Conversation with co workers/ financial literacy among non-boglehead types

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like2read
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Re: Conversation with co workers/ financial literacy among non-boglehead types

Post by like2read »

FD1150 wrote: Sun Oct 02, 2022 4:36 pm For most of my career, I was a fire officer in command of one or more fire stations. As such, it was my responsibility to see that my firefighters were well trained and prepared for whatever the job threw at them. I always made sure, whenever I got a new person, to talk to them about our 457b plan and suggest to them that it might be a good thing to enroll in. The Representative for the 457b provider was a sucker for good pot roast. I would call him and invite him to dinner with our shift. He would get a good, free dinner(firefighters can cook and we eat well) and my new recruit to sell on the plan. It was not the best deal around, but it was the only deal that we had access to. I must have been responsible for 30-40 new signups over my career.

Now that I am long retired and living a very comfortable life, I occasionally get a call from my fellow firefighters thanking me for strong-arming them into the 457b plan. Mission accomplished.
Bravo! Posts like this make me want to stop "holding my tongue" and encourage every 20 something to just do a target date fund.

l2r
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Re: Conversation with co workers/ financial literacy among non-boglehead types

Post by MichRoots »

My mother-in-law received an inheritance a couple years ago. She has over 70k in the bank earning 0 interest. I tried to show her the wisdom of paying down her 13% credit cards (nearly 20k balance), but couldn't get her to do it. At least she agreed to sign up for a 0% , no balance transfer card for 5k of the credit. She also finally agreed to put 5k into ibonds.
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Re: Conversation with co workers/ financial literacy among non-boglehead types

Post by ROIGuy »

Florida Orange wrote: Sun Oct 02, 2022 7:20 am Here's one small example. From a news article recently about financial literacy and the American public. In a survey of thousands of randomly selected adults, one question was "If you deposit $1,000 in a bank account that pays 2% interest per year and you don't touch the money, at the end of one year will you have A) More than $1,000, B) Less than $1,000, C) Exactly $1,000? Most people got the answer wrong.
That's not financial literacy, that is basic math. Which I think makes it all the more sad.
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Re: Conversation with co workers/ financial literacy among non-boglehead types

Post by AnnetteLouisan »

Mr.BB wrote: Sun Oct 02, 2022 5:17 pm
Florida Orange wrote: Sun Oct 02, 2022 7:20 am Here's one small example. From a news article recently about financial literacy and the American public. In a survey of thousands of randomly selected adults, one question was "If you deposit $1,000 in a bank account that pays 2% interest per year and you don't touch the money, at the end of one year will you have A) More than $1,000, B) Less than $1,000, C) Exactly $1,000? Most people got the answer wrong.
That's not financial literacy, that is basic math. Which I think makes it all the more sad.
I assume these tests are done by random phone calls? Can we really assume respondents are trying their best to answer? How would you feel if someone called you and random and asked you that in your dinner hour? What percentage of folks gave an answer that (ahem) wasn’t one of the choices? Were hang ups counted as getting the wrong answer? I mean, people have shows to watch and lives to lead without getting interrogated on 2d grade math in the privacy of their homes.

I’m sure most people know basic math. Maybe it was so simple that they thought it was a trick question.
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Re: Conversation with co workers/ financial literacy among non-boglehead types

Post by ROIGuy »

Rudedog wrote: Sun Oct 02, 2022 4:43 pm Most just turn their money blindly over to an "advisor" and don't even look at their statements. If anyone asks me a direct question I would answer it, but nothing else.
Could you imagine if a financial advisor had to send out a statement every quarter billing each customer instead of taking it from their portfolio. I wonder how many customers would leave them if they actually saw how much they were paying every year?
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Re: Conversation with co workers/ financial literacy among non-boglehead types

Post by ROIGuy »

AnnetteLouisan wrote: Sun Oct 02, 2022 5:21 pm
Mr.BB wrote: Sun Oct 02, 2022 5:17 pm
Florida Orange wrote: Sun Oct 02, 2022 7:20 am Here's one small example. From a news article recently about financial literacy and the American public. In a survey of thousands of randomly selected adults, one question was "If you deposit $1,000 in a bank account that pays 2% interest per year and you don't touch the money, at the end of one year will you have A) More than $1,000, B) Less than $1,000, C) Exactly $1,000? Most people got the answer wrong.
That's not financial literacy, that is basic math. Which I think makes it all the more sad.
I assume these tests are done by random phone calls? Can we really assume respondents are trying their best to answer? How would you feel if someone called you and random and asked you that in your dinner hour? What percentage of folks gave an answer that (ahem) wasn’t one of the choices? Were hang ups counted as getting the wrong answer? I mean, people have shows to watch and lives to lead without getting interrogated on 2d grade math in the privacy of their homes.

I’m sure most people know basic math. Maybe it was so simple that they thought it was a trick question.
Unfortunately if the article did not mention how it was done that would be total speculation.
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Re: Conversation with co workers/ financial literacy among non-boglehead types

Post by Doom&Gloom »

upstate90 wrote: Sun Oct 02, 2022 12:56 am ...

To make this story actionable ill ask everyone how often they encounter non-boglehead types who don't even seem to have basic 101 financial/tax/investing knowledge and if you do encounter it with a co worker, friend, or family member, how much effort do you put in to trying to explain, or teach them things that could help them?
I can't recall a co-worker ever asking me for financial advice, so I don't offer it. Now retired, but in retrospect nearly all of my co-workers fell into two groups: paycheck-to-paycheck and know-it-all. I didn't have much to offer either of those even if I had been asked.

Never been asked by friends either. A few wanted to brag or whine about their individual stocks. No advice offered there either.

Relatives almost all fall into the know-it-all category, so no advice there either. I do what I can when I can with DW and DS. I tried a couple of times with DD, but she also asked other people for their advice and followed that. I no longer waste my time there.
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Re: Conversation with co workers/ financial literacy among non-boglehead types

Post by Exchme »

I gave a talk to the staff every month. They were a bit of a captive audience, so one time I decided to change it up and did "Basics of Financial Literacy", included the smarts of contributing to the 401k, Boglehead philosophy, who needs and who doesn't need insurance, I showed charts of Enron and Amazon stock at different points in time without telling them what they were seeing to show them that they couldn't guess the future, the basics of timing claiming SS, etc. That was years ago and I've had several people approach me over the years and thank me for it, one just a few months ago, one wanted the slides to give the talk a similar talk to a different group. I did something similar for my kids after they were grown, (after handing them a nice gift check to make sure I had their attention). One asked for a write-up to pass to friends and several read it and thanked me, one even approached me and asked me all kinds of questions. So you don't have to be a bore about it or reveal your personal data in order to make a positive impact.
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Re: Conversation with co workers/ financial literacy among non-boglehead types

Post by AnnetteLouisan »

Mr.BB wrote: Sun Oct 02, 2022 5:27 pm
AnnetteLouisan wrote: Sun Oct 02, 2022 5:21 pm
Mr.BB wrote: Sun Oct 02, 2022 5:17 pm
Florida Orange wrote: Sun Oct 02, 2022 7:20 am Here's one small example. From a news article recently about financial literacy and the American public. In a survey of thousands of randomly selected adults, one question was "If you deposit $1,000 in a bank account that pays 2% interest per year and you don't touch the money, at the end of one year will you have A) More than $1,000, B) Less than $1,000, C) Exactly $1,000? Most people got the answer wrong.
That's not financial literacy, that is basic math. Which I think makes it all the more sad.
I assume these tests are done by random phone calls? Can we really assume respondents are trying their best to answer? How would you feel if someone called you and random and asked you that in your dinner hour? What percentage of folks gave an answer that (ahem) wasn’t one of the choices? Were hang ups counted as getting the wrong answer? I mean, people have shows to watch and lives to lead without getting interrogated on 2d grade math in the privacy of their homes.

I’m sure most people know basic math. Maybe it was so simple that they thought it was a trick question.
Unfortunately if the article did not mention how it was done that would be total speculation.
I don’t think it’s too much of a stretch, given that it was a survey of “thousands of randomly selected American adults,” and given how often such surveys are conducted by phone.
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Re: Conversation with co workers/ financial literacy among non-boglehead types

Post by Florida Orange »

AnnetteLouisan wrote: Sun Oct 02, 2022 5:21 pm
Mr.BB wrote: Sun Oct 02, 2022 5:17 pm
Florida Orange wrote: Sun Oct 02, 2022 7:20 am Here's one small example. From a news article recently about financial literacy and the American public. In a survey of thousands of randomly selected adults, one question was "If you deposit $1,000 in a bank account that pays 2% interest per year and you don't touch the money, at the end of one year will you have A) More than $1,000, B) Less than $1,000, C) Exactly $1,000? Most people got the answer wrong.
That's not financial literacy, that is basic math. Which I think makes it all the more sad.
I assume these tests are done by random phone calls? Can we really assume respondents are trying their best to answer? How would you feel if someone called you and random and asked you that in your dinner hour? What percentage of folks gave an answer that (ahem) wasn’t one of the choices? Were hang ups counted as getting the wrong answer? I mean, people have shows to watch and lives to lead without getting interrogated on 2d grade math in the privacy of their homes.

