Money Advice For Younger Guys

MichaelWitcoff

Hummingbird
Orthodox
Lots of people here are asking about money and what to do with it, so I thought I’d weigh in as a person who, while far from materially wealthy, has made the transition from wildly irresponsible to financially responsible and stable. I am not a financial advisor but this advice has served me well since beginning to use it.

My approach to money is extremely conservative and low-risk; I try to follow what Warren Buffet calls Rule #1, which is “don’t lose money.” The upside to this approach is that I do not make risky moves or investments which could wipe me out overnight. The downside is that I end up with huge investment returns less often than someone who takes those risks, though if you invest intelligently those big wins still do happen. I believe that my approach, for the average person, is far superior to the gambling/speculation approach.

My first piece of advice is to not invest a single penny in any asset whatsoever - stocks, bonds, real estate, precious metals, etc - until you have a bare minimum of 6 months of cash saved in an account that you are never going to touch unless you absolutely need it. Count up your monthly expenses, from rent to food to entertainment to charity and all other bills, and then multiply that number by 6. Until that number of dollars is saved in an account, don’t invest. The reason is that half of all Americans will be bankrupted by ONE trip to the Emergency Room, and you don’t want to be one of those people because you gambled your life savings on some tip from Wall Street Bets. This is less exciting than the roller coaster of gambling with stocks, but a much more responsible approach overall. Even if this takes you a couple of years, do it. Save for 6 months’ worth of expenses.

Once that’s done, start learning about investing if you haven’t been reading about it during the 6 months’ savings phase. Choose a few assets to start with, such as silver / real estate / stocks, and try to split your investment money equally between them. Never put a huge percentage of your portfolio into any one asset class, because if/when that one becomes devalued compared to the others, you’re going to have a bad time. All asset classes rise and fall in value compared to the others, and the point of diversifying in this way is so that your money stays more or less the same when one class falls and another rises to take its place.

For stocks, diversifying is a question of personal taste. Many people want a hundred or more stocks. Warren Buffett and his partner, Charlie Munger, hate diversification and became billionaires from a small handful of stocks instead. The Motley Fool recommends holding about 15 at a time. Personally I hold fewer than 10 and my returns thus far have beaten the market, sometimes significantly, without a single index or mutual fund. Index funds are collections of stocks that you can buy as one object, which I avoid because you can’t beat the market by buying the market and, more importantly, I don’t want to invest in companies that promote things I’m against (which most of the top companies do). I am still beating the market without touching the Fortune 500, so you don’t actually need stocks like Amazon or Apple to get great returns.

That said, even with only say 5 stocks, it’s wise to diversify between INDUSTRIES. You don’t want 5 stocks all in the same industry, such as food or oil production for example, for the same reason you don’t want all your money in one asset class in general. When it tanks, you get wiped out. Diversification between industries is more important than diversification in terms of sheer number of stocks held.

Never invest more than you can afford to lose - hence the important of 6 months’ savings no matter what - because you can always get wiped out completely. There is always some risk, though that is largely controlled by investing wisely.

I recommend everything written by Peter Lynch and Phil Fisher, as well as every video made by Warren Buffett and Charlie Munger, if you want this hyper-conservative, “don’t lose money” style of investing. Technically what I do is called value investing, an entire field unto itself. It is slow and boring but it works and you minimize risk significantly that way.

This is what works for me and I hope some of you younger guys found something here that helps you out as well. God bless and happy Friday.
 

Pointy Elbows

Woodpecker
Orthodox
I second all of Michael Witcoff's advice to young men. First, control your expenses. I have customers that drive 75k trucks and can't pay 2k on their account. Second, educate yourself - for life. Third, know the difference between a risk (if you lose all in that one investment, will you still be able to find a way to make ends meet) and a gamble (will the loss of any one investment/group of investments cause your financial ruin?).

With much help from above, I've done well in life. My best trade has been investing in myself. Read profusely about different topics. If you can, get out of corporate/gov America - unless you have a specific leg up that allows you to skyrocket. If you can, start your own business and re-invest profits profusely in your concern. Within your own business, you will learn to spot targets of opportunity. If it is really good, use a shovel and not a teaspoon. Tax advantages of small biz ownership are valuable.

