I've always found that "living at my means" has paid dividends. To many folks, 'round these parts, they'd consider it "living below my means," but that's mostly because they "live beyond their means."
I avoid personal debt like the plague. If that means living in a small house, and driving an old car, then so be it.
I've also found that learning to deliver software, as opposed to just "writing" software, has made me much more valuable.
Shipping isn't "fun," and many younger developers don't have the patience for it; but, when the rubber meets the road, shipping is what it's all about.
I don’t understand how delivering software is related to “how can I prepare for hard economic times?”
Let me tell you, as one of the highest performing team members in every organization I’ve been at: if a manager doesn’t care about you, no amount of performance will help you. It didn’t help me.
And whether a manager cares about you is mostly luck of the draw. Sure, there’s politics at play. But the most common situation is that you’re not really helpful to their career mobility.
In that situation, “learn to ship software” is the opposite of helpful. If your manager doesn’t have your back, and you can sense this, you need to look for a new job. Because I guarantee you’ll be the first to go. It all comes down to whether some dude in a proverbial suit likes you.
(Isn’t it interesting how it’s always some dude? I feel like women would be better suited to actually caring about team members.)
You should at least mention to those young devs that performance is one of the least important aspects of being a part of a team, for 97% of companies. It’s table stakes. Raising the stakes won’t help you if you can’t play the game.
As for preparing for hard economic times, my advice is pretty simple. Exploit the good times, and never assume it will last. If you can’t survive losing your income for three months, make changes. That’s pretty much it.
> Let me tell you, as one of the highest performing team members in every organization I’ve been at: if a manager doesn’t care about you, no amount of performance will help you. It didn’t help me.
I agree with the other comment that performance is a necessary but not sufficient condition.
You build your own brand. A good manager helps with that. A poor manager takes the credit and you aren't acknowledged.
I would say performance is a (more or less) necessary but not sufficient condition. We've all heard of cases where managers promote useless schmoozers, but my sense is that performance is still very very useful for being someone your manager cares about. If only because it more easily allows them to justify their patronage to their manager.
Generally fair advice, but the premise isn't always true.
I've had the funny situation for the last few years of my manager, being the CEO, doesn't like me personally. Most of my managers have, and the issue kind of come down to a culture clash where he's a salesperson and I'm an engineer, and I wouldn't put up with a habit of his of not paying his invoices on time which he's thankfully grown out of.
However he's seen that I deliver at the highest level, and he so he pragmatically keeps sending me projects so he can take his clip (it's a consultancy). This has continued for well over two years and even reached a steady state where I'm pretty sure it could be ongoing if I wanted, however the cost is he's pretty mercenary about it all and has consistently given me rescue projects others have left half finished.
So I basically agree with what you're saying, I think it's true generally. However reality is very complex with lots of individual situations that are out of ordinary.
Well, for one thing, it means that you have no problem hanging your own shingle. This is useful, for example, if you are an older fellow, and no one wants to play with you.
> I avoid personal debt like the plague. If that means living in a small house, and driving an old car, then so be it.
Going into debt that you can pay off and will make you a profit is good - because making a profit is literally the thing that gets you through bad times. (That's why having savings be 100% cash is riskier than investing - you are 100% guaranteed to not have it go up.) And recent years' zero-to-negative interest rates were the time to borrow.
But going into debt for a depreciating asset like a car is a bad idea, yes. A house is complicated, because land value likely means it's profitable, except that you can't sell it because you're living in it.
Debt is leverage. When times are good you are great, when they are not and the repo man cometh, they are awful. The banks always win via bailout or not.
Staying debt free is the only safe place, you have flexibility.
Think of it like crossing an ocean. When the winds are good let out the sails to be propelled along, when the storms come take it the sales and ride out the weather. If you want to do it all under your own steam without a bit of help, well it's a long paddle across an ocean so you will be confined to travelling a short distance in your life.
I feel like there’s a middle ground to be had here. You obviously don’t want to be over leveraged, but I don’t think a small amount of debt is inherently bad. I have a mortgage and some student debt, but they are a modest amount of my household income. You work to pay them off and save up an emergency fund, but the reality is that most Americans would never own a house without a mortgage. At a certain point, debt is essentially inevitable.
> But going into debt for a depreciating asset like a car is a bad idea, yes.
This is just as stupid as:
"But going into debt for a depreciating asset like a computer is a bad idea, yes."
They are both investments in potential tools. For many, an investment in a car can ultimately be cheaper than most other modes of transportation. Just like how companies finance their data centers with debt. Of course, it does not mean any car. Hell, it does not even imply a new car. But the advice of using debt to finance a car is always a bad idea is just patently false.
