditional or Roth, this distinction deals with how the money is taxed. Both can have penalties if you withdraw your money early (before you're 59.5 years old). I mention capital gains at a few points below. All this means is the growth your account has due to the market. You put in $100 one year, the stock you own goes up and your account is worth $110 dollars the next year, you've made $10 in capital gains.
IRA vs. 401k
The most easily available form of retirement saving accounts are IRA's. These are your accounts, not linked to your job. They're the most flexible (no one telling you what company you have to use) but have lower limits than 401k's. At most you can contribute $6k per year. However, if you or your spouse have a job with a 401k this amount goes down the more you make. If you do not have a job that offers a 401k, you should use this.
401k's are linked to your job. If you change jobs you can keep it in its current 401k, roll over the money into an IRA, or roll it over into your new company's 401k. 401k's have a higher contribution limit ($19,500 tax advantaged) and have greater protection than IRA's during bankruptcy (I've been told this but haven't confirmed it. Hopefully no one needs to worry about it). You will need to use the firm your company uses for 401k's. This can be good or bad depending on the company. If the company cheaps out, expect high fees.
If your company offers to match (partially or fully) your 401k contributions, most of these considerations are secondary. Get as much of a match from your company as you can. Many companies match 50% of your contribution and you are not getting an instant guaranteed 50% return on investment anywhere else.
Roth vs. Traditional
This distinction deals with how the money you put into your IRA or 401k is taxed. In Roth accounts, the money you put in is taxed as income right now. Traditional accounts are taxed as income when you take the money out. Post-income tax money goes into Roth. Pre-income tax money goes into traditional.
For Roth, your capital gains are not taxed at all. All money you take out when you're retired is tax free. For traditional, you can get capital gains on the money you would have paid in tax. But all the money you take out when you retire is taxed as income (Note, not capital gains tax).
Additional note in a Roth 401k, money your company puts in acts like a traditional 401k account (taxed coming out instead of going in).
Which you should pick is a question for someone not on KiwiFarms, but either is better than no savings at all. As a general rule, think of your tax rate now compared to what you expect it to be when you retire (if it's lower now lean towards Roth) and consider the capital gains you will get from the money you will pay in tax (a traditional account) verse not paying tax on capital gains (a Roth account).
I will say, the government has limits on how much you can contribute to a Roth IRAs based on your income (the more you make the less you can contribute) where it doesn't for traditional accounts. And I've seen numerous schemes to convert more money into Roth accounts (like the "mega back door" I mentioned in the previous post) and zero on how to convert money into tradition accounts (there might just not be any). Make of these two facts what you will.
gamer2014
kiwifarms.net
Also with contactless cards, its best to open up a "back up" account with a digital bank (monzo,n26,starling) and transfer sone money from your checking/current account to the backup account debit card and use that card instead of your main bank account (which has your salary paid into). Just so if your backup card get lost, stolen not as much money gets lost, as contactless means you dont need a pin to make purchases, so people could rack up purchases before the card gets cancelled.
Ugandan discussions
kiwifarms.net
Not sure about the law in the US, but in the UK there's significant safeguards in place to prevent this:
1) Provided you report a card lost/stolen as soon as reasonably practicable or as soon as you become aware (ie you're not negligent) your bank is liable for all losses arising as a result.
2) There's a limit on the number and value of transactions which can be made before a PIN is required (it was 5x or £137/approx $190 pre-pandemic).
Spasticus Autisticus
kiwifarms.net
That's true in the US as well (except we don't use PINs here except at ATMs), but the problem with having a debit card stolen is that your account is still missing that money until you get reimbursed. I've had this happen twice: once had a check stolen, another time the bank fucked up and used my account for someone else's mortgage, each time it took a couple of days to get reimbursed.
This is one of the reasons I always use credit cards when I can. Any time a charge is made to my cards, I get a text. So if I see a fraudulent charge, I just call up my CC company and report it and it's off my statement before my next bill. I've already caught one fraudulent charge that way.
The vast majority of people end up moving before or right after retirement though, and even with the equity garnered, it's almost never enough to buy a new place outright and they're stuck with a mortgage once again.
