[rfc]

Alright, I'll bite. This is such a victimhood mentality and a ridiculous statement.

I wasn't wealthy when I started investing. Hell, the first dollar I put into my long term portfolio was when I was living in my car! I started with ~$200 that I made from doing a collection of odd jobs (mowing lawns, computer repair, moving dirt, etc.). Every extra penny I made went into investing into a moderate portfolio focusing on high yield dividends (4-6%).

As I've grown in my career, got married, etc., I've kept effectively the same principles. I now get great passive income after 10 years of doing this and it's only getting better with each dollar we put in.

It is possible with the right mindset. In an investing group that I'm part of, my story is the norm - not the exception.

[dang]

When disagreeing, please reply to the argument instead of calling names. "That is idiotic; 1 + 1 is 2, not 3" can be shortened to "1 + 1 is 2, not 3."

https://news.ycombinator.com/newsguidelines.html

Your comment would be fine without the second sentence.

[clarry]

A bit of calculation would show that a lot of people have no chance of building "great passive income" in 10 years. They simply do not have enough income to save that much.

"I started with $200" tells us nothing useful.

I can start with $5 and have great passive income if I'm making $100k and wife is making $70k and both of us are capable of saving a good chunk per year.

I can start with $5000 and have little more than extra pocket money after 10 years if my salary is in the $20k to $30k range and I'm capable of saving $100 per lucky moon.

GP is absolutely right, compound interest does not do much if you don't have much. There is nothing ridiculous about it.

[TheOtherHobbes]

Here's something you can learn in less than an hour:

Most retail "investing" is really just skimming money from workers and giving it to shareholders.

Real jobs-and-opportunity-building investing isn't particularly encouraged by the markets. It's much easier to make money with various techniques that rely on the political manipulation of asset prices - like property, stocks, crypto, and corporate image - than by actually doing and making useful things at a reasonable price.

Which is why stock is such a contentious issue in the startup world. The operating rule is that you don't share profit with ordinary workers unless it's unavoidable.

Ideally if you're a funder you don't even share it with founders. That's more challenging to organise and happens less frequently, but if you're a founder it's naive in the extreme to assume you'll be spared any attempts to make it happen.

[wil421]

There are a lot of blogs out there about people retiring early and living off residuals. When I looked closely the people involved were not like “normal” people. One couple were high paid lawyers and the wife could basically freelance a few times a year and make a killing. Another couple moved to Portugal and somehow kept $100k++ remote jobs from companies in NYC. Another was a very high paid Microsoft manager in Seattle.

My father in law is out of touch as well. He talks about maxing out your 401k. He pays he son $15 an hour on 1099 and talks about how he should be saving, impossible. When my wife was making $40k right out of college he preached it as well. If you’re making $40k you can’t put $18.5k into the bank.

[exergy]

There is most certainly a category of people who cannot save at all because some combination of life factors lead them up shit creek, but there are plenty of low income people who could do with a lesson or two from Mr. Money Mustache. He has various case studies involving low income people and there are legions of journal entries on his forums where people earning pittances have nevertheless saved enough to be secure. Many have saved enough to retire early.

Nothing is one-size-fits-all of course, but I'd much rather be surrounded by those kinds of 'can-do' types who don't sit around waiting for life to come to them.

[falcolas]

Mr. Money Moustache is a terrible example. He (and his wife) had a $200k+ job within a year or two out of college. He is still working. He is making money off his website and as a motivational speaker. He has to spend a significant amount of time managing his investments to ensure that they keep an average of over 4% return.

MMM's lifestyle works well for MMM, because of his circumstances. Those circumstances don't easily carry over to the general populace.

[shantly]

Where I fell off the MMM train, within hours of discovering it, was a post about healthcare costs on the individual market where he wrote about how cheap they could actually be...

- If you had enough money in the bank to cover an extremely high family deductible for a year without it causing serious pain, if something bad happened, AND ALSO

- Two adults either of whom could, in months if not weeks, land a job with decent to excellent pay and a much better family insurance coverage, so there's almost no risk of having to pay that high deductible more than once, worst-case scenario is one of you has to work for a while.

Like yeah, no shit buddy, if you have in demand skills and are already rich health care can be cheap. Stuff's cheaper for the rich, news at 11. Thanks for the advice.

