[wait_a_minute]

Uh...isn't an index fund that tracks the S&P 500 basically self-driving money? That with something like Mint is basically all you need to do well financially speaking. It feels like this blog post is massively overcomplicating the problem of personal finance. It really isn't rocket science. If anything, the basics are simple and boring and unsophisticated.

[nradov]

Dilbert’s One Page Personal Finance List

• Make a will.

• Pay off your credit card balance.

• Get term life insurance if you have a family to support.

• Fund your company 401K to the maximum.

• Fund your IRA to the maximum.

• Buy a house if you want to live in a house and can afford it.

• Put six months’ expenses in a money market account.

• Take whatever is left over and invest it 70 percent in a stock index fund and 30 percent in a bond fund through any discount brokerage company and never touch it until retirement

• If any of this confuses you, or you have something special going on (retirement, college planning, tax issue), hire a fee-based financial planner, not one who charges you a percentage of your portfolio.

https://www.mattcutts.com/blog/scott-adams-financial-advice/

[bluGill]

401k need not be maximized - if it should depends on your age, existing savings and if you actually want to retire early, same for IRA.

You need to figure out how much savings is right for your long term plans. The 6 months expenses is the only one that I think applies to nearly everybody - even then if your doctor just gave you 2 weeks to live 6 months expenses isn't useful. Some people want to retire early - other people have discovered that a job gives them social benefits and they don't want to retire ever. Some people are willing to work longer in life so they can afford more toys now, others are willing to forego toys so they can enjoy the free time later. This is your personal choice.

[wait_a_minute]

Is that in order? I'd say having six months' expenses saved should be higher up in that list. After you've paid off all debt besides a mortgage, but before you start maxing out a 401k or IRA.

[organsnyder]

I'd put maxing out a Roth IRA ahead of saving for emergencies. You're limited to a certain amount you can contribute each year, and you can withdraw your contributed principal from a Roth with no penalty—it can effectively be your emergency fund (or part of it). Of course, long-term you definitely want a separate emergency fund to avoid needing to raid your Roth.

[wait_a_minute]

Hmmmm that could work, but I worry that if people treat their Roth IRA as their emergency budget in the event of a recession their total amount they can withdraw will be lower than their needs.

That is why keeping an emergency fund as a separate savings account at a bank makes me feel more comfortable. At most I'd put my emergency fund in a money market account to at least earn something, but the point of the emergency fund is to be liquid and available for emergencies. If there's a steep recession and all of a sudden you need to tap into your savings for 6-12 months until you find another job, you don't want to be doing that when your Roth goes down and cashing out your contributions means selling more shares than you purchased.

[svachalek]

The "Managing Cash" section was the most (maybe only) interesting section here for me. Most of the other "self-driving" examples are just about automated alerts and recommendations; I don't consider a car "self-driving" because it beeps at me when it's low on gas.

I agree personal finance is really not that hard at the basic level. The main issue is that our economy is driven by an advertising industry that depends on making sure most people never learn the basics.

[jmsuth]

I disagree, what you described is really just scratching the surface. Personal finance can become massively complicated, especially when you hit inflection points in your life like having a child, trying to buy a home, or nearing retirement. It is "boring and unsophisticated" math at the end of the day, but there are so many variables that it quickly becomes difficult to comprehend for most people.

People "don't know what they don't know" when it comes to financial health, especially surrounding things like proper insurance coverage and tax optimization. Software that can keep an eye on your finances and alert you to anything that seems off, or better yet, perform the necessary actions to keep you in good financial health, would be a huge help to these people.

[wait_a_minute]

Maybe. But to be honest that comes across as trying to sell some software. Ultimately, anyone can become a millionaire following some really boring advice.

1) Six months' of expenses in cash/money market. 2) Max out 401k if possible. 3) Anything left after that, buy index fund that tracks the S&P 500 and let it ride the market over the long term.

Literally all you need to do. Sure, there's room for some budgeting software or credit card alerting and things like that. But the market is not so complex to understand that you can't understand it yourself. I'd say within a weekend of study the average person can understand the basics.

[jmsuth]

True, those are all good things to do, but that's all about growing your money for retirement. It completely misses the side of protecting that money you work so hard to grow. Financial health is about more than building up savings, it's about building up resilience. You can gamble on not being one of the millions of people that become disabled / die and can no longer work each year to support their family, or you can play a little defense and wise up on what the adequate insurance levels are, create a will / trust, etc. These are the things people don't currently understand. They understand if they save more money they will have more money.

[gwbas1c]

No, "an index fund that tracks the S&P 500" is more like cruise control.

Self-driving money would basically take all your income, and decide if it's best to invest in such index fund, or pay off your mortgage early.

I always pay off small, low-interest loans faster, because I get tired of juggling the money. If I had "self driving money," it would continue to "write the check" for me as long as it can find a better investment vehicle for my remaining money.

[wait_a_minute]

It's not possible to automate a decision like investing more vs paying off mortgage early, because that decision is entirely up to your personal preference.

Do you prefer being debt free, or do you prefer keeping some debt that is at 3.6% interest while you earn 7% in the market? The former has a lower risk associated with it whereas the latter has a higher potential for net worth increases over time. But to decide which one you want, you'd need to figure out what your priorities are. A machine can't do that for you.

At best it could show you the outcomes if you were to pursue either path, given some set of assumptions. But a machine also can't predict the future so it wouldn't know what the absolute correct answer is.

The reason the S&P 500 tracking is more like self driving is because the economy will likely be worth more in the future than it is today, and so will investments made into index funds. It's possible the economy could be worth less, but if that happens we'll have much bigger problems to deal with than individual net worth.

[bluGill]

Those basics don't make the big money to investment companies. If you can be talked into trading money around often they make more money on those trades.

[wait_a_minute]

Index funds outperform most actively managed funds, last I checked. In most cases you'd be outperforming professional investors just by sticking with the S&P 500.

Yeah, it's possible to be the 1% of traders who can outperform the S&P 500...but very unlikely especially if you look at long periods of time.

And the post is about "self-driving money" rather than active trading. In that case, an index fund that tracks the S&P 500 is basically self-driving money.

[na85]

Don't forget the narrative being pushed by the owner class that taking on debt in the form of real estate mortgages and car loans is a sign of maturity and adulthood.

[friedman23]

First, real estate and car mortgages are completely different, nobody in their right mind would call a car an investment. I've never seen anyone suggest that taking out a loan to buy a car is a sign of maturity. Loans for real estate can make sense financially and real estate is one way for people to become rich fast.

[bluGill]

Real estate is a bad way to become rich fast (unless your full time job is landlord and you understand how to make this business work). It is often (but not always) worth it anyway, but real estate should break even with inflation over time: not a great investment.

[mrep]

Real estate returns are actually pretty much on par with stocks if you include rent [0]. Granted, if it is your main home, you are just transferring that rent value to yourself but it's still much better to transfer that value to yourself than someone else.

[0]: https://news.ycombinator.com/item?id=19817584

[friedman23]

> should break even with inflation over time: not a great investment

This is not historically true and the reason why so many people become rich (and poor) with real estate is because of the amount of leverage it enables.

[bluGill]

I agree with your statement even as I stand by my claim.

[na85]

I didn't use the term "investments"; I used the term "debt".

The debt itself is what's seen as adulthood.