I’m sure most people know basic math. Maybe it was so simple that they thought it was a trick question.
People were contacted by email and asked if they would like to participate in an online survey. Those who responded answered the questions online.
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Re: Conversation with co workers/ financial literacy among non-boglehead types

Post by student »

Mr.BB wrote: Sun Oct 02, 2022 5:27 pm
AnnetteLouisan wrote: Sun Oct 02, 2022 5:21 pm
Mr.BB wrote: Sun Oct 02, 2022 5:17 pm
Florida Orange wrote: Sun Oct 02, 2022 7:20 am Here's one small example. From a news article recently about financial literacy and the American public. In a survey of thousands of randomly selected adults, one question was "If you deposit $1,000 in a bank account that pays 2% interest per year and you don't touch the money, at the end of one year will you have A) More than $1,000, B) Less than $1,000, C) Exactly $1,000? Most people got the answer wrong.
That's not financial literacy, that is basic math. Which I think makes it all the more sad.
I assume these tests are done by random phone calls? Can we really assume respondents are trying their best to answer? How would you feel if someone called you and random and asked you that in your dinner hour? What percentage of folks gave an answer that (ahem) wasn’t one of the choices? Were hang ups counted as getting the wrong answer? I mean, people have shows to watch and lives to lead without getting interrogated on 2d grade math in the privacy of their homes.

I’m sure most people know basic math. Maybe it was so simple that they thought it was a trick question.
Unfortunately if the article did not mention how it was done that would be total speculation.
I have seen this question on a "quiz" at some website. This is probably a standard question used by various group.
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Re: Conversation with co workers/ financial literacy among non-boglehead types

Post by Herekittykitty »

Florida Orange wrote: Sun Oct 02, 2022 5:34 pm ........
People were contacted by email and asked if they would like to participate in an online survey. Those who responded answered the questions online.
So the people who responded are people who opened an email from someone they didn't know and agreed to participate in a survey, and at some point clicked on a link on the email or went to a site and clicked on it, and answered questions?

:oops:
I don't know anything.
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Re: Conversation with co workers/ financial literacy among non-boglehead types

Post by PersonalFinanceJam »

like2read wrote: Sun Oct 02, 2022 4:33 pm
arcticpineapplecorp. wrote: Sun Oct 02, 2022 2:37 pm
Florida Orange wrote: Sun Oct 02, 2022 7:20 am Here's one small example. From a news article recently about financial literacy and the American public. In a survey of thousands of randomly selected adults, one question was "If you deposit $1,000 in a bank account that pays 2% interest per year and you don't touch the money, at the end of one year will you have A) More than $1,000, B) Less than $1,000, C) Exactly $1,000? Most people got the answer wrong.
yeah Dr. William Bernstein has said:

William Bernstein is one of the foremost advocates for individual investors. When he talks about the dynamics of investing, I pay attention to what he says and most of the time I agree with him.

In Bernstein’s underrated book, The Investor’s Manifesto, he shares his thoughts on the difficulty of investing on your own (emphasis mine):

"Having emailed and spoken to thousands of investors over the years, I have come to the conclusion that only a tiny minority will ever succeed in managing their money even tolerably well.

Successful investors need four abilities. First they must possess an interest in the process. It is no different from carpentry, gardening, or parenting. If money management is not enjoyable, then a lousy job inevitably results, and, unfortunately, most people enjoy finance about as much as they do root canal work.

Second, investors need more than a bit of math horsepower, far beyond simple arithmetic and algebra, or even the ability to manipulate a spreadsheet. Mastering the basics of investment theory requires an understanding of the laws of probability and a working knowledge of statistics. Sadly, as one financial columnist explained to me more than a decade ago, fractions are a stretch for 90% of the population.

Third, investors need a firm grasp of financial history, from the South Sea Bubble to the Great Depression. Alas, this is something that even professionals have real trouble with.

Even if investors possess all three of these abilities, it will all be for naught if they do not have a fourth one: the emotional discipline to execute their planned strategy faithfully, come hell, high water, or the apparent end of capitalism as we know it. “Stay the course”: it sounds so easy when uttered at high tide. Unfortunately, when the water recedes, it is not.

I expect no more than 10% of the population passes muster on each of the above counts. This suggests that as few as one person in ten thousand (10% to the 4th power) has the full skill set."

So you’re telling me there’s a chance.

Bernstein is saying that roughly 0.01% of the investing public has the ability to put all of these factors together to be a successful investor.

source: https://awealthofcommonsense.com/2014/0 ... ting-hard/
I think Dr. Bernstein nailed it on this one. (And on many other things!).

It's kinda like someone skilled at throwing a football going - "well, you just need to hold the ball like this, put your left foot forward....." Some have an interest and are going to be willing and able to learn from that, and execute, and some others not. Some have no interest in football. Some can master the basics. Some hire someone to play football for them. And some number become quarterbacks.

l2r
Bernstein is overly pessimistic in this area. If he is even remotely right that means most of us are completely out of luck. There are approximately 122 million households in the US. If we assume that is the proxy for the number of actual investors in the US, then by the above logic just over 12 thousand will be successful. Now we can argue about what success is, but even at 10% hat gets us to just 12 million.

In my peer group of friends (early 40's) we are very open about a wide variety of subjects which a generation ago were off limits. The younger generation seems to be even more so. The analogies to sports or knowing how to do car repairs don't make a lot of sense to me. There aren't enough paid sports positions available for even a small fraction of the population to be employed by the sector. So my general lack of refining my sports ability is of little consequence beyond the enjoyment I can derive. There are plenty of other areas where I can get a good job with the skills I have honed. It may not be 100% of us but I would think it's in the high 90% of people will have to deal with some sort of financial shock and the eventuality of not being willing or able to be gainfully employed anymore. The consequences of that are much more dire.

There are a lot more resources available now which are easier to digest and will do the heavy lifting parts of math and basic investing for a person. Bogleheads should be sharing their wisdom in a humble and thoughtful manner.
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Re: Conversation with co workers/ financial literacy among non-boglehead types

Post by Florida Orange »

Herekittykitty wrote: Sun Oct 02, 2022 5:47 pm
Florida Orange wrote: Sun Oct 02, 2022 5:34 pm ........
People were contacted by email and asked if they would like to participate in an online survey. Those who responded answered the questions online.
So the people who responded are people who opened an email from someone they didn't know and agreed to participate in a survey, and at some point clicked on a link on the email or went to a site and clicked on it, and answered questions?

:oops:
The survey was conducted by FINRA. Participants were drawn from quota samples based on Census Bureau distribution for age, gender, ethnicity, education level and income.
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Re: Conversation with co workers/ financial literacy among non-boglehead types

Post by Richard1580 »

Mr.BB wrote: Sun Oct 02, 2022 5:25 pm
Rudedog wrote: Sun Oct 02, 2022 4:43 pm Most just turn their money blindly over to an "advisor" and don't even look at their statements. If anyone asks me a direct question I would answer it, but nothing else.
Could you imagine if a financial advisor had to send out a statement every quarter billing each customer instead of taking it from their portfolio. I wonder how many customers would leave them if they actually saw how much they were paying every year?
+1 If the fee showed up as a monthly bill more people would ask, "what exactly am I paying you for?" :-)
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Re: Conversation with co workers/ financial literacy among non-boglehead types

Post by You Know What I Mean »

alpenglow wrote: Sun Oct 02, 2022 9:57 am
AnnetteLouisan wrote: Sun Oct 02, 2022 9:47 am I’ve had coworkers come by and ask if our paychecks hit our account yet and what time they are supposed to hit. For some, minutes count.
I once mentioned that my paycheck hits my Fido CMA account a day early. There was a lot of interest. Again, me talking when I shouldn't.
One of the reasons I stopped listening to Planet Money podcasts occasionally was this episode on the benefits of DailyPay, etc. Rather than motivate people to save a little, it encourages (or at least enables) people to get their wages daily rather than waiting for the usual paycheck ("don't give your boss a loan").