Then what really got me were the people in his comments section (can't recall if he was down there too, but he certainly didn't discourage it) shitting on anyone who even ever so timidly pointed out that this advice was entirely useless—no part of it actionable—for people who were still trying to become FIRE-tier rich, despite its being presented as generally useful advice and a tone of "I don't get why people complain about health care costs, what dummies!" throughout the post.

[journalctl]

“Coming up at 11, rich people don’t understand why poor people don’t just stop being poor.”

[briandear]

Compound interest does require saving or investing, but presumably over the years you learn more, make more and move up. Those that stay in minimum wage jobs for ten years have only themselves to blame. Why would someone have a salary in the $20-30k range after 10 years? Find a new job, go work in an oil field, go learn how to sell cars, become an expert in something! A guy with a squeegee could end up with a car wash empire in ten years; but it takes work and discipline.

Look at the statistics for Asian immigrants — astoundingly successful as a group, many arriving in the country without money or even English. When you see an Asian family all living upstairs in their convenience store with the kids working and studying hard — those kids end up a Harvard. Their parents certainly aren’t buying rent-to-own TVs.

You can literally get promoted to manager at a McDonalds in six months — if you just show up on time have have even a tiny shred of maturity and ambition you can move up, even in the most menial of industries. There is definitely some personal responsibility involved, getting yourself addicted to drugs won’t help. Nor will getting in relationships with toxic people.

What’s ridiculous is that there are people that live their whole life as victims. Either they have a low IQ and are just simple minded, or they make a series of bad decisions again and again. Suggesting that compound interest “doesn’t do much if you don’t have much” —- nobody is saying compound interest alone is going to make you rich; it merely amplifies and helps you create wealth. Perhaps compound interest isn’t the right first step, what it seems like some people really need is some Tony Robbins so they can get themselves out of victim mindset that poisons them for generations. Maybe some Dave Ramsey as a first step to get financially disciplined.

Like one of the earlier posters, I too lived out of my car. I worked menial restaurant jobs, was in extreme debt, no family resources, even some troubles with the law. But barely 10 years from that I ended up working at a FAANG. It’s a long, involved story in which nobody would be interested, however the point is that this idea that people are stuck in their minimum wage fate is just fatalism nonsense. That fatalism is common in Catholic countries — it’s the reason that entrepreneurs were seen as strange in places like Mexico — the idea that you can change your stars is just sacrilege; “god’s will” has been responsible for more generational poverty than almost any other cause. The secular equivalent is the myth that if you are poor, you will always be poor.

Understanding compound interest isn’t just about building wealth, it’s about understanding the consequences of debt. Buying that shiny thing you can’t afford with “easy, low payments,” ends up shackling you to debt.

[eyepea2007]

Please don't discount the fact that--despite popular perception--economic mobility in America is much smaller than in most developed countries. Your rags-to-riches success (while wonderful) is a statistical outlier. The vast majority of studies bear this out. What one starts with (parents' income/wealth) has a massive impact on what one finishes with.

https://www.nytimes.com/2012/01/05/us/harder-for-americans-t...

[croon]

Honest question: What's the distribution of savings going into your portfolio in those 10 years?

Quick napkin math doesn't grant you any "great passive income" from "$200" and "extra pennies" for 10 years.

I'm not trying to be rude, but with incomplete data you're sending both the signals you want, as well as completely opposite signals. The latter suggest that in reality you just made a lot of money for the last 5+ years, which completely invalidates what I think you wanted to convey.

[antibland]

> This is such a victimhood mentality and a ridiculous statement.

Do you think you'd say this to the poster's face in an in-person conversation? I find it's too easy to communicate in this way on the Internet, but it appears hurtful and over-the-top. Nasty comments can affect peoples' lives and we rarely see the fallout of how we hurt others in this way. Let's all tread more carefully and be a little nicer to each other.

[whamlastxmas]

Calling someone being poor a "victimhood mentality" is possibly one of the most privileged, out of touch things I've seen on HN.

Why don't you go tell all those families on welfare to just go make more money and change their mindset.

[dang]

It's bad, but please don't respond to a bad comment by breaking the site guidelines yourself.

https://news.ycombinator.com/newsguidelines.html

[whamlastxmas]

I don't really feel inclined to sit by when ignorant prejduce, whether it be racism or classism, happens on HN. Feel free to ban me if you if that's how you want this site to operate.

