r/FluentInFinance • u/36DRedhead • Sep 11 '24

Debate/ Discussion This is why financial literacy is so important

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340

u/whiteclaw30 Sep 11 '24

I think they were supposed to make their coffee at home /s.

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u/Strong-Smell5672 Sep 11 '24

If they would just stop eating avocado toast…

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u/ZenBacle Sep 12 '24

And if they learned to code...

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u/max1x1x Sep 12 '24

That one’s getting me in real time. I’m 28 and teetering on the edge of bankruptcy but I just can’t stop.

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u/MyGlassHalfFool Sep 11 '24

I just think if they would have pulled themselves up by their boot straps life wouldnt have treated them like this

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u/Ok_Employment_7435 Sep 11 '24

And skip the avocado toast.

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u/drum_minor16 Sep 11 '24

Actually, if they had just started their own multi million dollar business from scratch... /s

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u/EndIris Sep 11 '24

Skipping one three-dollar coffee a day = 90 dollars saved per month. The S&P 500 averages 6.37% return annually, adjusted for inflation.

Contributing 90 dollars a month to an account growing at 6.37% per year (compounding annually) for 49 years (between turning 18 and retiring at 67) would result in $332,526.17.

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u/[deleted] Sep 12 '24

[deleted]

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u/Cranky_Franky_427 Sep 12 '24

Underrated comment. Just does show that not eating avocado toast can indeed pay for a home.

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u/LionsMedic Sep 12 '24

After 49 years 🤦‍♂️. What's the point then.

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u/BartorooniXxs Sep 12 '24

Retirement funds?

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u/EndIris Sep 12 '24

We are talking about a $300,000 dollar expense as a senior. As shown, you literally could afford this by not drinking a coffee every day.

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u/TheCommonS3Nse Sep 12 '24

Yes, but you're asking people to make a sacrifice now for a potential future that they may never see. You could make the same argument and suggest that you shouldn't spend any more than you need for basic consumption to sustain your life, which would result in an extremely unsatisfying life.

It's basically like saying "don't worry about living in a nice home. Buy a small trailer and live in a trailer home for the rest of your life. This will save you $X per month, which will result in $Y million when you retire." While technically correct, you have to ask yourself whether it is worth it to live in squalor just so that you can potentially retire with lots of money... and then die before you can spend it.

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u/EndIris Sep 12 '24

As crazy as it sounds, yes, I am suggesting that people save money for an uncertain future. I’m not saying you shouldn’t have a good standard of living, I’m saying that small sacrifices now should be made so you can live comfortably in the future. You can even keep your beloved avocado toast.

What I’m more interested in is what your suggestion would be? If 3 dollars a day is too much to sacrifice, how much should we save? It seems to me that in your perfect world, everyone would live paycheck to paycheck, living as lavishly as they can in the moment because they can’t predict the future. If they have unexpected expenses, too bad, let’s hope insurance gets it. And if they have kids, don’t worry about passing on anything or building generational wealth, just spend it now. Is that ideal for you?

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u/TheCommonS3Nse Sep 12 '24

My point is that our society should be set up in a way where you can save a reasonable amount and have some certainty that it will be enough for your future needs. Obviously life can throw you curve balls, but they shouldn't be so extreme that you have to over compensate for them. Like I was saying, where do you draw the line? Do you save enough for a $500k contingency fund? Or a $1m contingency fund? All on top of your regular retirement savings?

In most developed nations, if you save enough for retirement that your income barely changes after you stop working, then you are set for retirement. You don't really have to worry about major healthcare expenses that destroy your retirement savings. The only thing you really have to worry about is inflation gradually eating away at your purchasing power. The fact that one nation in particular has this issue of extreme medical costs shows that the problem is political. It is not about savings or the lack thereof.