https://www.npr.org/transcripts/787996422
"Well, she was just seventeen, You Know What I Mean, and the way she looked... was way beyond compare."
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Re: Conversation with co workers/ financial literacy among non-boglehead types

Post by Dottie57 »

AnnetteLouisan wrote: Sun Oct 02, 2022 8:13 am
jebmke wrote: Sun Oct 02, 2022 8:08 am
alpenglow wrote: Sun Oct 02, 2022 8:02 am
AnnetteLouisan wrote: Sun Oct 02, 2022 7:35 am I was generally laughed at, denigrated and reproached for budgeting and saving money in my 20s and 30s. One friend asked why I was saving so much. I told him if you save and start early, it accumulates and then your money makes money and after a while you can live off the interest. He said that’s not possible.
I've had similar experiences, but who is laughing now?!
Then they resent you on the backend. There is no win here.
Yep. Very true. But I also don’t give any indication anymore about my finances. I stopped all mention of my salary around 1996. I look like I make around $70k and have $175k saved, and that suits me fine.
If you retire early and don’t take SS, people will figure it out.
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Re: Conversation with co workers/ financial literacy among non-boglehead types

Post by AnnetteLouisan »

Dottie57 wrote: Sun Oct 02, 2022 7:44 pm
AnnetteLouisan wrote: Sun Oct 02, 2022 8:13 am
jebmke wrote: Sun Oct 02, 2022 8:08 am
alpenglow wrote: Sun Oct 02, 2022 8:02 am
AnnetteLouisan wrote: Sun Oct 02, 2022 7:35 am I was generally laughed at, denigrated and reproached for budgeting and saving money in my 20s and 30s. One friend asked why I was saving so much. I told him if you save and start early, it accumulates and then your money makes money and after a while you can live off the interest. He said that’s not possible.
I've had similar experiences, but who is laughing now?!
Then they resent you on the backend. There is no win here.
Yep. Very true. But I also don’t give any indication anymore about my finances. I stopped all mention of my salary around 1996. I look like I make around $70k and have $175k saved, and that suits me fine.
If you retire early and don’t take SS, people will figure it out.
I think people aren’t as interested in me as they once were. :)
And vice versa. And I’ve stopped spending time with frenemies.
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Re: Conversation with co workers/ financial literacy among non-boglehead types

Post by Dottie57 »

arcticpineapplecorp. wrote: Sun Oct 02, 2022 2:37 pm
Florida Orange wrote: Sun Oct 02, 2022 7:20 am Here's one small example. From a news article recently about financial literacy and the American public. In a survey of thousands of randomly selected adults, one question was "If you deposit $1,000 in a bank account that pays 2% interest per year and you don't touch the money, at the end of one year will you have A) More than $1,000, B) Less than $1,000, C) Exactly $1,000? Most people got the answer wrong.
yeah Dr. William Bernstein has said:

William Bernstein is one of the foremost advocates for individual investors. When he talks about the dynamics of investing, I pay attention to what he says and most of the time I agree with him.

In Bernstein’s underrated book, The Investor’s Manifesto, he shares his thoughts on the difficulty of investing on your own (emphasis mine):

"Having emailed and spoken to thousands of investors over the years, I have come to the conclusion that only a tiny minority will ever succeed in managing their money even tolerably well.

Successful investors need four abilities. First they must possess an interest in the process. It is no different from carpentry, gardening, or parenting. If money management is not enjoyable, then a lousy job inevitably results, and, unfortunately, most people enjoy finance about as much as they do root canal work.

Second, investors need more than a bit of math horsepower, far beyond simple arithmetic and algebra, or even the ability to manipulate a spreadsheet. Mastering the basics of investment theory requires an understanding of the laws of probability and a working knowledge of statistics. Sadly, as one financial columnist explained to me more than a decade ago, fractions are a stretch for 90% of the population.

Third, investors need a firm grasp of financial history, from the South Sea Bubble to the Great Depression. Alas, this is something that even professionals have real trouble with.

Even if investors possess all three of these abilities, it will all be for naught if they do not have a fourth one: the emotional discipline to execute their planned strategy faithfully, come hell, high water, or the apparent end of capitalism as we know it. “Stay the course”: it sounds so easy when uttered at high tide. Unfortunately, when the water recedes, it is not.

I expect no more than 10% of the population passes muster on each of the above counts. This suggests that as few as one person in ten thousand (10% to the 4th power) has the full skill set."

So you’re telling me there’s a chance.

Bernstein is saying that roughly 0.01% of the investing public has the ability to put all of these factors together to be a successful investor.

source: https://awealthofcommonsense.com/2014/0 ... ting-hard/

Is number 2 really necessary? Especially if your only investment is 401k. I’ve put money into reasonable investments.
As for #3, you don’t need lots of knowledge of financial history.

I don’t have ahuge nest egg but more than others I know.
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Re: Conversation with co workers/ financial literacy among non-boglehead types

Post by Normchad »

AnnetteLouisan wrote: Sun Oct 02, 2022 7:51 pm
Dottie57 wrote: Sun Oct 02, 2022 7:44 pm
AnnetteLouisan wrote: Sun Oct 02, 2022 8:13 am
jebmke wrote: Sun Oct 02, 2022 8:08 am
alpenglow wrote: Sun Oct 02, 2022 8:02 am

I've had similar experiences, but who is laughing now?!
Then they resent you on the backend. There is no win here.
Yep. Very true. But I also don’t give any indication anymore about my finances. I stopped all mention of my salary around 1996. I look like I make around $70k and have $175k saved, and that suits me fine.
If you retire early and don’t take SS, people will figure it out.
I think people aren’t as interested in me as they once were. :)
And vice versa. And I’ve stopped spending time with frenemies.
You are right about that. But if this comes up for me, I’m going with “I’m between jobs right now…..”. If nothing else, people won’t ask to borrow money :)
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Re: Conversation with co workers/ financial literacy among non-boglehead types

Post by jebmke »

Normchad wrote: Sun Oct 02, 2022 8:14 pm You are right about that. But if this comes up for me, I’m going with “I’m between jobs right now…..”.
Tell them you were laid off. Maybe they will buy you lunch.
Stay hydrated; don't sweat the small stuff
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Re: Conversation with co workers/ financial literacy among non-boglehead types

Post by $=WxTxI »

Triple digit golfer wrote: Sun Oct 02, 2022 9:43 am At 37, I've learned by now to avoid them. When I was younger and less mature, I would engage. Now, I avoid these types of conversations. People often ask me for advice and even then I don't give much because my experience is that people don't really want advice, they want confirmation bias.

A perfect example is my single, no kids friend asking me about paying extra on his 2.5% mortgage vs. investing. He is a saver, which is the most important thing, but he listens to Dave Ramsey and thinks Dave is the supreme authority on all financial issues. I told him that I wouldn't even consider paying extra on a 2.5% mortgage until all tax advantaged retirement accounts are maxed out. He asked what the max was and I told him the numbers for 401(k), IRA, and HSA. This is a guy who makes maybe $70-80k and he was appalled at the high amounts. How is he supposed to max those out?!?!?!

Never mind that I didn't say he should. I said he should prioritize doing so before paying extra on the mortgage, meaning, in his case, don' t pay extra on the mortgage because you're giving up valuable tax-advantaged space to do so. He brushed it aside.

So, instead, he's putting enough to get the company match on his 401(k) and every extra cent is going to the mortgage. So be it. At least he's not spending it on hookers and booze.

I've had worse conversations than that with co-workers close to twice my age in the past. A few years back a guy came to me somewhat angrily with his pay stub, asking why so much tax was withheld for his bonus and demanding a refund. After I explained that I'm not in Payroll or HR and have no control over withholding rates anyway, he said he's being penalized for getting a bonus instead of having it in his regular salary. I tried explaining that he'll get it back when he files and that he could adjust his regular withholding to even things out so that he can be paid more throughout the year and get a smaller refund, he didn't want to hear it and said that his refund is he and his wife's vacation money. So, quite hypocritical besides being illogical and unwilling to even consider that he is not 100% correct.

This is one example of many I've had. I should have just told the guy to talk to Payroll. If I was in Payroll I'd probably tell him those are the rates, talk to his accountant.

Not worth it.
Your friend isn't following Dave Ramseys advice. He's doing his own thing. So much for believing D.R. is the Supreme authority on all financial matters.

If your friend truly followed D.R. advice he would be wealthy in retirement, just slightly below a Boglehead.