But I still agree with you that by 35 you shouldn't be rented (circumstance allowing).
Financial Literacy 102: What is money?
To be competent with money, you have to know what it is and why we use it. Currency, no matter if its fiat or backed by gold/oil/land/labor,.... has three major aspects.
Currency is a medium of exchange:
This is the most intuitive one. You use money to exchange it for goods. It is better than bartering because instead of hoping that the smith will accept two goats for a new plow and that he doesn't want a cow, you can use currency as universal method of exchange (as long as it is legal tender).
Currency is a medium of information:
Currency is effective in giving you a (relatively good) understanding of the nature of something. If there are two cars, you know nothing about their model/make/state and you only know the price; then you can assume that a more expensive car is better than the less expensive one. There is a difference between 1$ cheese and 10$ cheese that you understand by just knowing the prices. Currency tells you something about a good. Of course, this is not always the case in our modern society with marketing tricks etc.
Currency is a medium of labor:
Imagine being a farmer with a massive grain farm. You harvest tons of wheat every year. Nice bounty, very prosperous. You can trade the grain (which you worked hard for) in a barter economy for everything that you need and still have left over. So much that you don't know what to do with it. So you save it. But you can't keep it saved up for years: wheat will eventually start to mold and rot and then your hard labor (which was transformed into wheat through the harvest) simply disappears. Currency doesn't rot, so you can keep it for a long, long time. Of course, this is not the case anymore with inflation, but generally, currency is more stable than grain or any other good.
To be competent with money, you have to know what it is and why we use it. Currency, no matter if its fiat or backed by gold/oil/land/labor,.... has three major aspects.
Currency is a medium of exchange:
This is the most intuitive one. You use money to exchange it for goods. It is better than bartering because instead of hoping that the smith will accept two goats for a new plow and that he doesn't want a cow, you can use currency as universal method of exchange (as long as it is legal tender).
Currency is a medium of information:
Currency is effective in giving you a (relatively good) understanding of the nature of something. If there are two cars, you know nothing about their model/make/state and you only know the price; then you can assume that a more expensive car is better than the less expensive one. There is a difference between 1$ cheese and 10$ cheese that you understand by just knowing the prices. Currency tells you something about a good. Of course, this is not always the case in our modern society with marketing tricks etc.
Currency is a medium of labor:
Imagine being a farmer with a massive grain farm. You harvest tons of wheat every year. Nice bounty, very prosperous. You can trade the grain (which you worked hard for) in a barter economy for everything that you need and still have left over. So much that you don't know what to do with it. So you save it. But you can't keep it saved up for years: wheat will eventually start to mold and rot and then your hard labor (which was transformed into wheat through the harvest) simply disappears. Currency doesn't rot, so you can keep it for a long, long time. Of course, this is not the case anymore with inflation, but generally, currency is more stable than grain or any other good.
David Brown
kiwifarms.net
Early Retirement Extreme by Fisker is a very based book about learning how to live frugally and rethink your life. It's not exactly a self-help, autobiographical feel good bullshit book, but more like an abstract manual on how to think about utility, value, and your lifestyle. The author lives on about $8000 a year which he gets from dividend checks and other investments. Obviously this took a pretty radical change in his lifestyle, but he explains how if you really don't want to work it's possible to get by. He did a great interview with a nerd on youtube here: https://www.youtube.com/watch?v=a0CG8PP30pw
He also has a wiki. https://wiki.earlyretirementextreme.com/
I suggest you take Fisker's advice on saving money and don't buy the book, but rather acquire a copy of it from b-ok dot cc. I'm sure posters on this website are savvy enough to find means of getting a digital copy for free. Remember, intellectual property is not ontologically real and so cannot ever have any moral content.
He also has a wiki. https://wiki.earlyretirementextreme.com/
I suggest you take Fisker's advice on saving money and don't buy the book, but rather acquire a copy of it from b-ok dot cc. I'm sure posters on this website are savvy enough to find means of getting a digital copy for free. Remember, intellectual property is not ontologically real and so cannot ever have any moral content.
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