Money Money Money

I’m in the first year of my career. I make more than my whole family put together. I save around £800 a month. Many people I work with make drastically more than me and yet don’t save a penny. This is normal. Most people are irresponsible. You shouldn’t be.

101

Generally speaking, being good with money is simple. Spend less than you earn. Save the difference in index funds. A few caveats:

• Index funds are the best choice now because they are low risk and outperform other kinds of investment. That may change. The further from 2019 you’re reading this, the more likely index funds are no longer the best option.
• Spending more than you earn is fine when you’re intentionally drawing down your savings in a sustainable manner, For example, if you retire/FIRE.
• This advice applies to normal people in normal situations. If you live in a society where your wealth can be taken from you or devalued easily, investing in other more permanent goods may be better. This is why the middle eastern branch of my family would invest in education/signalling, gold and property abroad. Money can be seized, houses repossessed, currency devalued by sanctions. A medical degree is always valuable because every society, even one in the midst of war/breakdown, values doctors.
• There are other exceptions. Use your judgement.

On Debt

Going into debt for luxury goods/consumption is almost always bad. Taking on debt to invest in yourself, e.g through education, can be good but still merits serious thought.

On Meaning

For the miser: Money is not meaning. You should not judge your success in life by the amount of money you make or have. You should not spend your time thinking about how much money you have except when doing so is productive. Material wealth is a means to an end, not an end in itself.

For the ascetic: Money does matter. It can buy wisdom, safety, a better future for your family, a longer life, time with people you love and many other things which have value. It can also be wasted on luxuries and consumption.

Scoring

A rough scale of how well you’re doing in terms of financial prudence:

• Shit tier: Spend more than you earn. Have large amounts of (consumption) debt.
• Bad tier: Not in debt but living paycheck to paycheck.
• Okay: Saving ~15% of income. Emergency fund covering 6 months expenditure.
• Good : Saving ~30% of income. Emergency fund covering 1 year.
• God tier: 50% savings rate.
• Marx tier: 70%+ savings rate

My stats

• Emergency Fund: 2 months (but I can move back in with my parents so actually more like 6 months)
• Saving Rate: 27% + 8% pension = 35%
• Tier: Okay