D.R. advises to pay off all non mortgage debt, then save 3-6 mo emergency fund, then save 15% for retirement, then save for kids college, then pay off mortgage, and finally build wealth and give.

True followers of Dave Ramseys advice will do better than ~98% of the population except for Bogleheads and few others.
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arcticpineapplecorp.
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Re: Conversation with co workers/ financial literacy among non-boglehead types

Post by arcticpineapplecorp. »

Dottie57 wrote: Sun Oct 02, 2022 7:57 pm
arcticpineapplecorp. wrote: Sun Oct 02, 2022 2:37 pm
Florida Orange wrote: Sun Oct 02, 2022 7:20 am Here's one small example. From a news article recently about financial literacy and the American public. In a survey of thousands of randomly selected adults, one question was "If you deposit $1,000 in a bank account that pays 2% interest per year and you don't touch the money, at the end of one year will you have A) More than $1,000, B) Less than $1,000, C) Exactly $1,000? Most people got the answer wrong.
yeah Dr. William Bernstein has said:

William Bernstein is one of the foremost advocates for individual investors. When he talks about the dynamics of investing, I pay attention to what he says and most of the time I agree with him.

In Bernstein’s underrated book, The Investor’s Manifesto, he shares his thoughts on the difficulty of investing on your own (emphasis mine):

"Having emailed and spoken to thousands of investors over the years, I have come to the conclusion that only a tiny minority will ever succeed in managing their money even tolerably well.

Successful investors need four abilities. First they must possess an interest in the process. It is no different from carpentry, gardening, or parenting. If money management is not enjoyable, then a lousy job inevitably results, and, unfortunately, most people enjoy finance about as much as they do root canal work.

Second, investors need more than a bit of math horsepower, far beyond simple arithmetic and algebra, or even the ability to manipulate a spreadsheet. Mastering the basics of investment theory requires an understanding of the laws of probability and a working knowledge of statistics. Sadly, as one financial columnist explained to me more than a decade ago, fractions are a stretch for 90% of the population.

Third, investors need a firm grasp of financial history, from the South Sea Bubble to the Great Depression. Alas, this is something that even professionals have real trouble with.

Even if investors possess all three of these abilities, it will all be for naught if they do not have a fourth one: the emotional discipline to execute their planned strategy faithfully, come hell, high water, or the apparent end of capitalism as we know it. “Stay the course”: it sounds so easy when uttered at high tide. Unfortunately, when the water recedes, it is not.

I expect no more than 10% of the population passes muster on each of the above counts. This suggests that as few as one person in ten thousand (10% to the 4th power) has the full skill set."

So you’re telling me there’s a chance.

Bernstein is saying that roughly 0.01% of the investing public has the ability to put all of these factors together to be a successful investor.

source: https://awealthofcommonsense.com/2014/0 ... ting-hard/

Is number 2 really necessary? Especially if your only investment is 401k. I’ve put money into reasonable investments.
As for #3, you don’t need lots of knowledge of financial history.

I don’t have ahuge nest egg but more than others I know.
reagarding #2: i take your point one doesn't need to be a quant or a polymath to invest, but then why as one example do some even bogleheads seem to understand the power of compounding interest yet find themselves seemingly amazed that bonds can actually lose money this year?

Why do so many people not understand the probability of stocks and bonds going down at the same time is not 0%? (see the post titled "why isn't diversification working?)

And to go one step further while also resonding to #3: if people understood financial history, then they shouldn't be so surprised that bonds can lose money and stocks and bonds can lose money in a given year...because it's happened before, right? And yet, how many posts do we have about people's world being rocked because they thought bonds always went up when stocks went down (and/or didn't understand the difference between negatively correlated and uncorrelated assets, which brings us back to Dr. Bernstein's point in #2 again. also see the post "why isn't diversification working?").
It's hard to accept the truth when the lies were exactly what you wanted to hear. Investing is simple, but not easy. Buy, hold & rebalance low cost index funds & manage taxable events. Asking Portfolio Questions | Wiki
Wannaretireearly
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Re: Conversation with co workers/ financial literacy among non-boglehead types

Post by Wannaretireearly »

3 pages, wow. I’ll need time to catch up with this thread!

There is something deep rooted here. School or any formal education does not teach folks to be a smart shopper. Unfortunately unless you learn this early, it’s a hard road.

Simply put, if your not a smart shopper, your also not going to buy into the most optimal and proven long term investment philosophies. There is a reason why this site is largely self selecting, most ppl who stick around here, already come with a ‘smart shopper’ attitude or aspire to have one.

Simple examples:
- how you shop for big purchases like cars and houses
- how you shop for smaller purchases and ensure you are being frugal

Suddenly expecting the general population to understand Roth Vs. Tax deferred vs taxable vs ??? Is just a step too far. Ppl zone out/gloss over. It’s just too much for the majority of the population :(

Not to get political, but the govt (any in US, Federal or State) does not help either. When was the last time you saw the govt explaining the benefits of various retirement accounts and which to use when? Why doesn’t that happen if the govt is supposed to work for the people?

Outside of the US, you will find much more govt encouragement and advice. I’d love to hear counter arguments!

Edit: Even when our company runs sessions on topics like Mega Backdooor Roth, I’m guessing less than 20% of super smart and well comped folks understand it. I’d guess less than 10% sign up.
“At some point you are trading time you will never get back for money you will never spend.“ | “How do you want to spend the best remaining year of your life?“
Dottie57
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Re: Conversation with co workers/ financial literacy among non-boglehead types

Post by Dottie57 »

arcticpineapplecorp. wrote: Sun Oct 02, 2022 9:29 pm
Dottie57 wrote: Sun Oct 02, 2022 7:57 pm
arcticpineapplecorp. wrote: Sun Oct 02, 2022 2:37 pm
Florida Orange wrote: Sun Oct 02, 2022 7:20 am Here's one small example. From a news article recently about financial literacy and the American public. In a survey of thousands of randomly selected adults, one question was "If you deposit $1,000 in a bank account that pays 2% interest per year and you don't touch the money, at the end of one year will you have A) More than $1,000, B) Less than $1,000, C) Exactly $1,000? Most people got the answer wrong.
yeah Dr. William Bernstein has said:

William Bernstein is one of the foremost advocates for individual investors. When he talks about the dynamics of investing, I pay attention to what he says and most of the time I agree with him.

In Bernstein’s underrated book, The Investor’s Manifesto, he shares his thoughts on the difficulty of investing on your own (emphasis mine):

"Having emailed and spoken to thousands of investors over the years, I have come to the conclusion that only a tiny minority will ever succeed in managing their money even tolerably well.

Successful investors need four abilities. First they must possess an interest in the process. It is no different from carpentry, gardening, or parenting. If money management is not enjoyable, then a lousy job inevitably results, and, unfortunately, most people enjoy finance about as much as they do root canal work.

Second, investors need more than a bit of math horsepower, far beyond simple arithmetic and algebra, or even the ability to manipulate a spreadsheet. Mastering the basics of investment theory requires an understanding of the laws of probability and a working knowledge of statistics. Sadly, as one financial columnist explained to me more than a decade ago, fractions are a stretch for 90% of the population.

Third, investors need a firm grasp of financial history, from the South Sea Bubble to the Great Depression. Alas, this is something that even professionals have real trouble with.

Even if investors possess all three of these abilities, it will all be for naught if they do not have a fourth one: the emotional discipline to execute their planned strategy faithfully, come hell, high water, or the apparent end of capitalism as we know it. “Stay the course”: it sounds so easy when uttered at high tide. Unfortunately, when the water recedes, it is not.

I expect no more than 10% of the population passes muster on each of the above counts. This suggests that as few as one person in ten thousand (10% to the 4th power) has the full skill set."

So you’re telling me there’s a chance.

Bernstein is saying that roughly 0.01% of the investing public has the ability to put all of these factors together to be a successful investor.

source: https://awealthofcommonsense.com/2014/0 ... ting-hard/

Is number 2 really necessary? Especially if your only investment is 401k. I’ve put money into reasonable investments.
As for #3, you don’t need lots of knowledge of financial history.

I don’t have ahuge nest egg but more than others I know.
reagarding #2: i take your point one doesn't need to be a quant or a polymath to invest, but then why as one example do some even bogleheads seem to understand the power of compounding interest yet find themselves seemingly amazed that bonds can actually lose money this year?

Why do so many people not understand the probability of stocks and bonds going down at the same time is not 0%? (see the post titled "why isn't diversification working?)