If something is interesting to you, read about it and find ways to enter that market. I've made (and lost) money on real estate, business, stocks, oil, and precious metals. If you aren't in the game, you have no chance of winning. So get your savings right, then get into the game of investing, no matter how small you have to enter. You'll lose some, but you will gain discipline and knowledge.

In Real Estate, you make money when you buy the property. Meaning: you must buy at a low cost/sf if you expect to return well at the sale. Don't "fall in love" with a property - it is just dirt and structure - it will only go up as the market rises and you spend to improve it. If interest rates ever adjust up (maybe they never will), then expect to see some price drops in RE.

In Stocks, I think most publicly traded companies are over-priced by the time they get through IPO. You might find some outsize gains in higher risk things like precious metal miners, but you may lose it all. If you're good at stocks, more power to you. I've not been very good, other than some index funds that just rode the wave.

I'm a compulsive saver, so precious metals appeal to me. They've been under-valued, imho, for a while. It may change, it might not. I just like that it is outside the system and has no counter-party risk. Similar thoughts on bitcoin, but I do have concern about the government's ability to freeze/confiscate it.

Pro Tip: your future spouse will effect your ability to achieve financial success. Watch her spending habits closely while dating.
 

Knight.of.Logos

Woodpecker
Orthodox Catechumen
That's helpful advice, especially the part about stocks. I've invested into Bitcoin and cryptocurrencies, and just started getting into silver, and once I reach my goals for silver I would like to start investing in the stock market. One of the things that has held me back was not knowing how many stocks to hold, and this helped me realize that 5-10 is a good starting place. If you have any recommendations for books on investing in stocks, I am interested.
 

C-Note

Hummingbird
Gold Member
If you work for a company that offers a 401(k) type plan, make sure you contribute enough to at least get 100% of the matching contributions your organization offers. If you can afford it, contribute the maximum allowed because it reduces your taxable income. 401(k) contributions are considered to be taken out of your salary before your salary is paid to you. Therefore, they lower your salary for tax assessment purposes.

Then, if you're in the US, open a Roth IRA with a company like Vanguard or your bank. Try to use the money in your IRA to trade in stocks. That way, when you sell stocks or receive dividends on the stocks, it isn't taxable. Also, when you start cashing out your Roth IRA in retirement, the distributions still aren't taxable.
 

nicolahcm

Pigeon
I agree that investing is a good thing, though I wouldn't suggest to spend too much energy into this.
Rather invest more time in learning useful skills that may help somehow other people, for example generating work for others, and at the same time generates a revenue.

Everyone just looking at the stock market and hoping to get rich while doing nothing to contribute somehow to the society, given how broken the system is. Sitting and hoping to get rich while doing nothing is not what God deems of us. See how many useless jobs already exist that do not generate any value, while only taking ( politicians, bureucrats, etc.. etc..).

I also do invest, but don't get limited only to this. With this approach you're more likely to succeed in investing because you see things more clearly without biases from emotions, being a secondary thing.
 

aynrus

Pelican
For the stock market enthusiast: https://jlcollinsnh.com/stock-series/

Just a personal note on 401ks...what the government giveth the government can take away. The better approach to reducing taxes on your stock portfolio in my view would be to found a trust to hold them. That way the stocks aren't a part of "your" normal income.
What type of trust are you talking about? Revocable or non-revocable personal, or business trust (which is a company, really)? Domiciled in which state (trust laws differ from state to state)? My understanding is that moving things out of realm of normal income by moving to trust isn't that easy, as IRS ain't fools either.
 
Depends on the state (I seem to remember that Nevada offered the best but I've heard good things about Utah's UDAPT trusts), I would go for non-revocable though. Even with putting the money in the trust you aren't completely avoiding taxes I admit. If I 'member rightly how it works is that basically let's say you own a few index fund shares in a trust that produce a dividend of a 1000 bucks a year.

So long as the trust assets stay within the trust (aka not distributed to you) then the Trust itself is essentially a legal entity whose taxes are separate from yours. What this means is the trust would only be subject to the lower dividend income tax brackets (which range from 15-20%) assuming your going for buy and hold.

