In order to help with it, we have a bank account that our bills come out of that has a little more than 6 months worth of all our bills (mortgage payment included) just sitting there, collecting zero interest. Every time a bill is paid, we top it up to the target amount. If we stop making money today, we don't have to do anything differently for 6 months.

It's not logical or financially wise, but it means that she doesn't worry about money as much. I consider the opportunity cost on the interest we might collect on that money as a bill that I'm happy to pay.

And once you do that you can find yourself suddenly feeling much more free - knowing that even if everything goes south room and board is taken care of can give you the courage to take risks you'd not otherwise take, such as starting a business, a family, even moving.

The main thing about "living paycheck to paycheck" that scares me is that feeling of being trapped.

Sure, the money isn't generating more wealth, but that amount is finite. It's a cushion that should effectively indefinitely and every dollar beyond is vigorously invested. And, should something happen to employment, you use it as a buffer (assuming no severance) and replenish as soon as you're employed again.

I have a friend who helped me get where I am. He makes even more than I do, but financially, I'm more well off than he is because he thinks that every single dollar needs invested -- to the point that despite making the top 2-3% of income for our entire region, he regularly is paying off revolving credit card interest because he isn't equipped to pay a $500 unexpected expense.

Sure, if you invest every single dollar, it's always earning 7-10% on average. But if you have to then pay 20%+ APR on credit cards because you can't handle unexpected expenses, it begs the question whether you're really getting ahead.

Betterment recommends 30% margin: https://www.betterment.com/resources/funding-a-safety-net-ca...

Neither of those are stocks.

Bonds are (usually) less volatile than stocks, but yeah, be careful about using them for short-term emergency funds.

With our system, our bills get paid with the money we have, and then when we make more money, it just goes back to the buffer account. Overflow goes into investing.

As someone who went through two recessions, survived multiple layoffs, and had a few medical things, this seems like crazy talk. The general rule of thumb is 6 months of savings. I've known many that didn't follow this rule, and ended up in very bad debt.

We have a decent amount sitting in our savings account, but not six months worth. But I can liquidate assets to get us the rest of that six months if necessary, and it would take about a week to get that into our bank account.

Personally I have 2 years in cash because I like to take 6+ month sabbaticals between jobs, but even that is a negligible amount due to my expense/income ratio.

yeah, so you're still ahead of the game if you had it saved.

Also that 20% loss will most likely recover in time. Inflation almost never reverses itself, it only slows down.

There's a reason rich people park most of their money in assets, and not in savings accounts. If they got more returns by keeping it in savings accounts, they would do that.

6 months of basic living expenses isn't "most of their money" for rich people. Ideally it wouldn't be for the rest of us either.

You seem to be thinking I'm against investing altogether - I'm not, but there is a significant risk avoidance in having an emergency fund that is 100% liquid and not tied to market risks.

It is common advice to have an emergency fund equal to several months of expenses in cash.

What is the alternative ? Having no emergency fund?

In the USA unexpected expenses (beyond monthly savings) can completely wipe a three month savings in a heartbeat.

Add to that getting laid off during a recession and you’re in for real pain.

I guess it’s just been 12 years since people ever had to deal with a bad economy.

Let's say you get 3% in an instant savings account, and 3.5% in a three months' notice savings account. If you never touch that money until your retirement in 30 years, that would give you 0.5 months worth of expenses extra interest.

Compare that to the hassle, extra work to keep track of several savings account, and the added risk in the unlikely event that you do need the money quicker (eg. A broken car, an unexpected medical emergency, whatever). Surely the trade-off must than tip in favor of simply having a bit bigger emergency fund?

(e.g. I would say for most people a car probably costs more than three months' expenses, so having that much extra in instant access probably doesn't shift you from "can't buy a new car in cash" to "can buy a new car in cash". Realistically you're (hopefully) insured and you're quite likely to finance your replacement car.)

I've had an "instant access" savings account take 2 months to pay out my money - some kind of AML issue, supposedly. Conversely, a lot of "three months' notice" accounts aren't "you physically can't take money out with less than three months' notice" but rather "if you withdraw with less than three months' notice you sacrifice one year's interest" or similar. I don't find the "hassle of an extra account" to be significant when it's two accounts at the same bank under the same login, but if you do then I would seriously consider having only a notice-requiring savings account.

Your strategy means that the best time to buy assets correlates with when your net worth dips then lowest.

It's absolutely both of those things. It's financially unwise to take any risks at all with your emergency funds and operating expenses, so having 3-6 months worth locked up is absolutely the best thing you can do.

Even Warren Buffet always keeps at least something like a fifth of his investments in cash. Otherwise how the hell are you going to buy low?