And to go one step further while also resonding to #3: if people understood financial history, then they shouldn't be so surprised that bonds can lose money and stocks and bonds can lose money in a given year...because it's happened before, right? And yet, how many posts do we have about people's world being rocked because they thought bonds always went up when stocks went down (and/or didn't understand the difference between negatively correlated and uncorrelated assets, which brings us back to Dr. Bernstein's point in #2 again. also see the post "why isn't diversification working?").
My basic understanding , without in depth reading or knowledge when I started my 401k contributions, was that anything purchased in the market Can go up in value, down in value or stay the same. I knew that saving/investing was what I need for retirement if I wanted more than S.S..
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upstate90
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Re: Conversation with co workers/ financial literacy among non-boglehead types

Post by upstate90 »

Glad I posted this topic, it seems a lot of people can relate. I’ve seen the studies/headlines about 50% of people don’t even have a positive net worth, or that 60% can’t afford a $1000 emergency etc etc. Even if someone does nothing besides spend less than they make they will be better off than half of the population.

The way I look at it is that most people exchange part of their finite life for money. They SHOUlD (like most ppl on here) use that money to save/invest so that they can stop exchanging life for money as soon as possible
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Re: Conversation with co workers/ financial literacy among non-boglehead types

Post by Ari »

Cheez-It Guy wrote: Sun Oct 02, 2022 10:01 am
Ari wrote: Sun Oct 02, 2022 5:12 am I live in Sweden and the investment knowledge here is generally a lot less than in the US (though it’s also a lot less complicated, tax-wise). Before I started researching this stuff at the age of 30 I didn’t know stocks went up over time. I talked to a colleague a few years ago who also had this belief and said that the Swedish market had just about broken even since 1980. I showed him a graph and he questioned where the data came from.

On the other hand, I have talked to my boss about investments and she started buying stocks. She has some individual stocks for fun, but most of her regular investments go into a cheap global index fund. So while I totally understand the “It’s not worth it” sentiment, it can also be very rewarding. Had I not talked to her about this and helped her open a brokerage account, she might have had a much poorer retirement. She’s ten years my junior, so she still has a lot of time to build up her assets. It’s nice to help people.
This is interesting, but have you lived in the US to form these opinions firsthand, or are you drawing general conclusions about US financial knowledge from Bogleheads? The posters here are certainly not a population-representative group.
Good point. I have lived in the US, but only for six months when I was young. My opinion is formed from American culture in general, which seems more aware of the stock market as a thing. Most people I know don’t even have the idea that investing in stocks is a thing people do. Talking about investing would be met with blank stares. One acquaintance simply said “I consider stock investing immoral” and that was it.

That’s not everyone, of course, and I think it’s changing. Because of demographics, the government has been edging retirement savings more towards individual contributions and trying to get people to save. But for a lot of people, retirement is still considered the government’s problem. My mom got really upset when she had to make decisions about her retirement.

But yeah, it’s all guesswork, of course. Haven’t spent enough time in the US to know, but I suspect stock ownership is a lot more common there than here.
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Ari
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Re: Conversation with co workers/ financial literacy among non-boglehead types

Post by Ari »

To clarify: I’m not saying that Swedes have worse financial sense. Having a huge mortgage that you don’t really plan to ever pay off is common, but otherwise people generally take care of their finances. It’s just that stocks and bonds aren’t part of that equation.
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Cheez-It Guy
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Re: Conversation with co workers/ financial literacy among non-boglehead types

Post by Cheez-It Guy »

Ari wrote: Mon Oct 03, 2022 12:25 am To clarify: I’m not saying that Swedes have worse financial sense. Having a huge mortgage that you don’t really plan to ever pay off is common, but otherwise people generally take care of their finances. It’s just that stocks and bonds aren’t part of that equation.
Thanks for the clarifications. I liked that Sweden let me put essentially everything on a credit card and I therefore had to exchange no currency. That was finically progressive!
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Re: Conversation with co workers/ financial literacy among non-boglehead types

Post by Parkinglotracer »

There has to be a student before there can be a teacher. And unsolicited advice is a form of aggression. These two sayings come to mind.
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JoeRetire
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Re: Conversation with co workers/ financial literacy among non-boglehead types

Post by JoeRetire »

Florida Orange wrote: Sun Oct 02, 2022 7:20 am Here's one small example. From a news article recently about financial literacy and the American public. In a survey of thousands of randomly selected adults, one question was "If you deposit $1,000 in a bank account that pays 2% interest per year and you don't touch the money, at the end of one year will you have A) More than $1,000, B) Less than $1,000, C) Exactly $1,000? Most people got the answer wrong.
Please cite the article where it indicates that most of the thousands of randomly selected adults got this particular question wrong.
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JoeRetire
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Re: Conversation with co workers/ financial literacy among non-boglehead types

Post by JoeRetire »

upstate90 wrote: Sun Oct 02, 2022 11:40 pm I’ve seen the studies/headlines about 50% of people don’t even have a positive net worth
Many people have a negative net worth at some point in their lives. I know I did.

Please cite the study you saw.
The way I look at it is that most people exchange part of their finite life for money. They SHOUlD (like most ppl on here) use that money to save/invest so that they can stop exchanging life for money as soon as possible
As soon as possible? It's nice how you decide what people SHOULD do.
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like2read
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Re: Conversation with co workers/ financial literacy among non-boglehead types

Post by like2read »

PersonalFinanceJam wrote: Sun Oct 02, 2022 5:48 pm
like2read wrote: Sun Oct 02, 2022 4:33 pm
arcticpineapplecorp. wrote: Sun Oct 02, 2022 2:37 pm
Florida Orange wrote: Sun Oct 02, 2022 7:20 am Here's one small example. From a news article recently about financial literacy and the American public. In a survey of thousands of randomly selected adults, one question was "If you deposit $1,000 in a bank account that pays 2% interest per year and you don't touch the money, at the end of one year will you have A) More than $1,000, B) Less than $1,000, C) Exactly $1,000? Most people got the answer wrong.
yeah Dr. William Bernstein has said:

William Bernstein is one of the foremost advocates for individual investors. When he talks about the dynamics of investing, I pay attention to what he says and most of the time I agree with him.

In Bernstein’s underrated book, The Investor’s Manifesto, he shares his thoughts on the difficulty of investing on your own (emphasis mine):

"Having emailed and spoken to thousands of investors over the years, I have come to the conclusion that only a tiny minority will ever succeed in managing their money even tolerably well.

Successful investors need four abilities. First they must possess an interest in the process. It is no different from carpentry, gardening, or parenting. If money management is not enjoyable, then a lousy job inevitably results, and, unfortunately, most people enjoy finance about as much as they do root canal work.

Second, investors need more than a bit of math horsepower, far beyond simple arithmetic and algebra, or even the ability to manipulate a spreadsheet. Mastering the basics of investment theory requires an understanding of the laws of probability and a working knowledge of statistics. Sadly, as one financial columnist explained to me more than a decade ago, fractions are a stretch for 90% of the population.

Third, investors need a firm grasp of financial history, from the South Sea Bubble to the Great Depression. Alas, this is something that even professionals have real trouble with.

Even if investors possess all three of these abilities, it will all be for naught if they do not have a fourth one: the emotional discipline to execute their planned strategy faithfully, come hell, high water, or the apparent end of capitalism as we know it. “Stay the course”: it sounds so easy when uttered at high tide. Unfortunately, when the water recedes, it is not.

I expect no more than 10% of the population passes muster on each of the above counts. This suggests that as few as one person in ten thousand (10% to the 4th power) has the full skill set."

So you’re telling me there’s a chance.

Bernstein is saying that roughly 0.01% of the investing public has the ability to put all of these factors together to be a successful investor.

source: https://awealthofcommonsense.com/2014/0 ... ting-hard/
I think Dr. Bernstein nailed it on this one. (And on many other things!).

It's kinda like someone skilled at throwing a football going - "well, you just need to hold the ball like this, put your left foot forward....." Some have an interest and are going to be willing and able to learn from that, and execute, and some others not. Some have no interest in football. Some can master the basics. Some hire someone to play football for them. And some number become quarterbacks.

l2r
Bernstein is overly pessimistic in this area. If he is even remotely right that means most of us are completely out of luck. There are approximately 122 million households in the US. If we assume that is the proxy for the number of actual investors in the US, then by the above logic just over 12 thousand will be successful. Now we can argue about what success is, but even at 10% hat gets us to just 12 million.

