[lucasfcosta]

Most people’s money problems would be solved if we taught them not to chase status instead of focusing on the numbers.

Financial literacy itself is quite simple: spend less than you make.

Everything else is an optimization and it’s pretty easy to learn with a few days of research.

I know this is the classical HackerNews type comment, but I honestly can’t understand why it’s so hard when there’s so much information available and so few pre-requisites (almost none) to learn about it.

[hot_gril]

It's not simple when big decisions have to be made, like investments, car purchases/loans, and home-related stuff. Main thing people don't seem to understand is that money upfront is worth more than money later.

[NoLinkToMe]

I don't agree with this. Spend less than you earn is a big part, for sure. Without it, you'll never really get very far.

But the rest is not mere 'optimization'. There is a massive difference between someone who puts their savings into a 0% interest account and sees it eaten away by inflation and in some countries (mine) a wealth tax, and someone who puts the savings as a pre-tax investment in their retirement account, which means you don't pay taxes on your salary, and in some countries (mine) don't pay taxes on the stock returns or on the equity as a wealth tax, and can get a 10% nominal annual return and see your money double >5 times over a 40 year career.

In my country the saver (A) versus the investor (B) who puts $1k in savings or a retirement fund at age 25 and liquidates at age 65 looks like this:

A) Saver: $1k salary is $500 take home pay (50% marginal tax of last bit of income). 0% interest rate at the bank. You pay a 2% effective wealth tax per year. That means $222 is left at age 65. Prices in this time went up by 3% a year, meaning what is left is the equivalent of $68 in today's dollars.

B) investor: $1k salary goes pre-tax into retirement account. You get a 10% return each year, so at 65 you have 45k. You pay no wealth tax or return taxes in the retirement account. You then pay it out as a personal income at a reduced retirement rate of 35%, meaning you have about 30k left. In today's dollars that's about 10k.

So $10000 vs $68. That's not optimization, it's the difference between gaining 10x versus losing 93% of it, or the difference between everything and nothing.

Country of example is NL. Discrepancies are bigger or smaller elsewhere depending on tax policies, but generally the difference will remain orders of magnitude.

I do agree that it's pretty easy to learn.

[vitus]

> Saver: $1k salary is $500 take home pay (50% marginal tax of last bit of income). 0% interest rate at the bank. You pay a 2% effective wealth tax per year.

Wait, what? Under that tax regime, you might as well squirrel away that money under your mattress; you'd at least have the equivalent of $300 left after 40 years.

Apparently there was a ruling by the Dutch supreme court equivalent (the Hoge Raad) last year that if your actual return is lower than the notional return (assumed ~6%), then you're supposed to be taxed on your actual return.

https://www.belastingdienst.nl/wps/wcm/connect/en/income-in-...

[vjk800]

> Financial literacy itself is quite simple: spend less than you make.

Maybe for the quantitatively minded Hacker News audience this is simple. But there are quite many people who have no idea how much they are spending, or sometimes even how much they are spending.

It's easy to forget if you live in tech - or even middle class - bubble, but even the most basic math is very difficult to some fraction of people.

[graemep]

> but even the most basic math is very difficult to some fraction of people.

That is the real problem. People need to learn maths before they can learn financial literacy.

[vjk800]

Maybe. Or maybe there is just a certain fraction of people that are incapable of learning it. Like dyslexia, but for mathematical operations. I mean, it's not like we're not trying. Math is taught in every school at every age group and it's around us everywhere.

[graemep]

There is such a recognised condition with regard to arithmetic. Its called dyscalculia.

Those with it need appropriate teaching, but can end up pretty good at maths.

> Math is taught in every school at every age group and it's around us everywhere.

it is taught everywhere, but I think it is usually badly taught - more commonly badly taught than any other subject.

[koolba]

> But there are quite many people who have no idea how much they are spending, or sometimes even how much they are spending.

Step one would be teaching people to write down the balance of all their accounts on 12/31 of each year. Checking, savings, brokerage, and all credit card debt (including current month spending). The difference in that number over two years is your net for the year.

Your gross is going to be approximately what you report on your taxes. In reality it’ll be a bit more but this gives you an upper bound.

[matthewmacleod]

Nah, that's reductive to the point of being useless. It's like saying "losing weight is simple: eat fewer calories than you burn". It's both completely correct and completely unhelpful.

Broadly, everybody realises that you will accumulate money if you spend less than you earn. That's not financial literacy though – how do you do that? How do you know how much you are earning, and how much you are spending? How can you figure out how to spend less?

Almost 30% of US adults are level 1 or below on the PIAAC numeracy scale – a level at which you can perform only the most basic arithmetic. It is, for many people, far from "pretty easy" or "quite simple".

[rytill]

How is “losing weight is simple: eat fewer calories than you burn” unhelpful? I’m genuinely asking, and want to understand how to empathize better.

It seems like a lot of people don’t make weight loss progress because they never internalize that fact and seem to “fight it” psychologically.

[Klaster_1]

Being frugal no longer cuts it. As basic needs cost, such as housing, continues to outpace income, financial literacy won't be enough. Unless it crosses a point where people purposefully elect government willing to address the issue.

[orangecat]

As basic needs cost, such as housing, continues to outpace income, financial literacy won't be enough. Unless it crosses a point where people purposefully elect government willing to address the issue.

Agreed, although I would note that a large part of addressing the issue of unaffordable housing is for governments to stop actively it worse by forbidding construction.

[roenxi]

> ...I honestly can’t understand why it’s so hard...

You're pretty close, you touched on all the major points in your comment. You suggested people not to chase status. But a lot of people spend their whole lives and all the resources at their disposal chasing status. All they understand, want or need is status. They are status chasing people.

You try teaching them not to chase status and it won't work. This is also what makes financial literacy so hard - people have these instincts that don't care about longer term material comfort even a little bit. They're calibrated for a world where "capital" is a stick with a rock tied to it and maybe a nice cave. There are these hang-overs from the old times where people's mind and body are strongly conditioned to only be sensitive to their current social status and they're willing to burn their entire bank account to get it now.

Watching such people up close when they are also intelligent is a fascinating experience. They know that they're not doing financially optimal things. They don't care. They'd eat nails and go without sleep if they thought that would make them look better than their peers. Being poor in 12 months time doesn't register as a threat intellectually or emotionally.

Note that even the people who are good at investing usually cheat by using their emotions in weird ways.

[XorNot]

Except your second line is contradicted at the outset, because the largest purchase most people will make - their home - is bought on debt (a mortgage).

Now there's sound, very good reasons to do this...but the headline issue itself already forces us to deal with more complex issues.

Right there we're into issues like why is it okay to buy some things on debt but not others, how do you evaluate the time value of money etc.

All still relatively simple...but not that simple, and frequently with no obviously correct answers either.

[dhruvrrp]

> Financial literacy itself is quite simple: spend less than you make.

I'd disagree with this. Financial literacy includes understanding how /how much to save as well. Too many people spend less than what they earn, but would be screwed if an emergency hit, because they have basically 0 savings/emergency fund.

And the consequences of this are dire, I've seen people in their 70s working because they basically cannot afford to not work due to a lack of savings.