You could also say being poor in childhood teaches you how to be frugal. I regard this as a healthy habit and better discipline I wish I had with money (coming from a middle-class family).

Another way to look at frugality is just an aversion to spending money on whatever it is that society or mass media tell you you have to buy, an important and healthy attitude one can have, IMO.

A term I've seen bandied about for the collective symptoms is having a Scarcity mindset and it's based on insecurity/fear of unexpectedly running out of money (which was a frequent event in childhood)

John Scalzi's classic "Being Poor" blog post[1] details the effects of poverty in detail.

1. https://whatever.scalzi.com/2005/09/03/being-poor/

Never been poor; me and my whole family have always done this. I just forced them to get rid of their standalone DVD player. They have remote controls for devices going back to the 90's.

The cellphone example is even better; you'd be a fool to immediately dump your old phone. It's small and easy to store, and if your new phone craps out or gets lost or stolen you may very well have a use for another phone that works right now. I have phones going back 2 generations.

This is just frugality and contingency planning.

Scarcity mindset is more like, "I have $300, I need to spend it before it goes away". That's what keeps people poor.

You don't have to be/(have been) poor to be a hoarder. On the old cellphone, my emphasis was a drawer full of backup-to-a-backup-to-a-backup devices that are now 10 years old and is running Android 2 and are potentially a fire hazard while charging and are not fit for use - they are emotional support devices. Keeping one generation of backup device is rational, 3+ means there's something to unpack.

I'm curious about how your family tradition came to be: a high number of people who experienced the great depressions in their formative years are/were compulsive hoarders in latter years.

Being poor is what keeps poor people poor; costs of necessities go down the richer you get; being poor is expensive

So what basis do you have for commenting on the experience of it?

> me and my whole family have always done this.

I'm sure there are other things that both your family and poor families have done, but that doesn't have explanatory value.

Second order frugality: Buy it for life. Quality over quantity.

Third order frugality: This inert matter is not nearly as interesting as the people who wish to sell it to us want us to believe.

This of course after having spent too much on high quality "stuff" with little use.

It's definitely happened to me multiple times. And I don't think it's just a coincidence, with any new hobby or skill you will start out improving very quickly and then eventually hit a plateau. The first thing you think when you hit the plateau is "I would be a little bit better/have a little bit more fun with this if I had better gear", and it's usually true and you do get a slight boost. But then a little while after that you hit a sustained plateau anyway and that's the point where you'll often lose interest.

You are also right in that there are plenty of people who are high earners, but never get to actually build wealth because they spend it all. This can often be the curse of living in a high cost of living area. You see all the wealthy people driving in nice cars and living in luxury homes, and this makes it difficult to consciously deny yourself these things and live (relatively) modestly but build long term wealth instead.

You could say anything, but what's true is that it's not frugality. Where do you get that?

It's a traumatic experience with lifelong consequences. I know that from many people who have experienced it.

That turns out to be the opposite of frugality.

Even though I have a great job now and have for years, I still find myself shying away from good things that I really can afford, or buying cheap shoes when dropping a Benjamin is better even in the immediate term.

I just want to say that if allowed to happen you can really be a force together, a moderation force coming from your side and your SO. She buys higher quality trash bags and tires (lol) now and I don’t splurge on stuff all the time now, and don’t waste as much money.

I really appreciate the perspective being with her has given me.

Could you explain what you mean? I grew up pretty poor, single income PhD student/post-doc salary family with two kids. Eventually my father got a proper position at a university, but until then we were pretty poor. My parents used to sleep on the floor, we had almost no furniture(I remember playing football in our living room with my dad since it was entirely empty) with most of our stuff coming from charities.

I wonder if I exhibit the behavior you talk about or not.

Sure.

I realize I waste a lot of time in supermarkets, shops or online stores, browsing/walking around and comparing prices just to penny pinch on low value things, when the savings I would make would have no meaningful impact on my yearly net worth, but the time and mental energy wasted browsing/walking around comparing prices could have better return on investment if used on other things like learning a new skill, reading a book, etc.

I avoid any kind of subscription services (Netflix, Spotify, cloud-storage, phone contract, etc.) to the disbelief of my friends ("But it's only 10 Euros a month!, Why don't you have it?"), preffering instead to spend my time building my own self-hosted solutions for cheap, which probably explains how I got into tech in the first place.

I own a cheap old car and prefer to fix it myself if I can, rather than paying someone to do it, even though the time I spend learning how to fix it, buying the parts, then actually fixing it, is probably worth more than a professional would have cost.

