Comment by lucasfcosta

It's not simple when big decisions have to be made, like investments, car purchases/loans, and home-related stuff. Main thing people don't seem to understand is that money upfront is worth more than money later.

I don't agree with this. Spend less than you earn is a big part, for sure. Without it, you'll never really get very far.

But the rest is not mere 'optimization'. There is a massive difference between someone who puts their savings into a 0% interest account and sees it eaten away by inflation and in some countries (mine) a wealth tax, and someone who puts the savings as a pre-tax investment in their retirement account, which means you don't pay taxes on your salary, and in some countries (mine) don't pay taxes on the stock returns or on the equity as a wealth tax, and can get a 10% nominal annual return and see your money double >5 times over a 40 year career.

In my country the saver (A) versus the investor (B) who puts $1k in savings or a retirement fund at age 25 and liquidates at age 65 looks like this:

A) Saver: $1k salary is $500 take home pay (50% marginal tax of last bit of income). 0% interest rate at the bank. You pay a 2% effective wealth tax per year. That means $222 is left at age 65. Prices in this time went up by 3% a year, meaning what is left is the equivalent of $68 in today's dollars.

B) investor: $1k salary goes pre-tax into retirement account. You get a 10% return each year, so at 65 you have 45k. You pay no wealth tax or return taxes in the retirement account. You then pay it out as a personal income at a reduced retirement rate of 35%, meaning you have about 30k left. In today's dollars that's about 10k.

So $10000 vs $68. That's not optimization, it's the difference between gaining 10x versus losing 93% of it, or the difference between everything and nothing.

Country of example is NL. Discrepancies are bigger or smaller elsewhere depending on tax policies, but generally the difference will remain orders of magnitude.

I do agree that it's pretty easy to learn.

> Financial literacy itself is quite simple: spend less than you make.

Maybe for the quantitatively minded Hacker News audience this is simple. But there are quite many people who have no idea how much they are spending, or sometimes even how much they are spending.

It's easy to forget if you live in tech - or even middle class - bubble, but even the most basic math is very difficult to some fraction of people.

Nah, that's reductive to the point of being useless. It's like saying "losing weight is simple: eat fewer calories than you burn". It's both completely correct and completely unhelpful.

Broadly, everybody realises that you will accumulate money if you spend less than you earn. That's not financial literacy though – how do you do that? How do you know how much you are earning, and how much you are spending? How can you figure out how to spend less?

Almost 30% of US adults are level 1 or below on the PIAAC numeracy scale – a level at which you can perform only the most basic arithmetic. It is, for many people, far from "pretty easy" or "quite simple".

Being frugal no longer cuts it. As basic needs cost, such as housing, continues to outpace income, financial literacy won't be enough. Unless it crosses a point where people purposefully elect government willing to address the issue.

> ...I honestly can’t understand why it’s so hard...

You're pretty close, you touched on all the major points in your comment. You suggested people not to chase status. But a lot of people spend their whole lives and all the resources at their disposal chasing status. All they understand, want or need is status. They are status chasing people.

You try teaching them not to chase status and it won't work. This is also what makes financial literacy so hard - people have these instincts that don't care about longer term material comfort even a little bit. They're calibrated for a world where "capital" is a stick with a rock tied to it and maybe a nice cave. There are these hang-overs from the old times where people's mind and body are strongly conditioned to only be sensitive to their current social status and they're willing to burn their entire bank account to get it now.

Watching such people up close when they are also intelligent is a fascinating experience. They know that they're not doing financially optimal things. They don't care. They'd eat nails and go without sleep if they thought that would make them look better than their peers. Being poor in 12 months time doesn't register as a threat intellectually or emotionally.

Note that even the people who are good at investing usually cheat by using their emotions in weird ways.

Except your second line is contradicted at the outset, because the largest purchase most people will make - their home - is bought on debt (a mortgage).

Now there's sound, very good reasons to do this...but the headline issue itself already forces us to deal with more complex issues.

Right there we're into issues like why is it okay to buy some things on debt but not others, how do you evaluate the time value of money etc.

All still relatively simple...but not that simple, and frequently with no obviously correct answers either.

> Financial literacy itself is quite simple: spend less than you make.

I'd disagree with this. Financial literacy includes understanding how /how much to save as well. Too many people spend less than what they earn, but would be screwed if an emergency hit, because they have basically 0 savings/emergency fund.

And the consequences of this are dire, I've seen people in their 70s working because they basically cannot afford to not work due to a lack of savings.