I wrote an article based on an experience last week. I'd love some feedback! It's about the general mindset one should have when planning for our financial futures. If you'd like to write an article about anything finance related and have it get published on the website send me a message. It would be greatly appreciated! https://frum.finance/finance/you-have-it-backwards/

I think this article hits the nail on the head. I could tell you that the first thought that I had after reading it was really an emotional response that went something like “if I do it this way what if I find out that even with the bottom of the barrel amount set aside for my retirement needs I would not have enough to pay my current necessities (and by that I don’t mean bmw’s and mortgages that I can’t afford but rather basic food, clothing, and tuition) and I don’t have the opportunity to change careers.” Logically I realize that this is a “stick my head in the sand” approach but I think this is emotionally why people don’t jump to do this method. Kind of like if you feel your house is actually on fire you’re going to run around looking for water even if you should be really calling the fire department and having them asses why the fires keep happening and how to prevent them (not sure if this analogy really holds up to scrutiny).

Wow that is some incredible, helpful, and meaningful feedback. I’d like to poke at two points of yours. 1. The BMW example is a poor one as you have pointed out because it implies that these big decisions are about the big things, but really I intended to have this discussion about every purchase, not ones that are luxurious. I think this discussion is essential from what shoes to buy, vacation, apartment hunting, and other essentials, not just the BMWs of the world. Do you think its worth adding a paragraph to clarify this point? Or were you able to still have a good takeaway? I just think back to when someone refuse to accept my help because they felt I couldn’t relate to anyone who wasn’t wealthy, so I don’t want it to come across that I am only commenting on the “luxurious” purchases and that I am also talking about the simple things. 2. So obviously the only uphill battle I face to really help people is the “stick head in sand” mindset. If it wasn’t for that, I really believe I wouldn’t have any work to do and everyone would be flourishing. I also understand 100% why people emotionally do it, because otherwise it would be near impossible to swallow some of the decisions people are making when you see it side by side to their long term effects. So given that, and the fact that you are able to be introspective enough to step outside yourself to realize you are currently sandy, what can I do? What could I have put in that article for you to stop and really say “I can’t not deal with this now”. Obviously I think if you read all the resources on the recommendation page you would feel that way, BUT I also recognize that suggesting that will be a loosing battle, since there is no way I can get every frum person to read 50 hours of content to change their lives. Is there anything you think I can add in there to frame the problem better that it can be a bigger wakeup call? maybe some numbers or a more realistic situation? What do you think would help us take the sand and turn it into a sandcastle. A dira betachtonim.

I’m not really clear on how to explain this but I guess maybe it would be encouraging (or possibly very discouraging) to know an entry level. Obviously we can’t ever know what expenses will come our way but if we could come up with some kind of general amount per family size that we can say “if you’re making $X per year and you have Y amount of kids then that is the baseline amount that could work for this system without having to rely on miracles or tzedaka or make unrealistic changes to your life. For example if a couple is making $20,000 a year and has ten kids then there is just no way to even begin this system without living on the street and panhandling after work. There might need to be some crowdsourced research that goes into amalgamating the “normal” amount that frum people spend on things to come up with the lowest possible income that a family needs to be making in order to even start thinking in this “backwards” way. Otherwise people who could really be doing this might “feel” like it’s not something possible for them anyway so why bother.

It’s such a broad range… I hand calculate it for each family. I think it would be more damaging and discouraging actually to give any sort of recommendations based off family size. I kid you not that I see families with 6 kids in their thirties that need to be saving 500 a month to reach their goals and I also see families with 2 kids in their 20s that need to be saving 6000 a month to reach their goals (these are real examples I recently dealt with, both in the same town). Both families make under 100k… Even if I calculated an average it would scare people who need to invest less per month and incorrectly comfort people that need to be invest more.

How does a family making less then 100k have the ability to put aside $6,000 a month and still have food to eat (and what could their goal’s possibly be (you don’t need to answer this))?

But the people that really need the help will be the people that are priced out and need a wakeup call that something needs to change... So I'll just scare them away...

If the change is something that is realistic then they shouldn’t be priced out. For example let’s say we say that someone making $50,000 a year with 3 kids has the ability to do this system and comfortably retire. Well someone might see that and say “hey I make $50,000 a year and I have 3 kids but I don’t seem to be able to invest each month so let me check this out.” Then they talk to you and figure out where it is that they are overspending and can adjust. But if we know that someone making $50,000 a year with 3 kids will not be able to realistically pay for their necessities and also invest then we have to at least let that person know that he’s relying on hopes and prayers.

So basically post case studies instead of averages. Yup I am actively working on that already! So sounds like it'll solve your problem.

yeah i think case studies would be really great

I don't understand how you can simulate monte carlos on a 25 year old to know when they can retire down to a $100 difference in the mortgage. Maybe they will have 2 children, maybe 12. Maybe some children will need extra medical or tutoring or therapy. Maybe their salary will stay relatively constant with small bumps, maybe they will have a fast upward trajectory and quadruple expectations. Maybe they will take the cheaper house and have unexpected home / car repairs. There are so many big picture differences over 40 years!