I'm afraid to make investments fearing that the market could crash the second I enter it, and erase my money, leaving me vulnerable to being homeless or dependent on doing shitty jobs I hate just to stay afloat, so I just hoard cash like an idiot as that makes me feels safe and lets me sleep well at night.

I think I might not be good enough for some bold career steps, like giving up my tech job and risking everything to start my own business of a coffee cart in the city center or pivoting to something other than tech that's less well paid, like being a teacher.

I spent too much of my youth studying hard at useless subjects on the pressure from my parents that "education will get you far in life, so beat those books and get good grades", only to realize far too late in life that I could have gotten in the same spot with 20% of the effort, leaving me time to actually enjoy my youth.

Sure, I'm working my way out of these habits slowly, but the Pavlovian impulses are still in my brain. Complex things these minds of ours.

>I'm afraid to make investments fearing that the market could crash the second I enter, and erase my money, leaving me vulnerable to being homeless or dependent on doing shitty jobs I hate just to stay afloat, so I just hoard cash like an idiot as that makes me feels safe and lets me sleep well at night.

I am terrified I won't have money when I need it, worried it won't be there or accessible. I've learned over time that there is no amount of money in my savings account that can alleviate this.

When I was a kid there was never enough money and disaster was one unexpected bill away. As an adult I know that's not true of my situation now, but I am incapable of getting out of that mindset.

Then consider things as "one time purchases" instead of monthly obligations - buy Disney+ for a year, once, and immediately cancel. Then if something goes wrong, there's no upcoming bill to pay.

A friend of mine worked on superyachts which were £400k a week to rent. He said that without fail the owners would be penny pinching at the end over a few £ here and there (on food, drink, suncream etc.) Same with upper-class Brits who had hundreds of years of intergenerational wealth but won't turn their heating on until November.

Not sure what to make of this; I've often wondered if it is a form of bell curve.

Poor penny pinching is often about doing what's necessary to survive, even if it's a terrible outcome in the medium term.

"Wealth does not last beyond three generations"

https://www.nasdaq.com/articles/generational-wealth%3A-why-d...

Now if by "owners" you mean the owners of the yacht, then it makes more sense as it's a business and they're controlling costs, especially the ones they see as "variable".

Maybe. Actual cost savings are observable now, with very high probability. Maybe that book or skill is useless; in other words, there's a broad distribution on possible outcomes. Who actually measures this stuff to assess ROI? It's not obvious that most people get a good ROI out of university degree, or at least at the same levels as in the past. At best I've seen some average measures, but not bottom 10 percentile measures, you know, essentially guarantees that one's time and energy and money isn't wasted. It should be of significant concern that even a CS degree isn't an effective guarantee of a job offer that requires the knowledge gained from that CS degree. It's as if a lot of the actual skill an employer requires is learned outside school, which is insane and conflicts with the broad everyone-must-graduate-college narrative in the US and Canada.

The US has has the privilege($$$) to import the minds and workforce it needs, thereby skipping the need to invest in local education, and offshoring this burden to brain-drain countries in the process.

So, the US is actually doing both: doing its best to brain-drain other developed countries while also spending more than anyone else on education. Is college the best place to train people to function better in teams? Or would Amazon be better served in funding lots of youth sports teams and recruiting from those?

If you haven't already, look into Certificates of Deposit ("CD") at your local bank. They're FDIC insured (so if the bank goes under, you're covered, up to something like $250k) and you don't have to worry about losing the principal amount you put in. If you ever need to withdraw that money in case of an emergency, you only risk losing out on the interest. Instead of dumping a ton of money into a single CD, look into CD laddering wherein you setup multiple CDs that expire in 3 months, 6 months, etc or some other cadence that you're comfortable with.

You can only buy $10k per person per year, but as a married couple, you could build up 100K in savings over 5 years, and even faster if you hold them in a trust.

One limitation of buying I Bonds is the annual purchase limit. Each person can buy a maximum of $10,000 per calendar year as the primary owner.

In addition, if you have a trust, you can buy another $10,000 per year under the name of the trust. A lawyer created a revocable living trust for us back in 2018. It was surprisingly easy when I opened an account for the trust at TreasuryDirect last month. It took only 15 minutes to open a new trust account and buy another $10,000 of I Bonds.

So it lets you double the amount you can buy.

The main benefit of cash recently is losing less value each day than stocks!

https://kpcu.com/Rates

Interesting, I've always hated shopping for food, but I happily waste money on takeaways/restaurants. I think for me it is more about food waste and the mental energy wasted planning all my ingredients to make sure nothing goes to waste rather than saving money. I spend money now to not have to worry about it as much.