I think you may be missing the qualifier that actually makes this advice true.
>But going into debt for a depreciating asset like a car is a bad idea, yes.
It's important to not go into debt for frivoulous consumption. If you buy an old car, it actually doesn't depreciate very much as long as it's kept in working order. The same with a computer, if I go into debt to get the new M1 Max because I need a computer to code, that's not very smart.
I can code just fine on a $300 used ThinkPad, and I can travel just fine on a $4000 used car.
If I'm unfortunate enough to really need either of those for income geneartion but can't afford it, then it makes sense to borrow for it, but only to get the minimum you need to get the work done.
Of course it's much more fun to get a newish F150 and the latest Apple gadget on a 96 month loan...
The problem is that qualifier isn't correct. The test needs another qualifier, it should be a depreciating, non productive asset.
Many assets that are incredibly productive depreciate. If you're making a living as a house painter you definitely want to invest in paint brushes rather than smearing the paint all over the walls with your hands. The fact that the brushes wear out pretty quickly is irrelevant. Same goes for an auto mechanic buying sets of wrenches, and possibly the developer getting a much faster computer that increases their productivity.
Fact is that owning a reliable car is a prerequisite to many jobs and living situations.
The advice is usually given around consumption type "assets". Like don't go into debt to buy a jetski or golf clubs or something. It's a mistake to transfer that logic to productive assets.
You don’t take a loan to buy paint brushes, you may take a loan to bootstrap a painting business - the business is not depreciating.
I agree though, you’d take a loan to buy eg a CNC mill, and you’d expect it to depreciate. On the other hand, you could buy a CNC mill second hand and avoid the large initial depreciation.
> For many, an investment in a car can ultimately be cheaper than most other modes of transportation.
That's a joke, right? It's entirely dependent on one's location, and i think for more people here on HN the inverse would be true ( I'm assuming the majority of users here live in or around big cities, where tech was traditionally concentrated). In well developed big cities ( so excluding the many failures at urban design and planning in the US) public transit is at least decent, and i don't think there are any places around the world where owning a car is cheaper than paying for public transit ( with the caveat that depending on how you measure the time spent could alter that)
> i don't think there are any places around the world where owning a car is cheaper than paying for public transit ( with the caveat that depending on how you measure the time spent could alter that)
That's the world's biggest caveat. Investment in a modest car that stops you from spending 3 hours each way commuting over 4 separate bus routes from exurban home to exurban job is about as high a return on money as you're ever going to see. Not to mention grocery shopping kids and whatever else.
There are painfully few places in the U.S. where this isn't true. I prefer your model and I live in one of those places (Brooklyn) but let's be honest here about how the world actually works.
>Investment in a modest car that stops you from spending 3 hours each way commuting over 4 separate bus routes from exurban home to exurban job is about as high a return on money as you're ever going to see.
I know your example is exaggerated but even so making decisions about where to live and work like that is on a parallel with making poor decisions about your finances.
> I know your example is exaggerated but even so making decisions about where to live and work like that is on a parallel with making poor decisions about your finances.
Except for the fact that non-terrible housing in U.S. cities comes at a premium, and in the U.S. the majority of jobs are now in the suburbs, not the cities.
> I know your example is exaggerated but even so making decisions about where to live and work like that is on a parallel with making poor decisions about your finances.
The example isn't exaggerated at all. Unless you happen to live on a straight bus line to work, it's going to add many hours to take a bus downtown and then out to the office.
Office locations come and go, a house is for the long haul. You're not going to sell and move houses every time you chance jobs.
It's definitely a trade off, in general the further out you are the bigger house you can buy. I strongly suspect people don't make the right tradeoff. The emotional draw of the big house overwhelms any thoughts about the long and expensive commute.
Chances are pretty high that living further from the city with a car is more cost effective than living in a city near transit with no car for a lot of people and jobs.
That, of course, is why people do it. I wish it wasn't true, I wish things were like Switzerland where every remote mountain town still has fast and effective connections to the national transit system. But they aren't, this is America.
Exactly. Not having a car is only a money saver if you place next to zero value on your time and what you can do with it.
If I switched to taking public transit to work, the additional childcare costs alone from the increased hours I'd be outside of the house would likely negate any savings I might have otherwise achieved.
Often on public transport, you can usefully do far more than you can driving, so it's not entirely wasted. I used to joke I was most productive on a train and so should set up my office on one.
Similarly for active transport, you get free exercise.