In my peer group of friends (early 40's) we are very open about a wide variety of subjects which a generation ago were off limits. The younger generation seems to be even more so. The analogies to sports or knowing how to do car repairs don't make a lot of sense to me. There aren't enough paid sports positions available for even a small fraction of the population to be employed by the sector. So my general lack of refining my sports ability is of little consequence beyond the enjoyment I can derive. There are plenty of other areas where I can get a good job with the skills I have honed. It may not be 100% of us but I would think it's in the high 90% of people will have to deal with some sort of financial shock and the eventuality of not being willing or able to be gainfully employed anymore. The consequences of that are much more dire.

There are a lot more resources available now which are easier to digest and will do the heavy lifting parts of math and basic investing for a person. Bogleheads should be sharing their wisdom in a humble and thoughtful manner.
I appreciate your optimism. A lot of us can be quarterbacks without being professional quarterbacks.

l2r
SuperTrooper87
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Re: Conversation with co workers/ financial literacy among non-boglehead types

Post by SuperTrooper87 »

Dottie57 wrote: Sun Oct 02, 2022 4:28 am I really am worried about them. But neither wants to hear from me or my cousin who is a certified financial planner. Cousin would not sell them anything and her advice is mostly bogleheadish.
Do you think it is an issue of pride or possibly intimidation? It is bad enough getting critiqued by a stranger in the profession - do you really want that person to be the one sitting across from you at family gatherings? I can certainly see it both ways and I would rather work with a trusted family member than try to locate a trustworthy CFP out in the world.

Maybe you have a trusted friend in the business you can refer them to that is likeminded - allowing them to get similar advice, avoid the family conflict and the embarrassment if that's the issue? Good luck.
Ari
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Re: Conversation with co workers/ financial literacy among non-boglehead types

Post by Ari »

arcticpineapplecorp. wrote: Sun Oct 02, 2022 2:37 pm
Florida Orange wrote: Sun Oct 02, 2022 7:20 am Here's one small example. From a news article recently about financial literacy and the American public. In a survey of thousands of randomly selected adults, one question was "If you deposit $1,000 in a bank account that pays 2% interest per year and you don't touch the money, at the end of one year will you have A) More than $1,000, B) Less than $1,000, C) Exactly $1,000? Most people got the answer wrong.
yeah Dr. William Bernstein has said:

William Bernstein is one of the foremost advocates for individual investors. When he talks about the dynamics of investing, I pay attention to what he says and most of the time I agree with him.

In Bernstein’s underrated book, The Investor’s Manifesto, he shares his thoughts on the difficulty of investing on your own (emphasis mine):

"Having emailed and spoken to thousands of investors over the years, I have come to the conclusion that only a tiny minority will ever succeed in managing their money even tolerably well.

Successful investors need four abilities. First they must possess an interest in the process. It is no different from carpentry, gardening, or parenting. If money management is not enjoyable, then a lousy job inevitably results, and, unfortunately, most people enjoy finance about as much as they do root canal work.

Second, investors need more than a bit of math horsepower, far beyond simple arithmetic and algebra, or even the ability to manipulate a spreadsheet. Mastering the basics of investment theory requires an understanding of the laws of probability and a working knowledge of statistics. Sadly, as one financial columnist explained to me more than a decade ago, fractions are a stretch for 90% of the population.

Third, investors need a firm grasp of financial history, from the South Sea Bubble to the Great Depression. Alas, this is something that even professionals have real trouble with.

Even if investors possess all three of these abilities, it will all be for naught if they do not have a fourth one: the emotional discipline to execute their planned strategy faithfully, come hell, high water, or the apparent end of capitalism as we know it. “Stay the course”: it sounds so easy when uttered at high tide. Unfortunately, when the water recedes, it is not.

I expect no more than 10% of the population passes muster on each of the above counts. This suggests that as few as one person in ten thousand (10% to the 4th power) has the full skill set."

So you’re telling me there’s a chance.

Bernstein is saying that roughly 0.01% of the investing public has the ability to put all of these factors together to be a successful investor.

source: https://awealthofcommonsense.com/2014/0 ... ting-hard/
The ironic thing about that Bernstein quote is of course that he himself shows some incompetence in statistics by assuming that these are independent variables when I’m pretty sure they are correlated. I’m not sure if that disproves or underscores his point, though.
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Ivygirl
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Re: Conversation with co workers/ financial literacy among non-boglehead types

Post by Ivygirl »

student wrote: Sun Oct 02, 2022 12:15 pm
delamer wrote: Sun Oct 02, 2022 11:42 am 1. I lost a friend recently I believe, in part, because she resented our financial stability. She is well-educated, in her mid-60’s. But she has to work a low-paying job because she lost her professional job in her late 50’s and couldn’t find a similar job.
Oh. If she resented you for this, maybe it is for the better that she is not your friend...
The friend can't keep up any more and had to get distance. The friend can't eat where you want to eat, can't travel where you want to travel, can't entertain you except in a humble way she may be afraid you would think beneath former standards.

It's true the friend should be humble and cheerful about being elderly and poor but maybe give her a break, she hasn't had any practice. It's a shock to slide downward in life and be left behind by former peers and know there are no more years to change things.
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Re: Conversation with co workers/ financial literacy among non-boglehead types

Post by Ari »

Cheez-It Guy wrote: Mon Oct 03, 2022 5:08 am
Ari wrote: Mon Oct 03, 2022 12:25 am To clarify: I’m not saying that Swedes have worse financial sense. Having a huge mortgage that you don’t really plan to ever pay off is common, but otherwise people generally take care of their finances. It’s just that stocks and bonds aren’t part of that equation.
Thanks for the clarifications. I liked that Sweden let me put essentially everything on a credit card and I therefore had to exchange no currency. That was finically progressive!
Yes, it’s a pretty cashless society here. We replaced our banknotes in 2016 and I still don’t know what the new ones look like, because I haven’t used them. Investing-wise, it’s actually a pretty Bogleheadish place. I’ve had a zero ER fund since long before Fidelity started offering them in the US, and with an ISK account, taxes are extremely simple as it’s paid on the total value, meaning no capital gains tax. But still, most people don’t invest. Until recently we’ve had pretty high guaranteed pensions, so it makes sense people didn’t worry about it.
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Re: Conversation with co workers/ financial literacy among non-boglehead types

Post by deltaneutral83 »

-It helps when you have a natural aptitude for something (I think Bernstein mentioned that in an earlier quoted post). I'm not mechanically inclined and I'll never be a fix it person. For someone who struggles with basic math, they have no chance at any discipline within personal finance.

-Like with anything else, not knowing is exponentially worse than not knowing that you don't know. This is why target date funds are gold for people who don't know, but they know that they don't know so the damage is minimal.

-Taxes, well, we've all got stories over the years. But honestly, our tax system requires a much higher level of financial literacy than "save 20% of your money into a target date fund."

-The most incredulous looks on faces for me around the water cooler undoubtedly revolves around health insurance and HDHP/PPO as health ins. is discussed here and there more frequently than any other money issue in my experience. People think if you have an HDHP and have a hang nail that it will cost you 20 grand and you'll need to sell your first born to cover it. A simple break even of the HDHP/PPO premiums/OOP max that is probably 6th grade math is seen as quantum physics to many. I mean people get noticeably irritated/scared/confused at the thought of having to analyze basic mathematics.
student
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Re: Conversation with co workers/ financial literacy among non-boglehead types

Post by student »

Ivygirl wrote: Mon Oct 03, 2022 7:36 am
student wrote: Sun Oct 02, 2022 12:15 pm
delamer wrote: Sun Oct 02, 2022 11:42 am 1. I lost a friend recently I believe, in part, because she resented our financial stability. She is well-educated, in her mid-60’s. But she has to work a low-paying job because she lost her professional job in her late 50’s and couldn’t find a similar job.
Oh. If she resented you for this, maybe it is for the better that she is not your friend...
The friend can't keep up any more and had to get distance. The friend can't eat where you want to eat, can't travel where you want to travel, can't entertain you except in a humble way she may be afraid you would think beneath former standards.