That means no SS, no Medicare or any other auxiliary taxes. Just 15-20 tax on the profits generated from the stocks that applies only to the trust. It shouldn't apply to you in other words unless you begin taking stuff from the trust (the income taken from the trust would still only be taxed based on the 15-20% investment income tax brackets).

Note two things, this is off the top of my head and I may be remembering things wrongly. Second I ain't a lawyer, remember CYA!
 

Coja Petrus Uscan

Crow
Orthodox Inquirer
Gold Member
Crash-course in economics, as relating to the stock market.

Economics covers how things relate to other things and money. Finance, covers how financial instruments (claims on real wealth) relate to real wealth (things) and other instruments.

The economy is a collection of things that have value. They are constantly shifting in relationship to one another, and thus value (say, inflation adjusted or constant USD).

The economy grows by people adding two or more things together to create things of more value. For their to be economic growth, you need to maintain both your current assets (wealth) and create new ones.

The stock market only aids in wealth creation when a stock is initially offered for sale. A company sells part of itself to investors in exchange for money.

Money is a tokenised form of wealth. The only reason our fiat currencies have value is because they act as a fascia for wealth - they are a claim on wealth.

Companies take this money and invest it in the company, trying to create more wealth.

After the initial offering of stock, the stock serves virtually no purpose in the functioning of the company. There is little difference for the company if the stock is at $0.01 or $1. At this point the stock is a claim on wealth, limited to the company. While the USD is a claim on any wealth people will accept USD for, a stock is a claim on the wealth of a company that can be exchanged for fiat.

There are two ways you can make money from stocks:

1) the company grows its wealth and can thus justify a higher stock price, as a result people buy the stock higher
2) people pile into the stock based on buzz, mania, compulsive buying etc. and buy the price higher than the company's wealth can justify

Ultimately, when you are buying stocks you want to chase future wealth creation - this is speculation. If you happen to be buying stocks that are going up without creating more wealth, you can expect to ultimately loose money.

Thus, picking good stocks over a ten (maybe more) year period is not that difficult, as there are plenty of indicators of which stocks industries will create new wealth in the future.

There are two takes:

1) buy growing markets in top-tier economies, e.g. biotech, 3D printing, robotics and minerals used in such products
2) buy markets established in developed countries that are growing into developing countries, e.g. IVF, airlines and airports (before the virus), payment processors

@nicolahcm is right, by buying stock you can 'make money' by doing nothing. The mechanism this occurs is by:

1) someone producing wealth and exchanging it for fiat
2) they then exchange the fiat for a stock you own
3) they buy the price higher, which 'makes you money' if you sell the stock

From a Christian perspective, this should at least be a lesser aspect of the economy. There is a requirement of wealth tokenisation to be able to provide for yourself in the future, but the game is rigged so certain entities can extract the large amounts of the fruits of others' labour.
 

aynrus

Pelican
Depends on the state (I seem to remember that Nevada offered the best but I've heard good things about Utah's UDAPT trusts), I would go for non-revocable though. Even with putting the money in the trust you aren't completely avoiding taxes I admit. If I 'member rightly how it works is that basically let's say you own a few index fund shares in a trust that produce a dividend of a 1000 bucks a year.

So long as the trust assets stay within the trust (aka not distributed to you) then the Trust itself is essentially a legal entity whose taxes are separate from yours. What this means is the trust would only be subject to the lower dividend income tax brackets (which range from 15-20%) assuming your going for buy and hold.

That means no SS, no Medicare or any other auxiliary taxes. Just 15-20 tax on the profits generated from the stocks that applies only to the trust. It shouldn't apply to you in other words unless you begin taking stuff from the trust (the income taken from the trust would still only be taxed based on the 15-20% investment income tax brackets).

Note two things, this is off the top of my head and I may be remembering things wrongly. Second I ain't a lawyer, remember CYA!
SS and Medicare taxes are on earned income only. They aren't applicable to dividends and capital gains, as these are not earned income. One never pays SS/Medicare on this income. Sometimes people deliberately want to pay them on this type of income, to pay into the social security system (this is desirable for me, actually), but then one has to have a company which earns this income and pay yourself a salary out of company's income, as a trader or investment manager.