[Kye]

>> "It is possible with the right mindset. In an investing group that I'm part of, my story is the norm - not the exception."

Two words: selection bias. That your path worked for you does not mean it's the only wise path for every circumstance. The path of most people around me is their savings get destroyed by surprise medical or repair bills because they were born into poverty and never get a chance to build meaningful savings. So it's better to spend it on something while you have it on things that can't be taken away in a bankruptcy.

Most people (in this context) make the mistake of spending it on drugs, worthless trinkets, junk food, etc. Most aren't encouraged to pursue skills that can pay the bills. Or they're actively discouraged. "Crabs in a bucket" is a real mentality. People I grew up around have it. I had to hide my interest in entrepreneurship just to protect it from sabotage.

I'm glad you were in a situation that enabled your path! It's great that you were able to thrive through early savings. I don't know when you came up, but cheap and functional cars are hard to come by in a post-Cash for Clunkers world and police are more aggressive with the homeless/car-homed. Your path is not as viable in the US in 2019.

[snikeris]

> Most people (in this context) make the mistake of spending it on drugs, worthless trinkets, junk food, etc. Most aren't encouraged to pursue skills that can pay the bills. Or they're actively discouraged. "Crabs in a bucket" is a real mentality. People I grew up around have it. I had to hide my interest in entrepreneurship just to protect it from sabotage.

These are the people most in need of the concept of compound interest. If they knew that small steps every day can lead to big outcomes, they would be more inclined to take them.

[organsnyder]

My family is mentoring a young woman that comes from a broken background (was abused, grew up bouncing between foster families). She's trying to do everything right: finishing her GED, getting a job, etc. In addition to support from my family and a few others, she is in a formal program to learn how to budget, and has always been willing to be proactive in finding ways to better her situation.

But every step along the way, the system is fighting her. Most recently, she's in jeopardy of losing two sources of assistance because she's doing "too well" to qualify. With those gone, she'll likely be making less than she was before she had a job.

Our system (in the United States) is seriously fucked up. All of the various programs try to pass the buck whenever they can. The negative feedback loops are overwhelming.

[snikeris]

I'm also familiar with the disincentives people face as they pull themselves out of our welfare system. I know two such people who face similar dilemmas.

[lowercased]

and it has been for decades. I was a shift manager at a burger king in the early 90s - nearly 30 years ago. Some of those same issues faced some of the people I worked with. Can't earn "too much" because their assistance would be cut off by a larger percentage than the increase in $ they might earn. This was in the days of sub $4/hr wages for most of the folks there.

Can't schedule Tara for an extra 5 hours because that will be an extra $20, which will put her over $100/week, and her assistance will be cut by $50/week because she earned that extra $20. (paraphrasing the numbers here). It was also costing some of these people $x/day to take a bus to and from work, but that wasn't calculated in their earnings/cutoff calculations.

Truly messed up 30 years ago, messed up today.

[Kye]

That's the thing: they do know. They watch rich people earn money doing, from their poverty-clouded perspective, nothing. Learned helplessness is a powerful force. It took me years to break out of it. I can see how wrong it was from the other side, but I also know how useless criticism of people inside it is.

Doing what's kept your head barely above water for years seems safer than putting a few dollars away every month hoping it grows higher than the next thing that fails in your car or house. That's if you can get a bank account at all. Everyone knows someone to ask for the number of a good bankruptcy attorney. That's networking when you're broke and defeated.

[huntertwo]

Wasn't familiar with the concept of learned helplessness and found this interesting study looking it up [0]

> The mechanism of learned helplessness is now very well-charted biologically, and the original theory got it backward. Passivity in response to shock is not learned. It is the default, unlearned response to prolonged aversive events and it is mediated by the serotonergic activity of the dorsal raphe nucleus, which in turn inhibits escape.

Learning how to help yourself isn't as easy as it seems especially when you barely or don't have the means to do so.

[0] https://www.ncbi.nlm.nih.gov/pubmed/27337390

[falcolas]

Let's take an median household. That's $40,000 in the US. Let's say they save 5% of their post-tax income monthly, and get an amazing rate of 3% APR with no fees.

How much will that compound interest have added after 15 years? Only about $7,000. Not exactly a "big outcome".