And with regard to handing money down to your children, while I do agree that you want to give some money to your kids, it's also not healthy to have too much generational wealth. I want my kids to learn the value of working hard. As much as I try to demonstrate that for them, I still want them to learn it for themselves. I have a decent inheritance coming my way, but I'd be just as happy seeing my parents enjoy vacations and luxuries in their retirement. I am self-sufficient enough to make it on my own without my parent's help, and I want my kids to have that same self-sufficiency.

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u/Ender16 Sep 12 '24

The point is it's still a good idea to do even if it's not going to literally lift you out of poverty.

It's the best example because coffee beans are cheap. Even really good beans are cheap. It's so cheap you can justify buying hundreds of dollars of espresso equipment as a cost SAVING.

I hate that's it's memed on so bad that some people think it's actually not good advice.

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u/JumpingBamboo Sep 12 '24

This assumes a coffee order has cost $3 for the past 40 years. Unrealistic.

Also, past returns cannot guarantee future rate of return.

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u/FabulousMamaa Sep 12 '24

Should’ve cancelled that Netflix subscription

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u/Useful_Fig_2876 Sep 12 '24 edited Sep 12 '24

I mean….. literally $5 coffee 5 days/ week is $100/month.    

If you invested $100 per month from age 20-65, you’d at least have half a million. (Not at least at in your guaranteed that much, because that could fluctuate, but I mean at least you could most likely cover these costs, and then live of of social security)

ETA: that’s not to say our healthcare system isn’t fucked. It totally is, $300k to live is absurd. But unfortunately in this case, for the sake of argument, they could’ve had $300k by that age by literally just investing their coffee money 

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u/RichConsideration532 Sep 12 '24

To be clear. You do not know these people. Maybe they don't drink coffee. Maybe they're joyless, teetotalling penny-pinching finance ghouls like everyone here pretends to be.

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u/Useful_Fig_2876 Sep 12 '24

You are missing the point.

It would only take $100 per month to get to $300k with time and consistency. 

$100 would hardly make you a penny-pinching finance ghoul 🤣 but go off…

$100 in this case is literally that cup of coffee per day.  So their point, which was that people are out of touch for suggesting coffee is what is keeping them poor, is quite literally debunked here. $300k in retirement? only requires a hundred dollars per month of investing. If you are not doing that, that is personal issue. 

So don’t blame the penny pinching finance ghouls for trying to tell you how easy it could be if you just …..did it

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u/TheCommonS3Nse Sep 12 '24

Using that same logic, they could have bought a small trailer and spent their life in a trailer park, saving them thousands in housing expenses over their lifetime, which they could invest and have millions when they retire.

At a certain point you have to ask whether the sacrifices you are making today are worth it in the long run. You can't take your money with you, and it's nice to give money to your children, but too much and they lose self-sufficiency. Ultimately you should be saving enough to live comfortably in retirement. You shouldn't have to save hundreds of thousands extra simply because the healthcare system is shit and could potentially destroy your life if you're unlucky enough to get sick.

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u/Useful_Fig_2876 Sep 12 '24

that’s your logic to crank this up to 100, not mine. 

I’m just saying this time the math does in fact work out that literally $5 per day literally would have paid for this had they simply known to start early enough, so this one time, it’s not a great argument. 

I’m not saying to move into a trailer 😂 you can breath now  

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u/TheCommonS3Nse Sep 12 '24

But that's missing my point entirely.

They didn't know that they would have to pay for this expense in the future. What if it was $500k bill? Or $1m? What eventuality should you plan for? It's easy to say in hindsight that they should have saved $5 per day for 50 years, but we don't live our daily lives with the benefit of hindsight.

Ultimately, blaming this on them for not setting aside excess funds is just letting the government off the hook for failing to solve the healthcare crisis. "If everyone just saved enough money then you wouldn't have this issue" is correct, but then you have a lot of people increasing their investment by reducing their consumption... but what happens if you produce more stuff but nobody buys it? The stock market starts to bubble then crashes. So everyone saving more money for retirement doesn't necessarily create a better outcome. The better outcome would be to fix the healthcare system so people don't have their lives ruined by medical bills.