It's true the friend should be humble and cheerful about being elderly and poor but maybe give her a break, she hasn't had any practice. It's a shock to slide downward in life and be left behind by former peers and know there are no more years to change things.
The poster delamer used the word "resented." So I take it as its face value without speculating.
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ClevrChico
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Re: Conversation with co workers/ financial literacy among non-boglehead types

Post by ClevrChico »

noco-hawkeye wrote: Sun Oct 02, 2022 8:09 am With that little saved by so many - it could be practically tax free. (which could be the bigger problem)
Yes, I have a parent whose IRA is tax-free, and they have an excellent retirement since they live in a LCOL area.
BitTooAggressive
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Re: Conversation with co workers/ financial literacy among non-boglehead types

Post by BitTooAggressive »

arcticpineapplecorp. wrote: Sun Oct 02, 2022 9:29 pm
Dottie57 wrote: Sun Oct 02, 2022 7:57 pm
arcticpineapplecorp. wrote: Sun Oct 02, 2022 2:37 pm
Florida Orange wrote: Sun Oct 02, 2022 7:20 am Here's one small example. From a news article recently about financial literacy and the American public. In a survey of thousands of randomly selected adults, one question was "If you deposit $1,000 in a bank account that pays 2% interest per year and you don't touch the money, at the end of one year will you have A) More than $1,000, B) Less than $1,000, C) Exactly $1,000? Most people got the answer wrong.
yeah Dr. William Bernstein has said:

William Bernstein is one of the foremost advocates for individual investors. When he talks about the dynamics of investing, I pay attention to what he says and most of the time I agree with him.

In Bernstein’s underrated book, The Investor’s Manifesto, he shares his thoughts on the difficulty of investing on your own (emphasis mine):

"Having emailed and spoken to thousands of investors over the years, I have come to the conclusion that only a tiny minority will ever succeed in managing their money even tolerably well.

Successful investors need four abilities. First they must possess an interest in the process. It is no different from carpentry, gardening, or parenting. If money management is not enjoyable, then a lousy job inevitably results, and, unfortunately, most people enjoy finance about as much as they do root canal work.

Second, investors need more than a bit of math horsepower, far beyond simple arithmetic and algebra, or even the ability to manipulate a spreadsheet. Mastering the basics of investment theory requires an understanding of the laws of probability and a working knowledge of statistics. Sadly, as one financial columnist explained to me more than a decade ago, fractions are a stretch for 90% of the population.

Third, investors need a firm grasp of financial history, from the South Sea Bubble to the Great Depression. Alas, this is something that even professionals have real trouble with.

Even if investors possess all three of these abilities, it will all be for naught if they do not have a fourth one: the emotional discipline to execute their planned strategy faithfully, come hell, high water, or the apparent end of capitalism as we know it. “Stay the course”: it sounds so easy when uttered at high tide. Unfortunately, when the water recedes, it is not.

I expect no more than 10% of the population passes muster on each of the above counts. This suggests that as few as one person in ten thousand (10% to the 4th power) has the full skill set."

So you’re telling me there’s a chance.

Bernstein is saying that roughly 0.01% of the investing public has the ability to put all of these factors together to be a successful investor.

source: https://awealthofcommonsense.com/2014/0 ... ting-hard/

Is number 2 really necessary? Especially if your only investment is 401k. I’ve put money into reasonable investments.
As for #3, you don’t need lots of knowledge of financial history.

I don’t have ahuge nest egg but more than others I know.
reagarding #2: i take your point one doesn't need to be a quant or a polymath to invest, but then why as one example do some even bogleheads seem to understand the power of compounding interest yet find themselves seemingly amazed that bonds can actually lose money this year?

Why do so many people not understand the probability of stocks and bonds going down at the same time is not 0%? (see the post titled "why isn't diversification working?)

And to go one step further while also resonding to #3: if people understood financial history, then they shouldn't be so surprised that bonds can lose money and stocks and bonds can lose money in a given year...because it's happened before, right? And yet, how many posts do we have about people's world being rocked because they thought bonds always went up when stocks went down (and/or didn't understand the difference between negatively correlated and uncorrelated assets, which brings us back to Dr. Bernstein's point in #2 again. also see the post "why isn't diversification working?").
The mean and honest answer is a lot of people are not very bright, or are lazy or have messed up priorities as to what they follow.

Can you tell me what is going on with the Kardasians or the royal funeral?
Triple digit golfer
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Re: Conversation with co workers/ financial literacy among non-boglehead types

Post by Triple digit golfer »

$=WxTxI wrote: Sun Oct 02, 2022 9:26 pm
Triple digit golfer wrote: Sun Oct 02, 2022 9:43 am At 37, I've learned by now to avoid them. When I was younger and less mature, I would engage. Now, I avoid these types of conversations. People often ask me for advice and even then I don't give much because my experience is that people don't really want advice, they want confirmation bias.

A perfect example is my single, no kids friend asking me about paying extra on his 2.5% mortgage vs. investing. He is a saver, which is the most important thing, but he listens to Dave Ramsey and thinks Dave is the supreme authority on all financial issues. I told him that I wouldn't even consider paying extra on a 2.5% mortgage until all tax advantaged retirement accounts are maxed out. He asked what the max was and I told him the numbers for 401(k), IRA, and HSA. This is a guy who makes maybe $70-80k and he was appalled at the high amounts. How is he supposed to max those out?!?!?!

Never mind that I didn't say he should. I said he should prioritize doing so before paying extra on the mortgage, meaning, in his case, don' t pay extra on the mortgage because you're giving up valuable tax-advantaged space to do so. He brushed it aside.

So, instead, he's putting enough to get the company match on his 401(k) and every extra cent is going to the mortgage. So be it. At least he's not spending it on hookers and booze.

I've had worse conversations than that with co-workers close to twice my age in the past. A few years back a guy came to me somewhat angrily with his pay stub, asking why so much tax was withheld for his bonus and demanding a refund. After I explained that I'm not in Payroll or HR and have no control over withholding rates anyway, he said he's being penalized for getting a bonus instead of having it in his regular salary. I tried explaining that he'll get it back when he files and that he could adjust his regular withholding to even things out so that he can be paid more throughout the year and get a smaller refund, he didn't want to hear it and said that his refund is he and his wife's vacation money. So, quite hypocritical besides being illogical and unwilling to even consider that he is not 100% correct.

This is one example of many I've had. I should have just told the guy to talk to Payroll. If I was in Payroll I'd probably tell him those are the rates, talk to his accountant.

Not worth it.
Your friend isn't following Dave Ramseys advice. He's doing his own thing. So much for believing D.R. is the Supreme authority on all financial matters.

If your friend truly followed D.R. advice he would be wealthy in retirement, just slightly below a Boglehead.

D.R. advises to pay off all non mortgage debt, then save 3-6 mo emergency fund, then save 15% for retirement, then save for kids college, then pay off mortgage, and finally build wealth and give.

True followers of Dave Ramseys advice will do better than ~98% of the population except for Bogleheads and few others.
I think he will be wealthy in retirement relative to his expenses. He'll be in his early 40s with a paid off house and at that point probably be maxing out a 401(k). But yes, I see your point. He's not following Ramsey to the letter. I'm certain he has the emergency fund covered and is putting in probably 10% to his 401(k) including his decent company match (I think it's something like he puts in 6% and they put in 4%). He has no debt besides the mortgage. So other than not doing 15% to 401(k), I think he's basically following Ramsey.
smitcat
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Re: Conversation with co workers/ financial literacy among non-boglehead types

Post by smitcat »

upstate90 wrote: Sun Oct 02, 2022 11:40 pm Glad I posted this topic, it seems a lot of people can relate. I’ve seen the studies/headlines about 50% of people don’t even have a positive net worth, or that 60% can’t afford a $1000 emergency etc etc. Even if someone does nothing besides spend less than they make they will be better off than half of the population.

The way I look at it is that most people exchange part of their finite life for money. They SHOUlD (like most ppl on here) use that money to save/invest so that they can stop exchanging life for money as soon as possible
There is no direct relationship between money and happiness.
If someone chooses to gain happiness and does not save as much as they 'should' they may be happier than someone who save more.

Because there is no direct relationship between the two.
KlangFool
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Re: Conversation with co workers/ financial literacy among non-boglehead types

Post by KlangFool »

smitcat wrote: Mon Oct 03, 2022 8:23 am
upstate90 wrote: Sun Oct 02, 2022 11:40 pm Glad I posted this topic, it seems a lot of people can relate. I’ve seen the studies/headlines about 50% of people don’t even have a positive net worth, or that 60% can’t afford a $1000 emergency etc etc. Even if someone does nothing besides spend less than they make they will be better off than half of the population.

The way I look at it is that most people exchange part of their finite life for money. They SHOUlD (like most ppl on here) use that money to save/invest so that they can stop exchanging life for money as soon as possible
There is no direct relationship between money and happiness.
If someone chooses to gain happiness and does not save as much as they 'should' they may be happier than someone who save more.

Because there is no direct relationship between the two.
smitcat,

https://en.wikipedia.org/wiki/Maslow%27 ... y_of_needs

That is not exactly true. There is a basic need of food and shelter. Until and unless the person satisfy that basic needs, then, the function of money may not be that important.