[refurb]

That’s pretty privileged of you to say $7,000 is not a big outcome.

To a lot of folks it is. That’s half a down payment for a house in a lot of the US.

[elweston2]

Plus the OTHER 32k they have saved. Over 30 years that is an extra 50,000.

You could save it for 15 and have 37k (7k interest)after 15 years. Or 0. You could save it for 30 and have 126k (54k interest) after 30 years. Or 0.

[falcolas]

$56k of earnings in exchange for freezing $70,000 of your income for 30 years? That seems insane if I'm honest.

If it were FU levels of money, or even 100%+ returns, I might think differently. But I can't imagine someone locking away $70k of their earnings for 30 years for only a 70% return.

[lowercased]

To be fair, $7000 in 15 years probably won't get you the house downpayment but... you're right on the privileged part.

I imagine that people actually seeing some progress over time may encourage them to save/contribute a bit more, or to put some money in to somewhat larger CDs or whatnot (even excluding stock stuff). Or... they may be encouraged to contribute a small bit to a 401k if they end up at a job that offers it.

You may $40k/year - having, say, $3k in savings can really change your outlook and susceptibility to otherwise crippling 'emergencies'.

[falcolas]

As a return for tying up 5% of your income (which is hard to do when you're working with a household budget of ~$625 a week) for 15 years? Yes, that is a tiny outcome. It's especially tiny when you consider that a static 3% APR is absurdly unrealistic.

You could use that same 5% and have a full down payment four years sooner.

[rfc]

1) You have your own selection bias as we all do. I'm not ignorant to that. However, many of the folks that have gone through similar transformations don't come from "easy" backgrounds. They had their own tragedies (financially, emotionally, etc.) that they had to overcome. Being born into poverty is an excuse to sidestep responsibility of your own life.

2) An outside can't sabotage your own idea. Only you can sabotage it. Sure, it doesn't make it any easier, but if someone can change your mind on your definition of "success" then you will never achieve it.

3) Yes, people spend money on dumb shit. I was in the same environment. Keeping up with the "jones" was a thing. Succeeding was also looked down upon. You know what is consistent with folks who came into success from those areas? They said f-that, I'm going to make my own path, regardless of what others say. They had mental fortitude.

4) My first car cost $2,000. My second car cost $1,000. Both I saved up and purchased. If police are harrassing you about being homeless in a car, then leave that location. That sounds like a police state (Cali anyone?). And before you say "It's not that simple to just leave!" Yes, yes it is. In order to change my situation, I literally "YOLO'ed" across the country (no job, nothing) in order to get out. Much like many in this investment group, in order to get out of hell, you have to make huge bets.

I live in the USA in 2019. I lived in the USA when I was homeless during the height of the recession. It is easier now than it was then.

[fuqmachine]

> However, many of the folks that have gone through similar transformations don't come from "easy" backgrounds.

You just basically said - Folks that go from A to B come from A. Of course!

You act as if your situation is the worst possible situation. For example, imagine having to take care of a sick parent and 2 kids and a wife. Imagine being addicted to drugs. Imagine having a criminal or drug-dealing record. Imagine having a disability. Imagine being suicidal.

Even if you went through all the terrible things I listed, imagine not having any mental fortitude. Mental fortitude doesn't come easily or at all to a lot of people. This pull yourself up by your bootstraps is a nothing but a shiny pokemon.

I came from poverty and I have everything I wanted now. But I also recognize that 99% of the people that were in poverty with me didn't make it out.

[runjake]

I'll counter the crap you seem to be getting in this thread:

I think you're catching a lot of crap for being "hurtful", but I don't see it that way. I see you being direct and appreciate your comments in this thread.

[solipsism]

If understanding compound interest and (more generally) feedback loops is important, then so is critical thinking. For example:

> many of the folks that have gone through similar transformations don't come from "easy" backgrounds.

Some simple critical thinking skills and basic logic (often learned in a philosophy course, but not always) would help one understand that this shows only that the statement <it's impossible for any poor person to become wealthy> is false. It certainly says nothing about the idea that <all poor people could become wealthy>.

[solipsism]

> In an investing group that I'm part of, my story is the norm - not the exception

That is a hilarious example of selection bias.

[inscionent]

Nice personal attack. Your anecdote is nice, but is that is all it is.