> I'm afraid to make investments fearing that the market crash or something like that would erase them leaving me vulnerable to being homeless or dependent on doing jobs I hate.

Yeah, I'm pretty risk averse when it comes to investments, which is screwing me right now with inflation as high as it is :(.

In India at least, this is a time tested way to escape poverty. Doing well in academics and get into STEM you will greatly increase your odds. Not for nothing India has millions of coaching centres and some of the most valued ed-tech startups. The poor can and do mortgage their house, land etc., to send their kids to good school and college.

That's a feeling I know well. It's even more irrational when it's a habit inherited from parents who weren't particularly poor, so you grow up living in quite a nice house that a lot of time and money has been spent extending, but a 50p ice cream is considered decadent. And after you've made a whole bunch of career choices not optimising for income, saved loads without investing it well, you still find yourself avoiding buying icecreams or coffees when out unless you've got company and comparing cheese prices per kg in a cheap supermarket, not because it's necessary or because you aren't aware that negotiating the price of your next house will save you more than three lifetimes of cheese price comparisons, but simply because doing anything else feels like being ripped off.

Of course it pales in comparison to cashing out your overpriced McMansion in some Karen infested suburb of a major metro with nice schools and moving to rural Idaho or switching jobs for a new one with "senior" in the title. But have you ever actually run the numbers? Cheaping out and/or reducing consumption has a huge impact on weekly or monthly finances if it is applied with any breadth. Monthly finances have a huge impact on money available for savings/investment.

This just isn't true for me. Comparing pennies on flour is extremely stressful. At one time - a time when I couldn't pay for natural gas for proper heat nor hot water - I cried because I spent 25 cents more on a product I liked a whole heck of a lot better. That quarter might have been the difference between going to the laundry or washing clothing in the sink (with water heated on a hotplate). Or at least, this was what was in my head.

I generally don't count pennies for flour as much anymore, but it took years, divce, remarriage, and a move to another country to even get to that position. I still get pretty panicked about spending money. Usually it happens on things more than approximately $50-$100 (after exchange rate). Occasionally I just go without a haircut or don't buy new clothes despite a few holes/being a bit threadbare, though.

Maybe! It all depends on whether or not you would actually do something more productive with the time. If you were to write a book or work on your company or take an extra job with those hours, sure, pay the professional. But if, instead, you were going to be watching TV instead, then you are way ahead. You have learned a skill, which can save you in the long run, even if you pay (you know if you are getting a good service and not being gouged, etc).

Having a cheap car – as long as it's not a lemon – is a good thing.

> I'm afraid to make investments fearing that the market could crash the second I enter it

Ok, that is a problem. Keep hoarding cash if it makes you feel better but take a portion and invest. Once you have managed to save enough to have 3-6 months expenses covered, you should be investing the rest. That's how you get out of shitty jobs, specially later in life. Markets generally recover and have for a century. If this stops we'll have bigger problems (and not investing doesn't shield you from them).

I basically agree with everything else you said.

Blended funds! You can choose what % of your money is invested at various risk levels. Choose a fund that puts only a fraction of your money in stocks, money markets, CDs, etc., and finally cash.

• 5 Things Nobody Tells You About Being Poor, May 27, 2011: https://www.cracked.com/blog/5-things-nobody-tells-you-about...

• The 5 Stupidest Habits You Develop Growing Up Poor, January 19, 2012: https://www.cracked.com/blog/the-5-stupidest-habits-you-deve...

• 4 Things Politicians Will Never Understand About Poor People, February 21, 2013: https://www.cracked.com/blog/4-things-politicians-will-never...

https://www.cracked.com/blog/6-harsh-truths-that-will-make-y...

Also, not buying a holiday until well into my 20s. I still feel like it's mostly not worth it, even though I can pay for it and it's probably sensible to take a break from time to time.

It makes it easier to dig yourself out, but depending on the circumstances it can also cause its own issues. For example, my mother ran away from an abusive but well-off home, so I was regaled with tales of upper-middle and well-off hypocrisy and all their problems, which makes it really hard to want to fit in/keep my mouth shut in spaces that I share with those people.

Still, I'm not sure how much difference that upper-middle-adjacent socialization makes when it comes to poverty thinking.

So yeah, I dislike the idea of being mortgage slave, but if I didn't optimize my income I wouldn't mind taking one to buy investment apartment, so I had to invest money in stock.

But the funny thing is I will refuse to buy something I consider overpriced even when total sum makes absolutely no difference at my income, I just don't like the idea of wasting my money on something which can be bought cheaper, so some people may think I am poor or cheap although I don't mind spending money on something I consider worth the money. For instance almost nobody here in Czechia has AC, but I am one of those few people who have one, because I value my comfort at home more than having newest smartphones and other crap.

