Ask HN: How can I use money to make money?
52 comments
Active income before passive.
The best "safe" passive investments might net you 10% annual returns, at best, if you're as good as Warren Buffett and in a strong economy. The effort of picking those investments is pretty high though, and could well be 40 hours/week. Most other higher returning ones are gambles.
If you have $1000, you'll can expect to get back $1100. Can you invest that $1000 into your career to make more than a $1100 salary increase? Books, classes, networking? Then the next level is buying time - dishwashers, not having to use coupons, etc.
At some point, you can't just invest enough money in yourself and that's when you look into passive income.
Businesses are generally not passive income, they're just a higher cap of active income.
The best "safe" passive investments might net you 10% annual returns, at best, if you're as good as Warren Buffett and in a strong economy. The effort of picking those investments is pretty high though, and could well be 40 hours/week. Most other higher returning ones are gambles.
If you have $1000, you'll can expect to get back $1100. Can you invest that $1000 into your career to make more than a $1100 salary increase? Books, classes, networking? Then the next level is buying time - dishwashers, not having to use coupons, etc.
At some point, you can't just invest enough money in yourself and that's when you look into passive income.
Businesses are generally not passive income, they're just a higher cap of active income.
By far the best investment you can make is to upgrade your earning potential.
I run a software consultancy and I could easily employ someone who specialized in writing software tests or a release engineer at 7x your current wage (these are unglamorous but ultimately not had things). Making 7x per hour changes the income and wealth equation dramatically. You could literally self teach both of those areas in 6 months.
Two books from the library, free gitlab account, fork 2 open source projects, implement test suite, begin writing tests. Start submitting pull requests upstream when you get good.
80% of software companies can benefit from work in those two areas and they provide more value than they cost so there’s effectively infinite work.
If that field doesn’t appeal to you I’d suggest starting a business. A recent study of people who earn more than a million a year (maybe posted here two weeks ago?) has shown that it’s primarily business owners. Typically in boring, but very established value areas, typically with a local monopoly. Things like car dealerships, auto repair. The article (which I can’t find right now) also mentioned “marketing research”? which baffles me.
A clever person could learn a lot in the library over a weekend about starting and operating a business, about choosing a good business to start (businesses without a lot of competition, but a solid customer base are good. I’d choose one that will still work in an economic downturn)
Beware the taste for the expensive lifestyle. It’s easy to creep by degrees to a lifestyle beyond your means. If your expenses exceed your income it doesn’t matter how much money you make, you’ll be in debt to you reverse it. I’ve lived both ways and can tell you low expense is the only way to go.
80% of software companies can benefit from work in those two areas and they provide more value than they cost so there’s effectively infinite work.
If that field doesn’t appeal to you I’d suggest starting a business. A recent study of people who earn more than a million a year (maybe posted here two weeks ago?) has shown that it’s primarily business owners. Typically in boring, but very established value areas, typically with a local monopoly. Things like car dealerships, auto repair. The article (which I can’t find right now) also mentioned “marketing research”? which baffles me.
A clever person could learn a lot in the library over a weekend about starting and operating a business, about choosing a good business to start (businesses without a lot of competition, but a solid customer base are good. I’d choose one that will still work in an economic downturn)
Beware the taste for the expensive lifestyle. It’s easy to creep by degrees to a lifestyle beyond your means. If your expenses exceed your income it doesn’t matter how much money you make, you’ll be in debt to you reverse it. I’ve lived both ways and can tell you low expense is the only way to go.
Excellent Advice! Spread this far and wide :-)
There are a lot of "boring" jobs in the IT industry which anybody with half a brain can easily pickup in a week or two. Use it as a stepping stone to slowly but surely build up a well-paying career.
There are a lot of "boring" jobs in the IT industry which anybody with half a brain can easily pickup in a week or two. Use it as a stepping stone to slowly but surely build up a well-paying career.
Are you hiring for part time jobs? I work for a FAANG company and would be interested if you are looking to hire someone who specialized in writing software tests or a release engineer.
in the UK, most places I've seen tests are written by people learning to code.
A real programmer will set up the environmwnt, then the QA team of much lower paid people will write the tests.
These people are paid the same as OP, and certainly nowhere near 7x his salary.
Funny how different countries have fundamentally different job markets!
A real programmer will set up the environmwnt, then the QA team of much lower paid people will write the tests.
These people are paid the same as OP, and certainly nowhere near 7x his salary.