I live in Seattle. To get to work in Bellevue, I have 1.15hr commute by bus + walking.
When I lived in SF, I had a 1.5-2hr Caltrain/bike commute to Palo Alto. Missing a train would cost me 45 min. A car getting stuck in the tracks or a suicide would cost 1-2 hours.
A car currently saves me 2hrs, enabling me to have more time to cook healthy food myself and visit the gym with cadence. Imho, a car pays me in dividends.
I could live closer to work, but it’s difficult to socialize in those areas.
I'm guessing GP was thinking of non-US residents when making their claim (although I'm very skeptical of the implication that non-US-based citydwellers make up the majority of HN).
That's why i said that most cities in the US are massive urban design failures. NYC, DC, SF have mostly decent transit, and I'm willing to bet there are more Americans here on HN who live around there than outside of around there. When you add the people from European or Asian or African cities with good transit, i presume we're in the majority.
> NYC, DC, SF have mostly decent transit, and I'm willing to bet there are more Americans here on HN who live around there than outside of around there.
I'd take that bet. America is a big place and unlike Europe, our population is not concentrated in one or two major cities. There are huge numbers of tech jobs in places most people outside the U.S. have never heard of. Just as a for instance, there are over 15 cities in the U.S. larger than San Francisco, like Houston, TX or Jacksonville, FL.
I'm not going to argue about urban design, I agree the U.S. could do much better on that front. But for now, a car is an absolute necessity for the vast majority of Americans, including Americans who work in tech.
I made it around just fine in Seattle, Vancouver, DC (Tenlytown), and Nashville without a car. Bikes and ubers. Everywhere but Nashville was pretty easy to be a person, and Nashville was a PITA at times but doable.
> Ubers are cars, just with an extremely high markup.
This should be be on a billboard.
You could even take it a step further, ubers are worse than just owning a car. If I drive my car somewhere, I stop driving it when I get there. Ubers on the other hand, have to deadhead between different pickups and drop offs in addition to the mileage racked up during the pickups and drop offs themselves. So folks using uber are contributing more vehicle miles on a per trip basis than folks who are using their own vehicles.
Certainly not a joke. Unless you live in Manhattan, or happen to luck into a house within walking distance of your job (ignoring pandemic WFH), then in order to maintain a lucrative career you need to get to work, in time, without spending most of your day waiting for buses. That means investing in a car.
A car by itself is of course a terrible non-investment. But if it brings home that high salary, it becomes an investment.
I live in a big city with excellent public transportation. But I need 1h to the workplace with them and 30 min with the car. An monthly tickets cost around 80€ here. The car with gas assurance etc 300€. I win around 10h time if i take the car … so 10h*my hourly rate … its a win win for me, sorry public transport ;)
Your advice might be okay for good times (investing, buying land, houses).
But in hard economic times, the global economy will be doing badly and therefore most investments will too, even housing (see 2008). Going into debt that you then invest is doubly risky: you have debt, plus you have a risky investment.
Saving cash is actually indeed the best way to prepare for hard times.
I apologize for being blunt, but you have it backwards.
A the adage goes: buy low sell high. In what people equate with "good economic times," prices are high, but in hard economic times everything is on sale!
That said, firstly and foremost we should all make sure to have enough savings to ride out hard economic times—including personal ones. That is, enough to pay our monthly expenses for a year or so, in case we become unable to work or we do not want to take income from investments (because say, the market is down). How long you should be able to last is a mater of individual comfort level, but IMHO, no less than 6 months.
Too much savings in the bank however—and this I believe relates back to the point being made by the original commenter—is actually not good. That money is losing value, and therefore so are you. You should invest it somehow, but that's not the only way. Another way is taking on debt, if that debt is the sort that generates a profit. We're not talking about car loans here (unless of course your a car dealer).
Please forgive me if I misinterpreted your point, but I felt it important to make this clarification.
Don't forget the other adage--Don't time the market.
> That said, firstly and foremost we should all make sure to have enough savings to ride out hard economic times—including personal ones. That is, enough to pay our monthly expenses for a year
Having a year of expenses is good practice in general. I'm not sure that qualifies one as ready for actual hard times at a societal level--not just a stint of unemployment, but global depression, accelerating price inflation, or even general European war and the rationing that could follow.
> Too much savings in the bank however—and this I believe relates back to the point being made by the original commenter—is actually not good. That money is losing value, and therefore so are you.
There are ways to save that protect you (somewhat) from inflation. Like short term bonds (ex: from treasurydirect.gov).
> Another way is taking on debt, if that debt is the sort that generates a profit. We're not talking about car loans here (unless of course your a car dealer).
