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“carpe diem and bring on the sea urchin”

January 14, 2013

This is the point at which Bellafante’s column both jumps the shark and at the same time demonstrates just how invidious a certain strain of personal-finance thinking has become. Obviously, this line of thinking is profoundly silly. For one thing, five years ago, Yaffa Fredrick was 18 years old; there’s no conceivable way one could expect her to have been saving $300 per week over the past five years. Not when most of those five years were spent in college. And in any case, at no point during the past five years — or during the next five years, for that matter — can anybody save $300 per week at a 6% return. Even 1% is pretty impressive, these days. In order to get anywhere close to 6%, you need to take a serious risk of losing a large chunk of your money, and/or you need to tie your money up in some highly illiquid investment. Neither approach makes a great deal of sense for a 23-year-old who could need her money at any time.

On top of that is the ridiculous idea that accumulating “a down payment on a starter apartment in New York” is such an obviously wonderful thing to be able to achieve that it’s worth not eating food for five years in order to get there. I think Bellafante might make an exception for a stuffed pork loin once a year, and maybe whatever bare-minimum expenditure might be necessary for purely nutritional purposes. But basically, she seems to be saying that if you’re 23, then to a first approximation you shouldn’t be eating out at all, and instead you should take all the money you can scrounge up from tutoring and baby-sitting, and put it into an S&P 500 index fund.

There’s an inescapable conclusion from Bellafante’s column: if you’re just starting out in the big city, a 23-year-old living on a relatively modest paycheck, then it behooves you to spend an additional 10-15 hours per week doing things like tutoring and baby-sitting, just so that you can take the proceeds and invest them in the stock market. Never mind that no 23-year-old in her right mind would ever do such a thing.

Read More | ”The invidious reach of personal-finance snake oil” | Felix Salmon | Reuters