Funny how different countries have fundamentally different job markets!
I would love to know more about this. Will it be okay, if I mail you for more info?
I believe more_corn is talking about this article: https://archive.ph/wVvTp
Previous discussion: https://news.ycombinator.com/item?id=31426440
(But maybe you meant that you were interested in software testing!)
Previous discussion: https://news.ycombinator.com/item?id=31426440
(But maybe you meant that you were interested in software testing!)
Yeah, I was talking about software testing. But thank you for that article.
Do you hire remotely? :)
Look up /r/personalfinance, /r/fire, /r/fatfire.
Be aware that it is unreasonable to expect returns higher than ~5.5%/year over inflation — and that is if you're really prepared to lose 50% of the value of your assets and not have them recover for 10-15 years. If you are being offered higher returns, it is very likely you are not fully aware of the risks you are taking on.
Be aware that it is unreasonable to expect returns higher than ~5.5%/year over inflation — and that is if you're really prepared to lose 50% of the value of your assets and not have them recover for 10-15 years. If you are being offered higher returns, it is very likely you are not fully aware of the risks you are taking on.
This is good advice. Another useful starting point could be: https://www.bogleheads.org/wiki/Main_Page
Fastest way probably is to get a higher paying job.
In terms of investments, the Rule of 72 is that a return of 7 percent a year will double your capital in 10 years. So assuming that S&P 500 will return roughly 7 percent a year, expect your capital to be doubled in 10 years.
Of course there is no guarantee that the S&P 500 will continue it's upward trend it has been on.
In terms of investments, the Rule of 72 is that a return of 7 percent a year will double your capital in 10 years. So assuming that S&P 500 will return roughly 7 percent a year, expect your capital to be doubled in 10 years.
Of course there is no guarantee that the S&P 500 will continue it's upward trend it has been on.
Oh interesting, so we can purchase our way into better paying jobs now? Where do I sign up and how much does it cost?
Oh interesting, we can just rephrase other people's thoughts to the least charitable version possible to complain about the world being unfair?
OP wants to have more money; sensible advice is to find and get a higher paying job that pays more than 20 usd.
Where in my comment do I say that better paying jobs can be bought?
Where in my comment do I say that better paying jobs can be bought?
The question posed by OP:
>"How can I use money to make more money?"
Getting a different job isn't making your money work for you. Getting g a different job generally does not cost money unless you're relocating. Maybe getting g a degree or other qualifications Costa money, but finding a new job does not.
>"How can I use money to make more money?"
Getting a different job isn't making your money work for you. Getting g a different job generally does not cost money unless you're relocating. Maybe getting g a degree or other qualifications Costa money, but finding a new job does not.
Yes I understand, that's why I talked about stocks and investing in the S&P 500.
I just wanted to state the obvious first that quickest way is to find a better paying job. And it doesn't even cost money like there are lots of free tutorials online to learn how to code better. I also understand that OP might already understand it (finding a better job as the best route) so I didn't spend too much time on that idea with just one sentence.
He also said that he wants to enjoy the finer things in life; so it makes sense for him to think about ways to get a better job.
I just wanted to state the obvious first that quickest way is to find a better paying job. And it doesn't even cost money like there are lots of free tutorials online to learn how to code better. I also understand that OP might already understand it (finding a better job as the best route) so I didn't spend too much time on that idea with just one sentence.
He also said that he wants to enjoy the finer things in life; so it makes sense for him to think about ways to get a better job.
Pay for interview practice, resume review, etc. or take a class to learn a new skill.
Yea that feels like a stretch tbh
It’s not. I know a person that ended up paying probably $10k for an interview coach and leetcode tutor that ended up leaving their $90k job at Accenture to making $600k at Netflix.
I wish I got returns like that at the market.
I wish I got returns like that at the market.
Sweet baby jesus, that much money changes the game significantly if you can work remote. Where I am, 90k and you're living large with a nice vehicle, 3br+ and some land. 600k and you might as well call up the mayor to tell them what type of wax you prefer on your truck.
For my friend, while it's remote there is an expectation that they will be working in their offices in CA. I myself would move nearly anywhere for that kind of money. Especially since it's all cash.
Sounds exactly like that viral Blind post I saw on Twitter. How many 600k jobs does Netflix have?