@bright-restaurant-33087 I agree completely. But then you reduce the problem to just sticking your head in the sand for most families. By saying so much will change, what's the point, you end up with families not taking action. My whole goal is to get meaningful changes to take place, which BH we have been seeing. So far what I've found is by giving these families a model that works for their current lives, and updating it as their life changes, people have been able to make impactful changes to their lives. Is it perfect? Far from it! Is it something to work from? Yes! If you have a better tool I can use to help families determine how much they need to be putting aside than I am all ears, really. Im not claiming I have found the perfect solution. this is the best option I have found so far. If people want their simulation to include more children, we add that in also. More children existing should be a reason to throw your hands up and not do the Monte Carlo. It is a reason to understand it's limitations though. This is also why I regularly redo everyone's model... Bc life happens and goals change... I think that's okay and the benefits outweigh the limitations.

I hear it as a starting point, but the range of possibilities in both income and expenses from 25-65 is so huge that it's extremely hard to pin down. I get that updating it frequently helps, but telling a 25 year old that $100 more on a house will set their retirement back 3 years is honestly a guess. There are more unknowns than knowns in that projection.

I agree completely. But then you reduce the problem to just sticking your head in the sand for most families. By saying so much will change, what's the point, you end up with families not taking action. My whole goal is to get meaningful changes to take place, which BH we have been seeing.

This is somewhat of a personal pet peeve, but I feel that giving a simplified inaccurate picture in order to get people to take a beneficial action is an intellectual version of "the ends justify the means" and is incredibly patronizing. That being said, the education and the demonstration of compounding interest is an invaluable service to the community!

I don’t see how you are saying its an inaccurate picture without even seeing the level of detail in the calculations… If two people are teachers its not like their salaries are fluctuating like crazy. I don’t believe I am giving an inaccurate picture to have people take beneficial actions, and I think if you saw the level of detail and advise given, I hope you wouldn’t feel that way as well. I think calling the statistical models we provide a “guess” is unfair, but I will accept the critique to try to provide more details to increase readers confidence. Any monte carl projection is best effort. It’s extremely unfortunate that you believe the work being done by frum.finance comes across as “patronizing”. My point about taking action is not just take action for the sake of it, but because we believe we are giving people the best approximation available to aim for so they know what actions to take. I don’t have a better tool available to me currently to answer the question of “how much should I invest?”

I'm sorry if that came across the wrong way - it sounds like you are doing very beneficial work for the klal, and I'm sure this couple will be on much much better financial footing than with no planning at all! However, when trying to calculate income/expenses from 25-65 there are so many variables at play, and tweaking them even a small amount will result in a drastically different end result, due to all the compounding. I've seen teachers pivot to much more lucrative tutoring and other fields (and maybe seeing the numbers will incentivize them to do so!) or just leave teaching entirely down the line, whether because they need a change or for financial purposes. OTOH, they could be laid off and have a hard time finding another job. They could have a premature baby or other health issue that could necessitate a parent being out of work for a few years and losing all the compounding interest over there. Even if they think they know how many children they "want" to have, they don't know what will end up happening and whether they end up paying 3 tutions or 6 or 10 down the line will have a much bigger impact down the line. And that's leaving out any true black swan events, which are by definition rare and impossible. Again, it is a huge service that you are doing for them, my personal preference is always a more nuanced and less certain approach, but it seems like many others disagree with me in many fronts

I agree that nuance is extremely important. I don’t at all make people feel like any of this is “certain,” but rather, a best efforts approach. I appreciate the kind words, but I really do think you actually appear to be agreeing with everything we are doing, even though I feel like you think you don’t. On your teachers comment, massive career changes are exactly my point. If a couple needs 4k a month to hit their goals, the financial plan we show them as caused them to do exactly like you are saying, make drastic career changes. But how else will they know they need to do that if we don’t calculate a best efforts estimation? I think we agree on all the actual financial nuances and details, but to actually help a family I need to use some sort of calculation or else everything will be up in the air and theoretical, which you’d agree is even less helpful than giving an approximation like we are doing.

I think these simulations are wildly helpful for establishing trajectories and ballparks. Like, you need to be saving roughly 6-800 a month to be able to retire in 30-35 years. Or whatever. I think the concern lies in telling a couple that an extra 100 on their mortgage can set them back 3 years in retirement can have unjustified impact on their decision, because that's such a meaningless amount in the scheme of things (property taxes alone fluctuate by more than many years) but i agree getting ppl to see that they have to be intentional with spending and saving over decades to be comfortable later in life is the key

I mean, that alone was just made up for the article to keep things simple… I would not give someone that exact advise as it is far too simplistic. But I tried to keep it as simple as possible in that short paragraph…

haha i actually missed that the example was fabricated 😳

Agreed. I just didn’t want to make the example a 1000/month change for fear people would thing “Well I would never make such a crazy monthly commitment” without realizing that it all adds up across many small decisions…

hmm maybe by giving ranges instead of hard numbers? Like, raising your housing costs by 3-500/month (assuming that's coming out of your investment contributions) Can set your retirement portfolio back by about X-Y dollars over 30 years

I guess I was just going I could keep that one paragraph simpler to get people interested at least to start asking questions, but I'll try to make it more of a range to see if I can keep it simple 🤷‍♂️

Sorry, I guess I also skimmed the article and didn't realize it was hypothetical! The approach of planning ahead is invaluable, I guess I agree with @thankful-angle-58448 about a range rather than an exact amount? and obviously explaining that this is a best estimate based on current circumstances, but circumstances change more often than not.

what about a preface to the example saying something like, for the sake of simplicity, I am reducing the example to only one variable and in a real scenario it would be a broader discussion? idk i’ll sleep on it but basically what about just a caveat ⚠️ before I give the contrived example?

Fair enough

updated 👍