As to other taxes....My understanding is that the acid test is if trust is revocable. Revocable is considered the same as you and not different entity. If one is a grantor, trustee and beneficiary at the same time, can it really count as separate from your persona... as a minimum yes should be non-revocable otherwise it's a Grantor trust and taxed same as the person.

Seems like the law is changing fast and currently regular income taxation is worse for trusts than for individuals.
While income tax rates for trusts are similar to those for individuals, the thresholds differ significantly, and have for a number of years. As of 2020, the top tax rate of 37% on ordinary income (e.g., interest, nonqualified dividends, and business income) begins after reaching a threshold of only $12,950. The top tax rate of 20% for preferential income, such as long-term capital gains (LTCG) and qualified dividends, begins after reaching a threshold of $13,150. Compare these thresholds to those for single filers, where the top marginal tax rate begins after reaching $518,401 of ordinary income— more than a $500,000 difference. There is an even greater disparity between thresholds for married individuals filing jointly, where the top marginal rate begins at $622,051. Trusts may also be subject to an additional tax for any undistributed investment income, known as net investment income tax (NIIT) [3.8%]

Another article on trust taxation...states that since 2017 law a trust can pay almost twice of individual in tax on interest income, also:
individuals also enjoy a substantial benefit over trusts when it comes to the income taxation of capital gains and qualified dividends.
(basically seems like only complex trust strategies requiring expensive legal and CPA services can make sense and would involve more than one individual, trustee organization, etc)

Business trust (like Delaware one) is a completely different thing and a form of business organization, they're not allowed in most states, I believe, and also heard hard to open a bank account sometimes as some banks consider them shady. Seems like they must be taxed as S-corporations and have very high rates + limited deductions.
 
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I think it's not actually that difficult to be at the very minimum financial stable (assets to your name and not in any debt) assuming that:

A) You don't have any type of debilitating physical or mental illness (i.e. you are able to hold down a job)
B) A tragedy that causes you to go thousands of dollars into debt doesn't happen

Debilitating physical or mental illness (paraplegia, schizophrenia, OCD, etc.) is not that common so holding down a job is possible for most, even if it is a miserable soul-sucking job. And while a tragedy could happen at any time, this is why insurance exists.

Obviously the extent to which a person will be financially stable depends in large part on how much money one makes in a year. Somebody making $100,000 a year (after taxes lets say) who is saving 25% of their income will be saving more money than somebody making $50,000 also saving 25% of their income. Intelligence, luck, and environment all play a role in earning potential. But apparently the average take home salary in the U.S. is around $40,000-$60,000 depending on the state. So think about what the "average" U.S. citizen's life is like in terms of education, intelligence, and realize that it is very possible to make $50,000 if you're a respectable human being. Even more so if you are educated/intelligent and grew up in a relatively decent environment. And $50,000 a year can take you pretty far if you are living anywhere other than a huge city with a high cost of living such as NYC or L.A (move ASAP if this is the case).

A great way to supplement your income is with passive income. Passive income means making money even when you're not actively working. Book sales for example. You can be asleep and people will still buy your books. Or start a YouTube channel or podcast where you talk about your favorite hobby and if you are entertaining enough people will donate to you. Passive income is very difficult to achieve because it requires creativity and talent which many people lack, but it's a great philosophy to have nonetheless.

When it comes to saving money, it mostly really comes down to frugality. The word "frugality" gets a bad rap because of those reality TV shows that feature extreme thrifters living in tiny houses, never washing their clothes, and using candlelight instead of electric bulbs, and obviously you don't need to be this extreme but having a similar mindset is a very good thing. Frugality to me is just anti-consumerism. Ideally, you want to get your monthly expenses as close to zero dollars as possible. Think about how many money you are throwing at various entities for things such as cell phone bills, taxes, eating out, and so on. It's really, really difficult to mentally keep up with it all and people try to tackle their spending habits by using complicated budgeting spreadsheets or whatever but the real solution is frugality, anti-consumerism, or minimalism (whatever buzzword you want to call it). Obviously you should pay taxes (IRS will break your kneecaps with a crowbar otherwise) and have insurance, but do you really need a house in the 'burbs? Or should you consider a more rural living situation? Do you really need that cell phone plan with *OMG* unlimited mobile data or should you buy a cheap calls-only plan and cut down on your Twitter browsing? Make soap at home instead of buying it from the store. Buy meat from the local butcher instead of buying it from Walmart where the price per lb is ridiculous. These are all things you need to consider when saving money.

