[alexpetralia]

One of my friends opined that if most people (limited to people on this forum, let's say) rationally priced in their future earnings, they'd be in debt more often, for longer and earlier in their life. The naive algorithm of "save as much as possible" might land high-earners with a huge nest egg they end up carrying to their grave. I think I agree with that.

[WJW]

> a huge nest egg they end up carrying to their grave

Oh no! The tragedy of not spending everything you own!

Sarcasm aside though, almost everyone will mispredict how much they are likely to earn in their lifetime and the opinion of your friend falters a bit in the presence of significant randomness. Estimating your future earnings too low is not really a problem, estimating too high can lead to serious problems when faced with unexpected expenses. Since there is only limited downside to being conservative with debt and serious downsides to being too extravagant, I don't think that potential high-earners are being all that irrational by avoiding debt.

Of course, if you are psychologically a "maximizer" then you might want to skate closer to that edge and risk falling off in exchange for potentially squeezing every last dollar out of your life. If your psychological profile is closer to being a "satisficer" then avoiding risk to maintain your current lifestyle is probably better for you. In personal finance, no solution is correct for everyone.

[andi999]

I am shocked as well that intergenerational wealth building is not a thing. I mean do people really think 'I was poor/had to earn everything so my kids should have it the same way'?

[coldtea]

Well, if you were poor, made something for yourself, and then had kids, then your kids had a non-poor home, care, clothes, things, toys, education, and so on, between 0 and 18 (or 22), no?

So, your kids didn't have it the same as you who grew up poor at all, even if you don't leave them an inheritance...

[pjc50]

Not everybody even wants to have kids. shrug

Also, the only companies who put intergenerational wealth building into their advertising material are the expensive watch manufacturers.

[jhanschoo]

If you don't have kids, and are rationally altruistic, it can be argued that you can create more expected pleasure by willing your fortune to charity than spending it on yourself, or earning just the minimum.

[WJW]

> Also, the only companies who put intergenerational wealth building into their advertising material are the expensive watch manufacturers.

Of course, because companies have a vested interest in consumers spending more rather than less. But there are reasons to do something other than "some company advertised that I should do this". Every family that built up generational wealth has had (by definition) at least one generation who earned more than they spent.

[coldtea]

>Oh no! The tragedy of not spending everything you own!

Well, the trafic part is the spending your precious time accumulating money you haven't spent - which turns into totally useless when dead.

[maccard]

> Oh no! The tragedy of not spending everything you own!

I really don't think this contributes at all to the conversation. We're not talking about going out and blowing your paycheck. If your total lifetime earning over 40 years of working is $1.2M, and you only spend $1M over your entire lifetime, you could have just worked for 16% less time and enjoyed the time. Otherwise what was the point, just trying to maximise the number??

[WJW]

Literally the next paragraph of my post addresses that. If you are accurate enough to predict your life spending needs to within 16% of the actual number, more power to you and go on living. It seems like a tall order to expect people to predict multiple decades into their own future though.

However, let's do the math: if you expect to live to be ~80 years old and are currently 40, then with the 200k buffer you mentioned you only have 5k per year or ~416/month. There are numerous eventualities that could eat up such an amount, like unforeseen illnesses or children or both. Having a bigger buffer means you will have a bigger chance that you will not need to stress out over unexpected costs.

So the point (IMO, YMMV) is not to maximize the number but to minimize the chances of life's surprises catching you off guard. The extra money buys peace of mind. (And yes, after some amount any extra money is just excess and time would be better spent enjoying hobbies/romantic partners/friends/children, but how much that extra buffer needs to be can only decided by everyone for themselves)

[kamaal]

This comment is gold. Debt phobia is real. But the facts here are big investments like buying a home, are not possible without debt, and earlier you go into a debt and earlier you can clear it. The earlier you will have that asset. The same logic continues for multiple properties too.

Another big factor in this is Change jobs often is not a workable strategy here. Anybody with regular focus on their health and investments will tell you. You just can't raise money for making big investments(like above) when you don't have a stable job. Same happens with health too. Unfortunately most people often equate rapid changes to a process with progress. Whereas big progress is often a result of consistent improvement to a single process over long periods of time.

In an economic system with Inflation, increasing responsibilities and biology making aging and being healthy hard. Hoping to save up to buy some thing later is strategy that just doesn't work.

Simple reasoning tells us you need to go into debt a lot, early and often.

[phgn]

Savings allow you freedom from having to earn money, the opposite of debt.

For example, you can temporarily "retire" for a few years and do what you want without pressure. Either directly or indirectly, I think having debt limits you to the path & earnings you've "forecasted" - the opposite of freedom.

At least that's the case for me.

[maccard]

> you can temporarily "retire" for a few years and do what you want without pressure

Not everyone strives to min max their time to the extent that they _can't_ be working while doing what they want. Assuming you're a white collar worker in tech, there are plenty of opportunities for you to make oodles of money, while having a balance between a job and life. Given the choice between being mortgage free in my 30s with an apartment in a cheaper part of town, and being able to quit work to travel/work on my carpentry for 3-5 years, or having a balanced life over the next decade, spending time and having experiences with family & friends, I'll pick the balanced lifestyle every single time.

[ZephyrBlu]

The problem is, how do you price your future earnings appropriately?

[roland35]

I think it is good to be conservative with your retirement savings though! It is much better to leave behind a large estate for your children/charities/whatever than risk spending the last years of your life pennyless due to a market crash or large medical expenses.

[pjc50]

> rationally priced in their future earnings, they'd be in debt more often, for longer and earlier in their life

Future generations may not be offered a choice in this. After all, why should student debt start at age 18 and not age 5? Ouch.

[kamaal]

You have presented a good edge case. But consider this. If you wouldn't want to go into debt at age 5. Would you want do it at age 45/55?