KlangFool
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smitcat
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Re: Conversation with co workers/ financial literacy among non-boglehead types

Post by smitcat »

KlangFool wrote: Mon Oct 03, 2022 8:50 am
smitcat wrote: Mon Oct 03, 2022 8:23 am
upstate90 wrote: Sun Oct 02, 2022 11:40 pm Glad I posted this topic, it seems a lot of people can relate. I’ve seen the studies/headlines about 50% of people don’t even have a positive net worth, or that 60% can’t afford a $1000 emergency etc etc. Even if someone does nothing besides spend less than they make they will be better off than half of the population.

The way I look at it is that most people exchange part of their finite life for money. They SHOUlD (like most ppl on here) use that money to save/invest so that they can stop exchanging life for money as soon as possible
There is no direct relationship between money and happiness.
If someone chooses to gain happiness and does not save as much as they 'should' they may be happier than someone who save more.

Because there is no direct relationship between the two.
smitcat,

https://en.wikipedia.org/wiki/Maslow%27 ... y_of_needs

That is not exactly true. There is a basic need of food and shelter. Until and unless the person satisfy that basic needs, then, the function of money may not be that important.

KlangFool
Your absolutely correct when it comes to basic food and water, I was not referring to that extreme but commenting on the themes in other posts within this thread.
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blaugranamd
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Re: Conversation with co workers/ financial literacy among non-boglehead types

Post by blaugranamd »

It's one thing to discuss theory like index vs active
Boglehead vs something else. It's another to educate folks on incorrect tax law like misunderstanding tax brackets or 401k tax treatment in retirement. That's important to help people understand and you can easily provide them with validation. I don't argue with folks who think they can stock pick, crypto, RE, etc. Lack of understanding basics of finances and taxes is rampant.
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Re: Conversation with co workers/ financial literacy among non-boglehead types

Post by arcticpineapplecorp. »

Dottie57 wrote: Sun Oct 02, 2022 11:36 pm
arcticpineapplecorp. wrote: Sun Oct 02, 2022 9:29 pm
Dottie57 wrote: Sun Oct 02, 2022 7:57 pm
arcticpineapplecorp. wrote: Sun Oct 02, 2022 2:37 pm
Florida Orange wrote: Sun Oct 02, 2022 7:20 am Here's one small example. From a news article recently about financial literacy and the American public. In a survey of thousands of randomly selected adults, one question was "If you deposit $1,000 in a bank account that pays 2% interest per year and you don't touch the money, at the end of one year will you have A) More than $1,000, B) Less than $1,000, C) Exactly $1,000? Most people got the answer wrong.
yeah Dr. William Bernstein has said:

William Bernstein is one of the foremost advocates for individual investors. When he talks about the dynamics of investing, I pay attention to what he says and most of the time I agree with him.

In Bernstein’s underrated book, The Investor’s Manifesto, he shares his thoughts on the difficulty of investing on your own (emphasis mine):

"Having emailed and spoken to thousands of investors over the years, I have come to the conclusion that only a tiny minority will ever succeed in managing their money even tolerably well.

Successful investors need four abilities. First they must possess an interest in the process. It is no different from carpentry, gardening, or parenting. If money management is not enjoyable, then a lousy job inevitably results, and, unfortunately, most people enjoy finance about as much as they do root canal work.

Second, investors need more than a bit of math horsepower, far beyond simple arithmetic and algebra, or even the ability to manipulate a spreadsheet. Mastering the basics of investment theory requires an understanding of the laws of probability and a working knowledge of statistics. Sadly, as one financial columnist explained to me more than a decade ago, fractions are a stretch for 90% of the population.

Third, investors need a firm grasp of financial history, from the South Sea Bubble to the Great Depression. Alas, this is something that even professionals have real trouble with.

Even if investors possess all three of these abilities, it will all be for naught if they do not have a fourth one: the emotional discipline to execute their planned strategy faithfully, come hell, high water, or the apparent end of capitalism as we know it. “Stay the course”: it sounds so easy when uttered at high tide. Unfortunately, when the water recedes, it is not.

I expect no more than 10% of the population passes muster on each of the above counts. This suggests that as few as one person in ten thousand (10% to the 4th power) has the full skill set."

So you’re telling me there’s a chance.

Bernstein is saying that roughly 0.01% of the investing public has the ability to put all of these factors together to be a successful investor.

source: https://awealthofcommonsense.com/2014/0 ... ting-hard/

Is number 2 really necessary? Especially if your only investment is 401k. I’ve put money into reasonable investments.
As for #3, you don’t need lots of knowledge of financial history.

I don’t have ahuge nest egg but more than others I know.
reagarding #2: i take your point one doesn't need to be a quant or a polymath to invest, but then why as one example do some even bogleheads seem to understand the power of compounding interest yet find themselves seemingly amazed that bonds can actually lose money this year?

Why do so many people not understand the probability of stocks and bonds going down at the same time is not 0%? (see the post titled "why isn't diversification working?)

And to go one step further while also resonding to #3: if people understood financial history, then they shouldn't be so surprised that bonds can lose money and stocks and bonds can lose money in a given year...because it's happened before, right? And yet, how many posts do we have about people's world being rocked because they thought bonds always went up when stocks went down (and/or didn't understand the difference between negatively correlated and uncorrelated assets, which brings us back to Dr. Bernstein's point in #2 again. also see the post "why isn't diversification working?").
My basic understanding , without in depth reading or knowledge when I started my 401k contributions, was that anything purchased in the market Can go up in value, down in value or stay the same. I knew that saving/investing was what I need for retirement if I wanted more than S.S..
i agree with you wholeheartedly and am not trying to argue but rather to expand the conversation...

i think most people who start investing in their 401ks think the same thing (markets go up and down) + (I need to save because SS won't cut it).

The problem is that line of thinking clearly isn't enough. If it was, I wouldn't have watched my middle age coworker have sold out of stocks entirely in 2008 in an absolute panic.

I think people who invest know that stocks are risky and can go down, but they don't quantify what that actually means in terms of the potential of actual losses to their portfolio. If they did, they wouldn't log in to their account and say "Oh my God! I can't believe my portfolio's down so much!!"

There should be no surprises here. It's basic math that if stocks lose x% that part of your portfolio that contains stocks will fall by x% and at a minimum you should expect that's how your portfolio will behave. But if that were true, then we wouldn't have as much panic selling as we do, right?

Perhaps more of this has to do with Bernstein's 4th point (his Four(th) Pillar of Investing) but I think people's bad investment decisions are generally a combination of 2 and 4 (they don't do the math to understand how their portfolio will respond to declines but even if they do, do they stay the course or not?)
Last edited by arcticpineapplecorp. on Mon Oct 03, 2022 9:51 am, edited 1 time in total.
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PersonalFinanceJam
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Re: Conversation with co workers/ financial literacy among non-boglehead types

Post by PersonalFinanceJam »

like2read wrote: Mon Oct 03, 2022 6:56 am ...
I appreciate your optimism. A lot of us can be quarterbacks without being professional quarterbacks.

l2r
True, and I guess it's optimism. It could just be disbelief in the narrative based on what I see in the world around me. To continue with a sports metaphor. Given the level of effort, attention, and yes even math I see go into a person's fantasy sports league I have a hard time buying into the narrative that your average person isn't capable of managing a simple retirement plan. Added again to the topic at hand, if just even a fraction of those fantasy sports conversations were instead around savings/investing I think we'd all be better off in the long run.

Maybe that's what I should do. For every person who asks if I'm in a fantasy league I should say "no, but I'm in an Investing league would you like to join?"
Jags4186
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Re: Conversation with co workers/ financial literacy among non-boglehead types

Post by Jags4186 »

Do not have these conversations at work. Play dumb if they come up. A really good answer is “I have a guy who does all that for me.”
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Re: Conversation with co workers/ financial literacy among non-boglehead types

Post by homebuyer6426 »

Florida Orange wrote: Sun Oct 02, 2022 7:20 am Here's one small example. From a news article recently about financial literacy and the American public. In a survey of thousands of randomly selected adults, one question was "If you deposit $1,000 in a bank account that pays 2% interest per year and you don't touch the money, at the end of one year will you have A) More than $1,000, B) Less than $1,000, C) Exactly $1,000? Most people got the answer wrong.
Quite possibly because it doesn't specify real or nominal dollars. If real, any of those answers could be correct. It's easy to formulate questions to make most people get them wrong.
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