Also, a good way to save money is by taking full advantage of the system. For example, credit card companies often times will literally give you free money in return for signing up with them and using their cash back credit card (e.g. spend $1000 in the first three months and get $250 back). This is to entice the normies who don't know how credit cards work. Yes, Karen, you have to pay off your credit card in full every month. If you cycle through dozens of different cards in a year, you can save serious cash. You can call it exploitation if you want, but banks already make tons of money off us anyway so who cares?

Investing your money, or "making your money work for you" as people say, does requires knowledge of how assets such as stocks, real estate, and cryptocurrencies work. But you don't exactly have to be an expert in economics in order to do well. If you aren't willing to learn how all this stuff works on even a basic level then don't bother investing at all. In most cases, reading the "For Dummies" book for an asset is enough. The more knowledge you have the merrier I suppose. And as Michael Witcoff said, never invest more than you can afford to lose.

Probably the most important thing to keep in mind regarding money is to avoid debt like the plague. And if you do somehow find yourself in debt, by attending university for example, pay it off ASAP (better hope you majored in STEM if you went to uni). Debt can easily spiral out of control and mess up your (societal) life.
 
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MichaelWitcoff

Hummingbird
Orthodox
Also, your local Dollar Store has 90% of what you already buy but at a fraction of the price. Including most of the name brand stuff, oddly enough, and the rest is basically the same generic products but without a certain company name or logo that can often double or triple the price with no change whatsoever to the actual product.
 

Cicero12

Sparrow
I know most men aren't super interested in fashion. However, focus the bulk of your money mostly on shoes. If you can save a few hundred bucks buy some decent Magnanis. Most shoes under 120$ are complete shit that are glued in, which ultimately break apart. Get shoe trees to keep them fresh and pristine, the wood absorbs the sweat and keeps them smelling nice. they also prevent the shoes from creasing and preserve them a lot!

I remember as a kid, my mom used to work for a very rich person. So, when I was young I always saw that his boots and shoes had these things on them. They aren't for decoration guys. Meanwhile, get clothing on clearance sales and goodwill. Trust me, you can find some decent stuff there.
 
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grenade001

Woodpecker
There's some great advice in this thread. One of the books I recommend for saving money and building wealth is The Millionaire Next Door.

I strongly advocate the "get rich slow" path the book advocated. I haven't read the book personally.

The people depicted in the book are naturally frugal, hardworking folk who effortlessly maintain constant surpluses. Over time, it cumulates into a net worth of over a million dollars. This path - buy and hold; frugality - isn't necessarily suited to the detail-oriented, active investor.

I have a lot of these "Millionaire Next Door" types in my family, and social circles. Unpretentious, not wanting for anything, and doesn't keep a monthly tab on the median house price in their suburb. All they were taught was to pay down the mortgage, and avoid debt where possible.
 

grenade001

Woodpecker
I think it's not actually that difficult to be at the very minimum financial stable (assets to your name and not in any debt) assuming that:

A) You don't have any type of debilitating physical or mental illness (i.e. you are able to hold down a job)
B) A tragedy that causes you to go thousands of dollars into debt doesn't happen

Debilitating physical or mental illness (paraplegia, schizophrenia, OCD, etc.) is not that common so holding down a job is possible for most, even if it is a miserable soul-sucking job. And while a tragedy could happen at any time, this is why insurance exists.

Obviously the extent to which a person will be financially stable depends in large part on how much money one makes in a year. Somebody making $100,000 a year (after taxes lets say) who is saving 25% of their income will be saving more money than somebody making $50,000 also saving 25% of their income. Intelligence, luck, and environment all play a role in earning potential. But apparently the average take home salary in the U.S. is around $40,000-$60,000 depending on the state. So think about what the "average" U.S. citizen's life is like in terms of education, intelligence, and realize that it is very possible to make $50,000 if you're a respectable human being. Even more so if you are educated/intelligent and grew up in a relatively decent environment.

... the real solution is frugality, anti-consumerism, or minimalism.