On one hand these people are a pain to deal with, but in most cases its not their fault either.

I work with ultra-privileged people who by all accounts are “well adjusted” and I find them harder to deal with than people I grew up with from home. Many of them have no history of and don’t understand trauma, and as a result they’re unempathetic to what the literal majority of people experience.

Edited for clarity

Financial issues aren't the only trauma in life, by a long shot. Plenty of people in that group have trauma. What makes people unempathetic is often that they don't come to grips with their own trauma; they deny it and thus deny it for others - if it's too painful to admit to yourself, think how dangerous other people's trauma could be!

It’s not just the trauma of being poor, it’s trauma of growing up in a dangerous area, or of your parents getting divorced, or of getting sexually assaulted, or of young friends or family members dying. All of which get far more likely the poorer you are.

Obviously I’m not saying that there aren’t wealthy, Ivy League educated people with trauma. But if we’re looking at the stats it’s not even close.

If I had a nickle for every time someone said something about the poors being scarred or broken and then in short order started spewing nonsense about how the poors have minimal agency, need guidance or protecting from themselves, are doing it wrong, etc, etc. I would be a very wealthy man. And a hell of a lot of HN would be poorer in $.05 increments.

Did you (in general, not personally) ever think that maybe it's all the upper middle class types who are doing it wrong and the only reason we get away with it is because we have money to sustain the lifestyle?

People who act like cheapskates, buying $500 cars, $20 Walmart jeans, while their peers sneer about the $2k Camry, and $50 Levis being a "better value", seem to do well at all levels of the economic ladders and even frequently improve their lot in life.

I scraped by on ~ $600 / mo in disability until I graduated college in my mid 20s in 2008. My spending habits, my hobbies, everything was ingrained around that age.

Today I make 25x as much, and barely spend 2x. It's hard to change early habits.

If you pay it off every month, credit cards have a negative cost (to you) and a fair amount of convenience (for renting cars, hotels, booking flights, etc).

Nobody cares about your data (unless you're high profile), but -- for example -- hedge funds and the like will spend big bucks to get aggregate sales data before this quarter's financial reports are written.

Sometimes you have to identify your weakness and ruthlessly cut them out of your life.

In high school, I went to a friend's house for lunch. Their father served a mountain of food. My friend said, a bit exasperated, 'Dad - why do you always serve so much food?!'

Dad said, caringly but directly: 'Remember that I grew up in a refugee camp in Palestine. It is very important to me that nobody ever runs out of food to eat in my home.'

An eye-opening moment for a teenager.

As with everything, during childhood impressions are stronger and effect your life more, but being really poor in your 20s has quite a similar effect.

I've seen this in action: e.g., clipping coupons but not paying down debt faster than the schedule.

You can learn to cope with the anxiety better if you talk to a therapist but it will never fully go away.

I mean, the generation who went through the Great Depression did pretty damn well in terms of savings, investment and a lack of waste.

it is like saying: ohhh my mommy was so bad to me and now i have issues, ohhh my mommy was so good to me and now i have issues.

victim mentality

There's great power in understanding where you came from, and how that affects your behavior today.

Easy solution

take a few hundred from the bank and physical set it on fire

keep doing it until you don’t care

it’s illegal but it works

That sounds bad. Why not give it to a homeless guy or to charity or something?

>it’s illegal

Honestly, the central banks can go to hell. They can print way more money than you can ever burn, which they do, even far too much of it, bringing us to where we are today.

There is no "natural" amount of money.

there can’t be any value

These days I realize I have nearly everything I need, so if I'm buying something I figure I can't really afford it unless I'm getting the "best" out there. Best for me means researching the best performing/quality/etc. item in the category. If I'm replacing a broken item I also take the opportunity to upgrade.

For example I needed a carpet shampoo cleaner recently. Instead of heading to Walmart to buy whatever consumer gear was slapped on the shelf, I spent a few weeks deeply researching the ecosystem and ended up with something about 4-5x the expense - but with performance to match. The difference in quality makes it almost a pleasure to clean my carpets these days.

It's easy to spend money simply on fancy and not get much out of it. But I feel pretty satisfied when I make an absurdly expensive purchase like the above but still feel great about it a year later due to the value/increased quality of life it bought me. In the moment if feels ridiculous paying many multiples more than I would have in the past, but over time these little incremental improvements add up.

It's the spending that I do like a "poor person" that bothers me the most - just buying crap on impulse, or "collector" behavior. I find I need to actively mitigate both impulses or I'd end up on a hoarding TV show.