Unless there is some full-proof investment scheme that you're aware of, this would essentially be gambling. If you take on debt and your profit-generating scheme fails (which is certainly possible in the "hard times" scenario that OP has envisioned), then you're worse off--you've got debt to service, on top of everything else.
> Don't forget the other adage--Don't time the market.
I did mean to to imply trying to time the market. The commenter wrote "Your advice might be okay for good times (investing, buying land, houses)." To me this says that it's OK to invest in good times but not bad. This in fact boils down t a form of attempted market timing—and the worst kind at that! Of course you should buy when times are good, but should also not stop buying when times are bad. If anything, bad times should be viewed as an opportunity. Hopefully you've prepared well to be in a position to take advantage!
> Having a year of expenses is good practice in general. I'm not sure that qualifies one as ready for actual hard times at a societal level--not just a stint of unemployment, but global depression, accelerating price inflation, or even general European war and the rationing that could follow.
I also did not intend to imply that having a years worth of expenses qualifies as preparation for "actual hard times." I was responding to the above comment, not the OP. That said, a year of expenses could be stretched for an awfully long time if needed.
> There are ways to save that protect you (somewhat) from inflation. Like short term bonds (ex: from treasurydirect.gov).
Naturally. This is an investment, which you should not avoid. We are saying the same thing. The only difference is that the commenter does not recognize debt as being good in some cases, but I would argue that not all debt is dangerous. If that were the case our economy would cease to function!
> Unless there is some full-proof investment scheme that you're aware of, this would essentially be gambling. If you take on debt and your profit-generating scheme fails (which is certainly possible in the "hard times" scenario that OP has envisioned), then you're worse off--you've got debt to service, on top of everything else.
No fool-proof scheme, and not gambling. If you have made solid investments, including those based on debt, and have given yourself enough runway to ride out hard-times (and of course this includes your debt repayments), then you should have no reason to panic or feel burdened.
There could be contracts that generate future value but oneself needs money atm to fullfill it. I know still gambling… but with little risk depending on the conditions
> but in hard economic times everything is on sale!
In sufficiently hard economic times, everything is on sale because no one has any idea what will still be around tomorrow and what is going to drop to zero.
Putting war and personal risk of injury or forced relocation aside, which go beyond hard economic times, anyone with a sufficiently long-term view will not fall trap to "not having any idea about what will still be around tomorrow and what is going to drop to zero."
Investing, buying property is the best during "SALES" and those occur during hard economic times.
1. Build an emergency fund. I have enough to cover about 12 months of all my expenses.
2. Avoid life style creep when you start making more money.
3. Invest pre-tax, take full advantage of 401k and IRAs (make sure your expense ratio is low in your selected funds)
4. If you need a car be reasonable, take efficiency and repair costs into consideration
5. Learn how to do basic home/car maintenance
6. Learn how to cook
The idea of emergency fund is that you are not forced to sell during hard times. It is extremely likely that total market will recover and go higher than before.
Saving cash beyond emergency fund is like setting it on fire. Every year inflation is eating it away.
Honestly, it's hard to give advice since it's so specific to the region and job market, etc.
Like many US engineers can easily afford to buy a house outright with $200k+ salaries, that isn't possible as often in Europe or Asia for example.
But basically do what you can to get fixed costs that you know you can afford and stability - i.e. a fixed rate mortgage, fixed rate utilities, and trade union membership and unemployment insurance, etc.
There are very few US engineers who can afford to buy a house outright. The ones making $200K+ salaries are mostly in HCOL areas where houses are very expensive. And the ones who can afford to buy outright are usually doing so based on equity gains, not salaries.
"Going into debt you then invest" is probably the exact wording used by pathological gamblers to justify betting their house at cards. In older times, that's how people gambled their way into slavery.
"I'll borrow some money to buy the seeds I need to plant my crops" and then the harvest goes bad and you have neither food nor money to repay the debt. Suddenly the wealthy neighbor you borrowed from is taking your land to pay for it.
Buying a house gives you extreme leverage, though, and with extremely favorable tax treatment. You can put as little as $25k down on a $500k house and when the land underneath it increases in value you get to keep all the upside and pay no capital gains on up to $250k in profit ($500k if you're married). And you'll pay, what, a fixed rate of 3.5% for 30 years?
If you find a bookie giving you terms like that, then you should take them.
This is a conversation about hard economic times, when the house could very well depreciate in value, and you'll be stuck with a mortgage worth much more than the house. Remember 2008? It was caused by people assuming like this that the value of houses always goes up.