As a young 20-something, I can confirm that is very much possible for a man of moderate intelligence, and means, to achieve financial security. This can be achieved even while working in less "glamourous" industries.

It was stated in "The Richest Man of Babylon" that "10 percent of what I make is mine to keep". This is achievable for all of those who do the work in being consistent when implementing this knowledge. 10% of $50k is $5k - $417/month over the course of twelve months. In 20 years, the Principal amounts to $100k (in current dollars). This is scaleable regardless of salary. Those so inclined can aim for 15, 20, 25%, etc.

If you have a good relationship with your parents, you can save 50% easily. This is whilst taking over paying the bills, food. It allows you to support parents, and save on the cost of rent - especially if you live in the same city.

There is a world outside of the doomers on Reddit. There is abundance in the world, and the good things you want are accessible. It doesn't come from a welfare EBT, you need to put the work in consistently. However, it is the right path, and work provides continuing, and sustainable self-dignity.

Forget about the grifters and the loafers - anything worth having is worth some effort.

Probably the most important thing to keep in mind regarding money is to avoid debt like the plague. Debt can easily spiral out of control and mess up your (societal) life.

THIS!

I had friends who took out personal loans for big cars as soon as they turned 18. After loan repayments, they had maximum $200/week for everything else. It weighs heavy on a person psychologically when they even buying a can of Coke would throw their finances into a world of hurt.

Eventually they reached a stage where they couldn't afford to run the car, and make ends meet, so they sold the car at a loss, and downsized to a small car. As there was still monies owing, they had to make repayments on a loan for a car that they didn't have any more.
 

debeguiled

Peacock
Gold Member
Also, your local Dollar Store has 90% of what you already buy but at a fraction of the price. Including most of the name brand stuff, oddly enough, and the rest is basically the same generic products but without a certain company name or logo that can often double or triple the price with no change whatsoever to the actual product.
This is no joke.

Just go.

I was looking for some cheap mini screw drivers for fixing glasses and they didn't have that, they had a little kit specifically for fixing glasses, with the appropriate screw drivers as well as extra screws and extra little pads for your nose.

I was looking for a combination pen and stylus and not one of the big stores had what I wanted except for Office Depot, which was charging ten bucks for two of them. The dollar store had a selection of exactly what I was looking for with options like a laser pointer, flashlight, and, I am not kidding, carpenter's level.

Dollar stores also usually beat thrift stores on price.

They also have nostalgia candy like Cracker Jacks, three for a dollar, Fiddle Faddle, which discount groceries don't seem to have, Boston Baked beans and freaking Yo Hoo drinks, not to mention big boxes of that candy you pay three dollars for at a movie theater.

A case could be made just for visiting the dollar store when you don't even know you need something. I even got an awesome pair of reading glasses there which may not be as strong as a twenty dollar pair from Walgreens, but remember, I have the repair kit.

What else? I got exactly the size of Rubbermaid food storage for lunches, just one like I wanted, not three for 5 dollars or whatever.

I thought it was just a sales gimmick store to fool the ignorant filled with crap, but it isn't.

Seriously, dollar stores are the move.

As long as you don't buy the coffee.
 

aynrus

Pelican
My 2 cents:
- get education in a profession that can bring good income and in high demand, even if you're not thrilled about it. For example nurses were making a ton (in recent years, not sure what's going on now) - and only required 2-year RN degree. Or, on-demand trades profession such as electrician (huge demand and shortage in many areas). Or do a software engineer thing (though you will compete with all H1-Bs and they'll have priority over you in most companies).

- make money for few years

- leave the US and live where it's cheap, off these money, while running some passive income or online business, which might not bring much on the US scale but enough for overseas

I'm not as optimistic as a poster above and have a deep conviction that any decent, intelligent person, a "respectable human being...who's...educated/intelligent and grew up in a relatively decent environment." will get railroaded and treated badly as an employee in this country. (to avoid that would have to kiss to many....well..."donkeys", not allowed to say more here). I don't believe that simple, frugal,non-materialistic life is possible in the States, unless in some rare, lucky situation (sometimes called "having a small trust fund"). Things are just too expensive here and everything is geared into forcing high consumption and competition with the Jonses and work culture here is just hellish pressure cooker.
 
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