Until recently, Netflix only had two levels for SWEs: Senior and Manager. Netflix is known for paying an extremely large base salary.
https://www.levels.fyi/company/Netflix/salaries/Software-Eng...
https://www.levels.fyi/company/Netflix/salaries/Software-Eng...
There's no free lunch. Everybody wants more money so there's no easy way to get it. Roughly the possible avenues break down to the categories:
1) learn how to provide exceptional value to people who will pay for it
2) take on exceptional risk in financial markets
Personally I think we are shifting into a new paradigm in society where the challenge for most people will be not having a drastic reduction in their standard of living, not figuring out how to get a luxury car.
1) learn how to provide exceptional value to people who will pay for it
2) take on exceptional risk in financial markets
Personally I think we are shifting into a new paradigm in society where the challenge for most people will be not having a drastic reduction in their standard of living, not figuring out how to get a luxury car.
Another thing you can invest in besides stocks, is to invest in yourself.
For example, my SO is working hard to get a side business going writing romance novels. To do this, she's spent a few thousand of dollars on seminars and conventions with both a learning and a networking component (which has gotten her into a regular work group of published authors), learning as much as she could about the industry, money on cover artists, copy editors, proofreaders, joining promotional anthologies, buying props and make up and books to show off on her promotional social media videos, not to mention all the time in learning this stuff and writing the books.
It's starting to pay off as she already has quite a few followers and preorders for her first book that will release in a couple months, higher than some other established authors in her group. There's some authors she knows personally that were able to make $200k doing this in their first year, so she may be on a similar trajectory at this point.
And she's still working a full time job as a marketing manager (making almost six figures for that) during all this, which she's hoping by this time next year she can quit and do this full-time (needless to say, I've been the main person keeping our house somewhat in order during all this, she hasn't had the spare energy).
So yeah, that's one way you can "use money to make money".
For example, my SO is working hard to get a side business going writing romance novels. To do this, she's spent a few thousand of dollars on seminars and conventions with both a learning and a networking component (which has gotten her into a regular work group of published authors), learning as much as she could about the industry, money on cover artists, copy editors, proofreaders, joining promotional anthologies, buying props and make up and books to show off on her promotional social media videos, not to mention all the time in learning this stuff and writing the books.
It's starting to pay off as she already has quite a few followers and preorders for her first book that will release in a couple months, higher than some other established authors in her group. There's some authors she knows personally that were able to make $200k doing this in their first year, so she may be on a similar trajectory at this point.
And she's still working a full time job as a marketing manager (making almost six figures for that) during all this, which she's hoping by this time next year she can quit and do this full-time (needless to say, I've been the main person keeping our house somewhat in order during all this, she hasn't had the spare energy).
So yeah, that's one way you can "use money to make money".
I agree with your comment from top to bottom and I am actually in the process of learning some sort of marketable CS based skill set… cybersecurity seems right up my alley and it’s only getting more important to secure infra against cyber attacks, so those people will paid very well I reckon!
I recommend the book "The Wealthy Barber." It breaks down the basics of personal investing - it's a great place to get started.
There's a rule of thumb that says if you have a compounding interest rate, you can divide 72 by your interest rate to get the number of years before your investment doubles. (So if you're getting 7.2%, your investment doubles in 10 years.) Also, financial planners often use 7% as a rough estimate of the average returns you'll get from a well-balanced portfolio of mutual funds.
So, again: that's roughly doubling every 10 years. So run a few scenarios in your head, and you'll see how that can pay off big time. $2,000 a year now means $20,000 when you're 30, doubling to $40,000 (at 40), $80,000 (at 50), $160,000 (at 60), and $320,000 at 70. All that from $2,000 a year for 10 years. [Which, actually was also compounding even higher between ages 20 and 30.]
And there's two obvious ways to kick that up. If you do the investment in a retirement account, it's pre-tax dollars. (So the $1,000 you're investing only means giving up about $750 of your post-tax income.) Best of all, you can withdraw it early without penalty for tuition, a first home purchase or medical emergencies.
And if your employer ever offers a match to your retirement contributions, take it. It's free money they're offering you.
There's a rule of thumb that says if you have a compounding interest rate, you can divide 72 by your interest rate to get the number of years before your investment doubles. (So if you're getting 7.2%, your investment doubles in 10 years.) Also, financial planners often use 7% as a rough estimate of the average returns you'll get from a well-balanced portfolio of mutual funds.