This is sound. The difference between "below my means" and "at/above my means" is having a bunch of cash on hand so layoffs and market crashes are annoyances rather than crises. Not everyone can do this, but if you can, it's worth it for your sanity alone.
Also learn to cook. Cooking is infinitely cheaper than eating out.
There are a lot of comments about streaming services, which is similar to "make your own coffee." You can cut all that out of your budget at the drop of a hat. It's not particularly important as long as your saving margins are significant.
>is having a bunch of cash on hand so layoffs and market crashes are annoyances rather than crises
If you really planned well, getting laid off due to market conditions can be a blessing. I've allowed myself a 3 month sabbatical before and it was amazing. My costs were higher than I wanted them to be, so I started to stress (unnecessarily really) toward the end. I'm in a much better position now though.
Edit: Health insurance w/ COBRA is the biggest cost. I wish the ACA would apply to recently unemployed people and apply the subsidized zero income rate temporarily, at least for catastrophic events.
Your edit is good information to know. I didn't realize California's ACA marketplace won't let you enroll if you lose your job and have the option for COBRA until it's exhausted.
Not the best choice if denominated in a currency that loses its purchasing power by 8% annually and whose supply is managed by the people who called the 2007 housing market as "a little frothy", the 2021 inflation as "transitory", and habitually gives in to the crack addict tantrums and demands of the market for easy money if they even hint at tapering asset purchases. These people are somewhere on the spectrum from totally incompetent to actively malicious, and trusting them to steward the value of your cash savings is pants-on-head idiocy.
Identify any and all durables and non-perishables that you know for a fact you'll use in the future. Convert your fiat into those goods as fast as you possibly can. Appliances, canned food, dry rice/beans/wheat, toothpaste, keyboards, printer toner cartridges, whatever it is you use regularly, buy it now.
If you have variable-rate debt, pay it down. Pay it down now. The next rate adjustment is going to murder you.
You can also somewhat mitigate the collapse in purchasing power by converting your worthless currency into precious or base industrial metal ETFs, or globally-diversified equities. Just bear in mind that the government will steal 15-30% of your realized "gains" (which are not actually gains, just standing still in terms of purchasing power). Your half of a grass-fed cow in the freezer and 800lbs of Jasmine Rice will be taxed at precisely 0% when you eat it.
Or you can buy TIPS or other inflation-indexed securities and gamble and pray that the bullshit PCE/CPI deflator they pull out of their ass and dramatically lowballs cost-of-living increases we actually experience doesn't put you too deep into negative real yields.
There's no real winning when both your currency and your fiscal policy is managed by sociopaths, but we can still try to mitigate the damage by escaping the currency.
Ah I can relate. I might not be the fastest, most innovative or most technical developer but I've been told my super power is getting stuff delivered. I think this comes from a combination of communication skills, requirement gathering and prioritisation, and finally, as you say, patience.
Over the last 50 years this has been terrible advice on balance.
With more nuance it makes sense - avoid bad debt for lifestyle that doesn't produce future economic value, and avoid an excess of investment debt but carry enough investment debt in well considered assets that you can be part of our economic systems growth which is built into our society by design and enforced by our government systems.
Your advice is great for fairly financially savvy individuals, but most of us are not especially financially savvy. For the vast majority of people simple, albeit less than perfect, advice is much better than really good, but complex, advice.
I think the key take away here is learning to deliver, as that is what companies actually, finally care about - everyone else is nice, but without the final person that ties the bow to get the product out the door, you're fluff.
And the advice to treat dept like a disease is worth following. There is no better feeling than telling the car sales failure you want $5K off because you're paying in cash, with a spreadsheet identifying that's their take from the financing you are not using.
Car dealers don't give cash discounts anymore. In fact it's often the opposite because dealers get volume incentives for financing more customers through the manufacturer's captive lender. And interest rates now are often still lower than the inflation rate, so if you have good credit you're actually coming out ahead by borrowing.
Right, asking for a cash discount is going to have the salesman laughing behind your back. They might give a financing discount, but they don't want cash. So read the fine print, but it may make sense to finance a vehicle for the anti-cash discount (like a $1000 discount coming from some program run by the lender) and then pay off the loan completely after a month. Depends on fees etc if this makes sense for you, but it might.
I avoid personal debt like the plague. If that means living in a small house, and driving an old car, then so be it.
I've also found that learning to deliver software, as opposed to just "writing" software, has made me much more valuable.
Shipping isn't "fun," and many younger developers don't have the patience for it; but, when the rubber meets the road, shipping is what it's all about.