• Make a will.
• Pay off your credit card balance.
• Get term life insurance if you have a family to support.
• Fund your company 401K to the maximum.
• Fund your IRA to the maximum.
• Buy a house if you want to live in a house and can afford it.
• Put six months’ expenses in a money market account.
• Take whatever is left over and invest it 70 percent in a stock index fund and 30 percent in a bond fund through any discount brokerage company and never touch it until retirement
• If any of this confuses you, or you have something special going on (retirement, college planning, tax issue), hire a fee-based financial planner, not one who charges you a percentage of your portfolio.
https://www.mattcutts.com/blog/scott-adams-financial-advice/
That is why keeping an emergency fund as a separate savings account at a bank makes me feel more comfortable. At most I'd put my emergency fund in a money market account to at least earn something, but the point of the emergency fund is to be liquid and available for emergencies. If there's a steep recession and all of a sudden you need to tap into your savings for 6-12 months until you find another job, you don't want to be doing that when your Roth goes down and cashing out your contributions means selling more shares than you purchased.
You need to figure out how much savings is right for your long term plans. The 6 months expenses is the only one that I think applies to nearly everybody - even then if your doctor just gave you 2 weeks to live 6 months expenses isn't useful. Some people want to retire early - other people have discovered that a job gives them social benefits and they don't want to retire ever. Some people are willing to work longer in life so they can afford more toys now, others are willing to forego toys so they can enjoy the free time later. This is your personal choice.
I agree personal finance is really not that hard at the basic level. The main issue is that our economy is driven by an advertising industry that depends on making sure most people never learn the basics.
People "don't know what they don't know" when it comes to financial health, especially surrounding things like proper insurance coverage and tax optimization. Software that can keep an eye on your finances and alert you to anything that seems off, or better yet, perform the necessary actions to keep you in good financial health, would be a huge help to these people.
1) Six months' of expenses in cash/money market. 2) Max out 401k if possible. 3) Anything left after that, buy index fund that tracks the S&P 500 and let it ride the market over the long term.
Literally all you need to do. Sure, there's room for some budgeting software or credit card alerting and things like that. But the market is not so complex to understand that you can't understand it yourself. I'd say within a weekend of study the average person can understand the basics.
Self-driving money would basically take all your income, and decide if it's best to invest in such index fund, or pay off your mortgage early.
I always pay off small, low-interest loans faster, because I get tired of juggling the money. If I had "self driving money," it would continue to "write the check" for me as long as it can find a better investment vehicle for my remaining money.
Do you prefer being debt free, or do you prefer keeping some debt that is at 3.6% interest while you earn 7% in the market? The former has a lower risk associated with it whereas the latter has a higher potential for net worth increases over time. But to decide which one you want, you'd need to figure out what your priorities are. A machine can't do that for you.
At best it could show you the outcomes if you were to pursue either path, given some set of assumptions. But a machine also can't predict the future so it wouldn't know what the absolute correct answer is.
The reason the S&P 500 tracking is more like self driving is because the economy will likely be worth more in the future than it is today, and so will investments made into index funds. It's possible the economy could be worth less, but if that happens we'll have much bigger problems to deal with than individual net worth.
Yeah, it's possible to be the 1% of traders who can outperform the S&P 500...but very unlikely especially if you look at long periods of time.
And the post is about "self-driving money" rather than active trading. In that case, an index fund that tracks the S&P 500 is basically self-driving money.
This is not historically true and the reason why so many people become rich (and poor) with real estate is because of the amount of leverage it enables.
The debt itself is what's seen as adulthood.