So, again: that's roughly doubling every 10 years. So run a few scenarios in your head, and you'll see how that can pay off big time. $2,000 a year now means $20,000 when you're 30, doubling to $40,000 (at 40), $80,000 (at 50), $160,000 (at 60), and $320,000 at 70. All that from $2,000 a year for 10 years. [Which, actually was also compounding even higher between ages 20 and 30.]
And there's two obvious ways to kick that up. If you do the investment in a retirement account, it's pre-tax dollars. (So the $1,000 you're investing only means giving up about $750 of your post-tax income.) Best of all, you can withdraw it early without penalty for tuition, a first home purchase or medical emergencies.
And if your employer ever offers a match to your retirement contributions, take it. It's free money they're offering you.
Instead of paying rent, get on the property ladder by buying a property that you can live in while paying less on a mortgage than you do paying rent. It doesn't need to be large, that first house, but it will build your equity in an appreciable asset. That asset can be used (down the track) as collateral in a loan or two when you need capital.
For every bi-monthly pay period, I deposit 12% into my IRA and 4% into my regular investment account. Also, a certain amount is taken from my paycheck and deposited into my 401k.
I've deposited the maximum $6,000 into my IRA for the past two years, and I plan on doing so indefinitely. If it's December and the paycheck withdrawals haven't totaled $6k, then I'll transfer the remainder from my bank. And although I don't deposit as much into my regular investment account, whenever I see fit I'll transfer some of my bank account funds into it.
I wouldn't be able to do this if it were not for money coming in.
I've deposited the maximum $6,000 into my IRA for the past two years, and I plan on doing so indefinitely. If it's December and the paycheck withdrawals haven't totaled $6k, then I'll transfer the remainder from my bank. And although I don't deposit as much into my regular investment account, whenever I see fit I'll transfer some of my bank account funds into it.
I wouldn't be able to do this if it were not for money coming in.
Didn't realize you could put more into an IRA when you're already maxing out a 401k. I should probably start doing that. Thanks to most of my 20s working for startups and small companies without a 401k, I'm pretty behind on retirement savings goals.
You can also just toss stuff in taxable investment accounts. Tossing 20k a year in FXAIX or whatever still adds up over time,
Okay, so the most important thing about making an investment is ...
that YOU are comfortable with it.
That it lives within your comfort level of risk/reward, and that you understand the downsides and the upsides. Generally, the more risky something is, the better upside. Very risk adverse? Look to something like Bonds, but the upside is lower. If you want to be comfortable, you need to factor in your timeline too. If you want your fancy new car next year, you have to steer less risky, while if you are looking at a 20-30 year timeline, a dip this fall or next year won't matter too much. And you also want a bit of diversity -- if you invest broadly, things that are going up are balanced with things that aren't doing as well.
Over a number of years, you can do very well by sticking with such a strategy. And, being comfortable means you are more likely to stick with it, rather then sell if something doesn't go great.
That it lives within your comfort level of risk/reward, and that you understand the downsides and the upsides. Generally, the more risky something is, the better upside. Very risk adverse? Look to something like Bonds, but the upside is lower. If you want to be comfortable, you need to factor in your timeline too. If you want your fancy new car next year, you have to steer less risky, while if you are looking at a 20-30 year timeline, a dip this fall or next year won't matter too much. And you also want a bit of diversity -- if you invest broadly, things that are going up are balanced with things that aren't doing as well.
Over a number of years, you can do very well by sticking with such a strategy. And, being comfortable means you are more likely to stick with it, rather then sell if something doesn't go great.
At 20 years old, you don't need to invest, you need to level up.
there's no min age requirement for investment - start as early as possible, because time is a valuable resource for investing.
Getting a higher income (aka, leveling up) is great too - not mutually exclusive with investing.
Getting a higher income (aka, leveling up) is great too - not mutually exclusive with investing.
> At 20 years old, you don't need to invest
Investing money every year from 20-30 and then stopping will leave you (assuming fixed interest rates of ~7%) the same amount of retirement money as starting at 30 and doing it every year.
Investing money every year from 20-30 and then stopping will leave you (assuming fixed interest rates of ~7%) the same amount of retirement money as starting at 30 and doing it every year.
Read “Rich Dad Poor Dad”. It is really all you have to do to get the financial education needed to manage money well. It changed my life.
Counter view: Rich Dad, Poor Dad is a awful book with terrible advice written by a charlatan. Stay well away from it.
I read the book as a teenager and gave me some thought on financial literacy from a very young age. As a starting point with a good story its a decent book. Unsure about the rest of the series.
The rest of the series is simply the same message repeated in different ways. Not worth the $. All you need is the first book.
Maybe you can provide some detail for this counter view? Otherwise it’s just confusing what to believe.
Let's see:
- He discounts the (financial) value of education
- Deliberately muddles the definition of an asset and a liability
- Suggests commiting tax fraud and participating in insider trading
- Fails to offer any actually good investment advice
- He discounts the (financial) value of education
- Deliberately muddles the definition of an asset and a liability
- Suggests commiting tax fraud and participating in insider trading
- Fails to offer any actually good investment advice
The entire premise of Rich Dad, Poor Dad is to move from the ES (Employment, Service) side of his ESBI equation to BI (Business, Investment). This is sound financial advice. You're also confusing tax deferral with tax fraud. Nothing he wrote is illegal.
Yep agree. The negative reviewer clearly didn’t get it.
Have you even read the book? It sounds as if you either didn’t read it or simply didn’t get it.
Which specific point in my comment do you take issue with?
All of them. I get that you don’t like the author. OK that’s fine. But every single counter argument you make is false.
Thanks for the clarification! I will steer clear of this book then.
You might want to take everything with a grain of salt. The book. And the criticism of the book.
The negative reviewer clearly didn’t get the book or for some reason dislike the author. The counter examples are simply false.
Read "Simple Path to Wealth" by J L Collins. Set it and forget it.
1 point by brooksdra 0 minutes ago | root | parent | next | edit | delete [–]
My takeaway was: 1) Beating the market is much more difficult than mainstream information would lead you to believe. I've been investing my money for over thirty years and couldn't agree more.
2) Matching the market is as simple as purchasing a total market index fund. Collins suggests Vanguard Total Market Index Fund (VTSAX). But that isn't available everywhere, so in my 401K I had to find the closest thing. I switched over to this about five years ago and spend almost no time thinking about it.
3) If total market exposure is too risky for ones tolerance or circumstance (I am creeping up on retirement), Collins recommends mixing in a percentage Vanguard Total Bond Market Index Fund (VBLTX).
4) Concerned about international diversification, Collins explains that is already covered through the larger US companies investing in overseas as part of their business. This comes with an advantage of a filter for the currency exchange, and the kinds of unpredictable business practices you don't expect as a US investor.
5) I have no conflict of interest in this book. I share it with anybody interested and most new grads I meet. In my experience it is sound advice for anybody that isn't investing as a profession. Even then... well, I'll let Collins describe it.
6) Lastly, this seems to be an accepted philosophy of the FIRE community. FIRE is another strategy I wish I'd had known about 30 years ago.
Hope this helps
My takeaway was: 1) Beating the market is much more difficult than mainstream information would lead you to believe. I've been investing my money for over thirty years and couldn't agree more.
2) Matching the market is as simple as purchasing a total market index fund. Collins suggests Vanguard Total Market Index Fund (VTSAX). But that isn't available everywhere, so in my 401K I had to find the closest thing. I switched over to this about five years ago and spend almost no time thinking about it.
3) If total market exposure is too risky for ones tolerance or circumstance (I am creeping up on retirement), Collins recommends mixing in a percentage Vanguard Total Bond Market Index Fund (VBLTX).
4) Concerned about international diversification, Collins explains that is already covered through the larger US companies investing in overseas as part of their business. This comes with an advantage of a filter for the currency exchange, and the kinds of unpredictable business practices you don't expect as a US investor.
5) I have no conflict of interest in this book. I share it with anybody interested and most new grads I meet. In my experience it is sound advice for anybody that isn't investing as a profession. Even then... well, I'll let Collins describe it.
6) Lastly, this seems to be an accepted philosophy of the FIRE community. FIRE is another strategy I wish I'd had known about 30 years ago.
Hope this helps
I have the advantage of being extremely flexible, I can make changes in all sorts of ways to optimize for a certain goal… usually it’s only my own discipline (or lack of) that stands in the way.
Lately I’ve learned that I have a taste for an expensive lifestyle and I want to explore that angle a bit more which is why I’ve been looking for ways to use the money I already have to invest and get a return on it.
With time on my side, I don’t mind making investments that won’t see returns until a few years down the line, I just have no clue where to start.
I don’t care about being filthy rich, I want a GTR not a Lamborghini.